Dustin S. Klein

Monday, 22 July 2002 10:02

Steel alignment

In mid-1997, Atlas Steel Products Co. president and CEO Lawrence Burr had a problem. His Chicago processing and warehousing facility's second five-year lease would soon expire, and because the plant was underutilized, it didn't pay to renew the lease.

But the decision was about more than simply trimming costs. The company-which processes aluminized steel-had spent 12 years establishing its Chicago market and wanted to keep a presence there. "It was part of that year's strategic agenda to resolve the issue," recalls Burr. "But we didn't want to abandon Chicago, because it's an important region for the steel industry."

So Burr explored other options, including building a new facility. Each option had its own problem, and all were nixed. Then Burr called an old friend, Gary Hamity, to discuss his dilemma. Hamity, owner of Mapes and Sprowl-a Chicago steel company with which Burr had done business for years-had his own problems, stemming from oversupply in the steel industry.

It was a timely call, says Burr. "Coincidentally, they (Mapes) were looking to enter into an alliance. We'd known each other a long time and trusted each other implicitly. It was a good match."

In November 1997, the two steel companies formed a strategic alliance which allowed Atlas to phase out of Chicago Heights (and consolidate operations at its Twinsburg site) and use Mapes & Sprowl's Chicago facility to depot steel for local customers. In return, Mapes & Sprowl depots its steel at Atlas' Twinsburg facility.

The arrangement was so beneficial that in August 1998, Burr initiated another alliance, this time with Sumitomo Corp. of America, a New York-based steel distributor. Sumitomo and Atlas had also worked together, and the ensuing agreement was similar to the Mapes deal-Atlas would depot its steel at Sumitomo's four Midwest service centers-Detroit, Columbus, Cincinnati and Nashville-and Sumitomo would use Atlas' facilities to depot steel for its regional customers.

For manufacturers who need to slash costs and keep their competitive advantage, a strategic alliance may be an effective solution. Here's how Atlas' two alliances allow the company to save money while maximizing facility use and increasing its customer base.

Trimming overhead

By shutting the Chicago Heights facility, Atlas removed that building's lease and its associated expenses from the company's budget. And while all 13 Chicago employees were offered positions in Twinsburg, only one accepted the move. That further cut costs. Burr then sold one of the two steel slitting machines based in Chicago and moved the other to Twinsburg, which increased Atlas' processing capacity.

"That pulled an enormous cost of that second facility out of our business," says Burr. "And with changes we'd made in our workforce here, we were able to do more with the existing workforce (in Twinsburg)."

Steel previously cut in Chicago was now slit in Twinsburg, then shipped to Mapes' Chicago operations for regional distribution.

Better use of space

Because Atlas no longer needed to store steel for its Chicago, Detroit, Columbus, Cincinnati or Tennessee customers in Twinsburg, it freed up space in the company's existing 65,000-square-foot plant.

Before the alliances, the Twinsburg facility was filled to capacity, and Burr was considering expansion. Now, however, even with Sumitomo's and Mapes' products stored in Atlas' facility, expansion plans have been put off.

"We'll grow intelligently now instead of for the sake of growing," says Burr. "I believe in smart growth."

And when it does become necessary, Atlas won't need to move. The facility sits on 15 acres, where Burr says it will be possible to expand to 200,000 square feet.

Access to new markets

Neither Sumitomo nor Mapes competes directly with Atlas-their steel products are drastically different from those produced by Atlas. Sumitomo deals in hot-rolled and cold-rolled steel while Mapes specializes in enameling and silicon steels. That, says Burr, creates the opportunity to tap into the others' existing customer bases. "We currently share two customers (with Mapes)," he says. "This gives us the opportunity to pursue customers who use both products."

That works both ways. As Atlas reaches Sumitomo customers who need aluminized and heat-reflective steel, Sumitomo is able to market its products to Atlas' customers.

It's an arrangement that's especially convenient considering where the companies are located. "Because of the geographical spread, we broaden their market as they broaden ours," explains Burr. "We're all able to serve our customers more efficiently."

All of this has given Atlas a suitable alternative to consolidation. Burr admits that in recent years, his company has been pursued by large consolidators looking to expand their product lines and gobble up Atlas' customer base. Now the alliances have helped Burr create a one-stop shop for steel products.

Innovation, though, isn't a new concept for Burr. He's bucked conventional wisdom regularly since he bought Atlas in 1983. Back then, the company was a $3 million aluminized steel supplier, with barely a dozen employees. But the tough-nosed former journalist envisioned ways to make it grow. He instituted a team approach to the company and empowered his employees with major decision-making abilities covering how the operations were run. "They had wisdom," Burr says. "They knew there were ways to do it better." That type of approach was basically unheard of in the 1980s.

Now, 15 years after he began streamlining his company's processes and utilizing his employees' skills and talents, Atlas is one of the leading providers of aluminized steel in the nation. It has 64 associates and revenue in excess of $50 million. Burr says these alliances provide an opportunity to quadruple those figures in the next few years.

Joint development of new products

As one of the benefits of the agreements, Atlas will place equipment in both Mapes' and Sumitomo's facilities. That enables the companies to process small batches of Atlas' products for just-in-time delivery.

Atlas, maintains Burr, is just taking advantage of its niche market strength and parlaying what it can do for both Sumitomo and Mapes. "It's a more effective use of resources," he says.

By understanding each company's processes, it's possible to develop new products from which everyone benefits. But it's not something any company can do. "As long as you can do it with people you trust, you can maximize your opportunities," he says.

Burr says he expects to duplicate the model created by these two alliances and forge new alliances. And he's considering turning the tables on those pesky consolidators he's worked so hard to avoid. "We're also looking at acquisition strategies."

Monday, 22 July 2002 10:00

The options

When President Tom Sincharge spent some real time with the three proposals to move Yesterday Corp. into e-commerce, he found that each addressed the company’s needs from a different perspective.

All three warned against simply throwing money at technology for technology’s sake and recommended that any solution must be able to grow as the company grows.

But that’s where the similarities ended. Here’s how Sincharge categorized the differences.

One piece at a time

Arif Cubukcu, president of Beachwood-based Innovative Organization Systems Ltd. (IOS), suggests that Yesterday Corp. design a sophisticated system one piece at a time, eventually tying them all together.

That would include a first phase investment in hardware, such as the main and back-up servers—to run all computer operations and handle the Web site. That would coincide with development of a Local Area Network so Yesterday’s employees could share data and software, and installation of a dedicated Internet connection to support the company Web site and carry EDI (electronic data interchange) transactions.

After that, Yesterday could add operational and e-commerce software—Cubukcu cites specific off-the-shelf products that handle general business functions, such as Gentran, Maccola, Solomon, UA Accounting and Microsoft Back Office—which would be shared through the network.

“You want to be able to enter data once and make it available to anybody who needs it,” explains Cubukcu. “The last thing you should do is duplicate your efforts.”

A main concern with this approach, warns Cubukcu, is that when you begin writing code to tie software together, you increase the chance of problems. “I believe in buying components that are already designed,” he says. “But it’s a big puzzle and you have to find a way to put everything together.”

Based on data provided to Cubukcu about Yesterday Corp., he believes it would also have to invest in about 20 PCs for its three locations—16 for the main offices and two each for the manufacturing facilities. Eventually, each of its 10 inside salespeople would need a laptop computer, too.

The main component of the approach Cubukcu recommends is a comprehensive Web site that would:

  • provide customers and prospects with information about Yesterday Corp. products;

  • accept orders;

  • accept payment or generate an invoice for established clients such as Grande (see previous article: The Ultimatum).

Eventually, Cubukcu says, the entire operation could be integrated, so a new order on the Web site generates a shipping label in the warehouse, an entry in the inventory system, a receivable in the main office and a detailed report to the sales team. But he considers those to be second phase.

The first phase—basic hardware, software and setting up the Web site—would cost $125,000 to $175,000, based on Cubukcu’s estimates.

“Putting the catalog online is something that can be done immediately,” he says. “But you haveto leave it open in its design so that you can expand it to become part of an accounting or inventory system later.”

To demonstrate the capabilities that Yesterday Corp. would have, Cubukcu’s team at IOS Ltd. designed a model Web site, which you can find at yesterdaycorp.cyberorg.com.

The turnkey solution

Mark Geyman, director of marketing for NetForce Development, in Woodmere Village on Cleveland’s East Side, prefers to reduce the risk that comes with tying together varied computer applications. To do that, he recommends installation of a turnkey system that satisfies Yesterday Corp.’s short-term needs and long-range goals.

After a series of meetings with key management to determine exactly what those needs and goals are, the first decision is whether to use a PC-based (Windows) network server or a substantially more costly Unix-based platform, says NetForce President Lauren Patrick.

Patrick suspects a Unix-based server is probably more powerful than what Yesterday needs.

A second issue in the turnkey approach is whether to write custom software—more costly than off-the-shelf products, Geyman says. He figures Yesterday would be best served in its Internet needs with a product from Microsoft or Netscape—both affordable and capable of being customized to a degree.

Next, the company would need to establish a LAN for each of its locations and connect the LANs with a “virtual private network”—an Internet-based means of connecting remote locations. Patrick would recommend using a national Internet Service Provider such as UUNet or Digex rather than a local provider for the simple reason that sales people or executives who are traveling will find it easier to connect with the office.

However, with all of its operations anchored in Northeast Ohio, there are local providers that could do the job.

Because of Yesterday Corp.’s four-month deadline, the heart of the turnkey approach would focus on the infrastructure first, then make EDI and e-commerce the top priorities.

After that, the other applications can be phased in, with the company’s existing database being converted to fit those packages.

“The best option would be to start with accounting and inventory now, then bring in sales in six months,” says Patrick “That type of phased-in approach would allow Yesterday to grow.”

Such a solution would cost between $125,000 and $200,000.

One project and one goal at a time

It’s difficult to anticipate changes or problems that might pop up in the future, says Joseph LaMantia, vice president of DeCarlo, Paternite & Associates Inc. in Independence. That’s why he favors tackling the challenge as a series of small projects.

LaMantia says a quick evaluation of Yesterday’s situation showed the company was in dire need of information system planning, hardware infrastructure, networking, data communication, business systems software (e.g., ERP), EDI, e-commerce and technology integration.

“When we came in and looked at them, we saw they didn’t have a strong MIS staff. No one understood technology, no one understood how to leverage technology for a solution, there was no consistent IS budget and no strategic plan,” he says. “The company was reactive, not proactive and considered Information Services a less important area in the company.”

Yesterday’s executive management, he continues, had “no understanding between EDI and e-commerce.”

In a typical project-by-project approach, the company starts with an extensive self-analysis (with help from consultants) to determine short- and long-term needs—not just what a CEO or board of directors thinks the company needs. That’s a two- to-four week process, followed by joint development sessions between consultants and management to write a long-range plan, or Information Systems Strategy Plan (ISSP).

According to DPAI Senior Consultant Brett Rabung, the resulting document contains many smaller projects over a period of one to three years. In a case like Yesterday’s, those individual projects eventually add up to satisfy a company’s larger goals.

Explains Maher Atwah, DPAI’s technical manager, “As an entire project, it’s too hard, but once you break it down project by project and goal by goal, it’s easy to accomplish.”

This approach also calls for a Web site, which becomes the center of all communications. DPAI general manager Don Snyder says that probably means starting with a basic Web site that advertises Yesterday’s products, tells a bit about the company and allows customers to place and pay for orders. Over time, a private portion o f the site could be developed for use by only those with access codes, to share private and timely information between locations, with traveling employees, and with customers and the external sales force.

Operations could be tied together gradually by implementing a phased modular ERP system, starting with a manufacturing module, says LaMantia. While this could result in a very expensive solution, it allows a company to add other modules—such as accounting and sales packages—as it can afford to make that type of investment.

An immediate goal, explains LaMantia, is to integrate EDI capabilities into current infrastructure. In Yesterday’s case, that allows the company to retain Grande as a customer. Such a project includes training Yesterday’s work force about the differences between EDI and e-commerce.

The final part of a phased-in approach is to plot the next stage of technology integration, and consider any changes in the way a company may do business to satisfy its customers’ technological needs.

Such an approach, according to LaMantia’s estimate, would cost between $50,000 and $125,000 for the first stage—EDI and e-commerce—plus another $10,000 to $20,000 for development of a comprehensive Information Systems Strategic Plan.

The board decides

After Sincharge finished his presentation, two board members suggested Yesterday scrap the entire project and take its chances by losing Grande as a customer. Another demanded Yesterday choose the least expensive plan and build a skeleton system that only satisfied Grande.

There was agreement all around that Sincharge’s original plan was simply too large and expensive to implement all at once. “We looked at the hard figures and realized that we couldn’t just jump headfirst into this,” Sincharge says. “It wasn’t cost effective.”

Instead, the board decided the company needed to analyze its complete needs, develop an ISSP and move forward with the project in stages, beginning with Grande’s EDI demands and installing a new network system and Web site. After that, says Sincharge, Yesterday would integrate software with greater interconnectability and develop an intranet.

“We really wanted an efficient long-term solution, even if it cost more money up front. We didn’t want to put all our efforts into a short-term solution only to find that we had to start from scratch the next time we had a new idea, he explains. “We figured if we did it this way, as we grew we’d save money on the back end as we started to see a return on our investment. Bottom line, we went with a plan we could swallow.”

The company also called a recruiting firm to help hire an MIS director to oversee the company’s network needs.

In early January, Yesterday took its EDI capabilities live, satisfying Grande and keeping it as a customer.

EDI vs. e-commerce

EDI is a method of ordering and payment through dedicated software programs specific to each customer. It is the favored means of exchanging money among large corporations, because it is secure and the ultimate in customer focused: It’s customized to fit each company’s own operating needs.

E-commerce, on the other hand, provides a one-stop electronic commercial outlet for multiple customers who log on and conduct business through a Web site. While security is no longer an issue, perception of security remains a barrier for some. While e-commerce aims for convenience to customers, it’s a one-size-fits-all solution designed by the seller rather than the buyer.

Action points

  • Don't get overwhelmed; it starts with a phone call.

  • Prepare to make an investment. It costs money, but returns are easy to come by.

  • Staff up. You'll need to hire a dedicated in-house information systems specialist or pay an outside firm for ongoing help. Don't try sneak responsibility for information systems into the job description of an employee in another department.

  • Plan for the long-term before buying for the short-term.

  • Consider what technology might be used for:

    • Exchange of money

    • Customer service

    • Inventory control

    • Data collection and analysis

    • Increased internal communication

    • Joint venturing

    • Sales and marketing

    • Training and staff development

  • Prioritize needs and address them in order.

  • Let the business needs drive technology decisions-not the other way around.

Monday, 22 July 2002 09:58

The high art of fakery

If you take a close look at the tapestries hanging in the Cleveland Museum of Art’s newly renovated armor court, you’ll notice something fishy.

Four of them are fakes—standing in for the real ones, which were shipped to Belgium early this year for restoration. (The other four were restored while the room was being redone.)

The stand-ins, however, are themselves a work of art—digital art generated by Merrill David Inc. of Cleveland. “The museum wanted to make sure there wasn’t blank wall space for 18 months,” explains Neil Gloger, Merrill David sales manager.

While the fakes—ranging in size from approximately 10 feet by 13 feet to 14 feet by 22 feet—are merely printed, rather than sewn, the detail is so fine that you can distinguish individual stitches.

The computer files used to create them were up to six gigabytes (take your average desktop PC, double the hard-drive capacity, remove all software and data, and you might be able to squeeze in one file), and printing them out took up to 20 hours.

Plenty can go wrong in 20 hours of printing, and on more than one occasion, Gloger says, the staff had to scrap the print run and start over.

The replacement rugs are printed on a special banner fabric developed and donated by Painesville’s Avery Dennison. They won’t tear under their own weight, Gloger says, and they present “zero diffuse reflection,”—a fancy way of saying “no glare from the armor court’s skylights.”

“We tried them on canvas first,” Gloger says. “But the glare was terrible.”

Monday, 22 July 2002 09:58

If you want something done right ...

When it comes to training your work force, either leap in with both feet or don’t bother at all. A good training program should have clear objectives about what you want the employees to learn and the full support of management. Otherwise, it’s doomed from the start, says Judy Opalach, president of Cleveland-based Skill Builders.

Opalach helped set up manufacturer Horsburgh & Scott’s employee training program a decade ago. That program’s success has made it one of the regional models companies look at when they’re ready to design their own. While Horsburgh & Scott earmarks $45,000 a year for its program, start-ups can cost a bit more. Done right, they can cost as much as $60,000 or $70,000 a year.

But once you’re past the sticker shock and realize that a strong program can pay for itself in a year or less, Opalach offers five key steps to getting the optimum training program off the ground.

Establish trust

“There’s a lot of fear initially among the workers,” explains Opalach, who cut her teeth with Project Learn 15 years ago. “Often, they’ve got a lot of questions about why the employer is starting a training program, including whether it’s to weed out the dummies.”

To diffuse that situation, she suggests employers be up front with their employees and explain the plans for the program: Describe how it will work and why it’s needed. She says an all-hands meeting is a good way to broadcast the message.

After that, the person who is setting up and managing the program should meet with employees in small groups—without other managers present—to alleviate any fears people have about participating in training programs.

Make an assessment

Opalach also uses those small, personal meetings to figure out where people stand in terms of their skill levels and training needs. But, she stresses, it’s not an intelligence test.

“It’s a basic assessment for reading, writing and math, and anything else that an employer may choose to have that’s significant in the workplace,” she says. That could include tasks such as basic blueprint reading or understanding a specific process on a machine. “It depends on who the focus for the training is.”

Conduct a job-task analysis

In conjunction with the basic assessment, the trainer needs to take an objective look at how employees will use their new skills.

That’s something many employers overlook when they’re developing a training program, warns Hal Miller, president of Solon-based Marplex, which designs training programs for manufacturers.

“When an insider decides what’s going to be in a training program, they’re putting things in that they think the student needs,” Miller says. “In order to do it effectively, though, it’s important for the person developing the training program to go to the students and find out what they really need in order to accomplish the company’s objectives.”

Opalach suggests first-hand observation. “Go in and shadow somebody on the job,” she says. “Look at all the things that they are doing and what skills are related to each particular job.”

For example, consider a task that is usually assumed to be simple and require little instruction: filling out forms. “Look at the form and all the different skills it takes to complete it,” she says. “Reading, the ability to understand abbreviations and acronyms, the ability to write dates numerically, to write comprehensive concise sentences and spell correctly. People don’t realize how much goes into every task.”

Develop the curriculum

Once you’ve got a thorough picture of what skills the employees need to learn, the hardest part is developing a curriculum around those skills to meet stated objectives.

Miller says text and illustrations are critical to any training program’s success. “You have to ask yourself, ‘Does the illustration illustrate what you want it to, and how well do the words explain what the student’s looking at or what the company needs him or her to learn?’” he says.

For example, if the goal is to teach an employee how to operate a machine, the text should be written from the employee’s point of view—not that of the engineers who designed the equipment. Any diagrams need to be accurate and contain the appropriate level of detail.

“What you teach has to apply to the job,” adds Opalach. “Adults learn best by something that’s going to be relevant to them and applicable. If you can apply exactly what you learned, then there’s a much greater success rate.”

Evaluate the program and make adjustments

Employers generally make one of two mistakes at this point: They either fail to follow up at all, or they try to find the immediate return on investment.

“It’s not an overnight result,” Opalach warns. “Education doesn’t work like that. Employers need to be aware of that if they’re going to do any kind of measurement of the program’s success.

“You can turn out a widget in 24 hours or less, but in education, the product’s going to take a little bit longer because it’s an intangible.”

She suggests employers give any start-up training program one to two years before conducting a formal evaluation of its success. However, that’s not to say there’s anything wrong with gauging it by talking to supervisors and asking if they’ve noticed improvements in performance and confidence among employees.

After the first group has gone through the program is a good time to make adjustments where employees’ needs aren’t being met. Says Opalach, “It’s an evolving process. A good program is always in a constant state of flux.”

Employer’s checklist: Building a training program

Training is often an afterthought in business, relegated to an employee’s first few hours on the job. If you want to get more from your people, here are five steps to assure the success of a training regimen:

Establish trust.

Change is difficult. Whenever you introduce new things to the workplace, expect to meet some level of resistance. If you’re up front with employees about the motives behind a new training program, there won’t be muffled whispers around the office or on the shop floor.

Assess skill levels.

People don’t necessarily start from the same educational baseline. Reading, math and writing levels differ. Adjust your training program so nobody is discriminated against—or left behind. Offer advanced training courses for those who are ahead of the pack and basic courses for those who need an extra push.

Analyze job tasks.

If you don’t know the elements of all the skills needed for each job, it’s difficult to figure out specific training employees need. Don’t assume anything.

[Develop a curriculum around real needs.

Be sure that the curriculum chosen fits both your company’s objective and the employees’ needs to do the job effectively. Keep an open mind. Nobody knows their job better than the employees doing it every day.

Continually improve the program.

Don’t fall in love with the training program’s first incarnation. If it needs changes, make them.

Monday, 22 July 2002 09:57

Raise a glass to the plan

As Dan Conway’s station wagon rumbled south on I-77, the back end sagged under the weight of the beer, stacked to the roof in cases. His older brother Pat was driving, when the headlights of a car behind them suddenly started to flash.

Their stomachs lurched, even though the absence of red lights told them immediately that it wasn’t the law. They drove on, trying to ignore the motorist behind them, but he was both frantic and persistent.

Finally, Pat put on his right blinker and pulled off onto the shoulder. The other driver followed.

“The guy gets out of his car and tells us he’s been looking for us,” Pat says. “He says he has a retail store and wants to carry Great Lakes beer. Then he made us follow him back to his store.”

Things have changed for the brothers—owners of Great Lakes Brewing Co.—since that summer night eight years ago. They no longer limit retail sales of their beer to the number of stores they can hit in the family car on the way home after work.

“We eventually decided that distribution wasn’t our business,” Dan says. “Brewing is.” But at the time, they didn’t have a choice. “It was always something we knew we were going to do because we couldn’t afford distributors. But tactically, we didn’t have a clue. We had a small number of accounts on each side of town, so getting the beer to them was a little tricky.”

Today, Great Lakes beer is handled by eight different distributors in a region extending from Toledo to Youngstown.

One thing hasn’t changed: The increasingly successful beer-brewing duo has continued to operate under the same business plan that set the scene for that odd meeting on the highway in their second year of business.

In fact, the brothers say their careful adherence to that plan is the main reason Great Lakes Brewing has been able to rise above the continuous shakeout that exists among craft brewers everywhere, to join the small handful of stable regional brewers across the United States.

When Cleveland first fell in love with Great Lakes beer, there was only one place to get it: at Great Lakes Brewing Co., the Ohio City restaurant that was the larger and better-known portion of the Conways’ business.

The restaurant opened in 1988, when the craft beer explosion—which has since put such names as Anchor Steam and Red Ass Ale on the shelves of the nation’s better stocked grocery stores—was in its infancy.

Pat and Dan knew that if they tried to push their way into Northeast Ohio’s bars, restaurants and stores as a start-up brewery, they would fail. Instead they would start with a restaurant to provide three important things: cash, a captive market to buy every pint of beer they could produce and word-of-mouth buzz.

At times, the strategy was hard to swallow. They never wanted to be restaurateurs.

“All we knew,” Dan says, “was that we wanted to be the biggest brewery in the Great Lakes region. We didn’t worry about how long it would take to get there. We just wanted to stay focused on slow and steady methodical growth.”

But to the people who drank their beer in those first years, Great Lakes represented, more than anything, just another good place to go on Friday night.

It would be a decade before the beer business grew larger than the restaurant.

“There was a lot of frustration sticking with the brewpub concept because it is the restaurant business,” Pat admits. “So many things can go wrong with a restaurant. We went through a lot of pain, but we learned that end of the business.”

Last year, as the restaurant hit its 10th anniversary, revenues closed in on $10 million—of which 55 percent came from outside sales of beer. As if to celebrate that milestone, the Conways unveiled a new $6.5 million brewing facility. Located in the old Schlather Brewing Co. building across the street from the main business, the expansion boosts capacity to 30,000 barrels a year.

Great Lakes really began three years before the restaurant opened—and just a year after Christian Schmidt, Cleveland’s last brewery, shut down. At the time, Pat Conway was teaching English to inner city kids in Chicago and Dan was a commercial banker at Huntington National Bank.

For years, the two shared a love for European beers—a taste they had acquired while studying abroad during college. “Those experiences left lasting impressions,” says Pat. “Dan and I talked all the time about how we should bring that European beer taste to Cleveland by opening a microbrewery.”

Beginning in 1985, they spent two years developing a long-range business plan. While their dreams were big, their wallets weren’t. Out of necessity, they committed to slow and careful growth. But when they incorporated in 1986, they chose the name “because we wanted to set the goal of expanding to the entire region at a later date,” Pat says.

Great Lakes Brewing Co. opened in September 1988 on Market Avenue in the depressed Ohio City neighborhood. With four of their own beers on the menu and just two brewing vessels, the Conways juggled to keep their featured product on tap.

Well before opening, the Conways hired Thaine Johnson—a former Christian Schmidt brewmaster—out of retirement. His job was simple: make good beer.

Johnson’s first step was an expedition to find some used brewing equipment. He called the Conways from Colorado, saying he had located the perfect setup.

With the money already allocated, the brothers hopped on a plane, prepared to write a check for the $100,000 asking price. But the evening before they were to sign the deal, the trio met for dinner at a restaurant outside of Boulder. As they discussed the deal over beer, Johnson started to identify things that were less than ideal about the equipment.

After still more beer, they decided to make a swing through California’s microbreweries to see what else might be on the market.

A few days later, on the plane back to Cleveland, a disappointed Johnson told the Conways he didn’t like anything he’d seen and suggested designing their own plant.

The ideas were scribbled on scrap paper, and when they arrived in Cleveland, Johnson called an old friend from his brewing days to help design the brewery, while the Conways found a manufacturer in Dayton to build it. “It ended up costing a little bit more in the end,” says Pat. “But it was exactly what we needed.”

The Great Lakes start-up had been funded with the Conways’ own money; Pat sold a piece of property he owned in Chicago and Dan liquidated some of his investments. But by 1987, a year before they opened, it became obvious that they would need outside capital. The main problem was scraping together the most basic financial projections.

“There weren’t too many breweries in the nation,” Pat says. “The ones that were around were closing, not opening. Restaurants were closing, too. So we not only picked two industries that people don’t traditionally lend money for, but then we were looking at a location in a depressed part of Cleveland.”

The Conways contacted the California breweries they’d visited while looking for equipment. Those owners graciously opened their books to the young entrepreneurs. “We poured over tons of projections,” says Dan. “Those really helped us put some solid figures in writing.”

In part because of Dan’s former ties to Huntington, when the duo approached the bank, they were quickly approved for a $400,000 loan.

By the end of 1989, its first full year of business, Great Lakes produced 750 barrels of beer—roughly three hours of worth of production atthe old Christian Schmidt. The Conways delivered beer to three wholesale accounts—one each on the Cleveland’s W est, East and South sides. Total revenue: $1.5 million—mostly food sales.

Theirs was the kind of early success that so often leads to distraction and mistakes. The more aggressively the Conways stuck to their business plan, the better they looked. And the better they looked, the more their phone rang with opportunities that were flattering, enticing and outside of their focus.

“Over the years, we’ve been approached by more people than you can imagine who wanted us to make beer for them and put their label on it,” says Dan. “We’ve always had the resolve to say no. It’s just not part of our strategy.”

The Conways also were approached to open a second location of their restaurant in Columbus. The idea of rolling out a nationwide brewpub franchise has also been tossed at their feet.

While they believe they now have enough restaurant management savvy to make it work, they’ve stuck with a plan that makes them brewers rather than franchisers. They have expanded six times, each effort larger than the one before it. In all cases, the expansion was driven by their plan to build a name brand for their beer—rather than the unforeseen opportunity that so many other entrepreneurs would seek.

But even within the constraints of their strategy, the Conways must resist the temptation to grow on a near-daily basis. For example, as their brewing capacity and financial stability increase, the brothers have stuck by their original promise to maintain product quality by only brewing enough beer to meet standing orders.

Store owners who want to stock up on extra Budweiser for the Super Bowl or Memorial Day weekend merely have to wait for the beer truck to arrive, and they can get what they want.

But with Great Lakes, distributors must place advance orders with the brewery. If a customer wants extra, the distributor can’t get it.

There’s a reason. To maximize its flavor, the beer isn’t pasteurized or infused with preservatives. It has a 90-day shelf life under refrigeration, compared to six months warm for big national brands.

“You have to educate them about how to store our beer. It’s a quality issue,” Dan says. “We treat inventory in everyone’s warehouse as our own.”

The distributors hate it—but overlook it because the beer sells well and is in constant demand. Still, they are constantly nagging Great Lakes to change its brewing policy. The Conways, in usual fashion, say that’s not in their plan.

“Our strategy at every turn addresses quality and customer satisfaction,” maintains Pat. “We’re not Anheuser-Busch or Miller and we’re not trying to be them.”

While the adherence to a “pure product” doesn’t always sit well with distributors, it has impressed the bankers.

“It takes a lot of discipline to say no,” offers Douglas Wigton, a loan officer at Huntington National Bank.

Huntington has financed several Great Lakes projects, most recently issuing a letter of credit to back $5.7 million in industrial revenue bonds for the latest expansion. “That’s one of the things that’s given me a lot of confidence in them. People approach them all the time and beg them to expand. And they just don’t do it.”

Explains Pat, “If we’d gone and tried to pursue those other plans, it would have taken us away from our focus. We walk away from more business than we would know what to do with. But don’t get me wrong, you do get very enamored by the dollars people try to throw at you, so it’s easy to see why other breweries do it. But when you do a gut check, you find out that what they’re asking us to do doesn’t satisfy either our economic intuition or business sense.”

Even after building a 10-year track record of level-headed decisions, the Conways protect their business carefully. The most recent expansion included plans for a corporate tasting room overlooking the brewing floor. It would be used for private parties, high-level entertaining and the most important kinds of dealmaking.

But the room—a little bit of easily justified luxury that ought to be due after 10 years of success—is now on hold. The production end of the expansion cost more than expected.

“We’ll finish that when our cash flow allows,” Pat says, when giving a tour of the roughed-in tasting room. “Until then, we’ll take people for tours of the new plant, then bring them back to the restaurant for a tasting.”

“Two years ago, when we started on this expansion, that was a decision they included in the proposal,” says Wigton, their banker. “If they had money left over, or if they found it along the way, they’d build the tasting room. But they were adamant about moving it to the next phase of Great Lakes’ growth if they couldn’t afford it. They just don’t sway from their plan.”

No plan is perfect, and even baby steps occasionally fall in the wrong place. Consider the Conways’ first effort to upgrade their bottling line in 1990. Until then, Pat says, “it was brain damagingly slow. Each bottle would be filled, then handed to the next guy, who’d cap it. It took all day to fill 30 cases of beer.”

When they started shopping for a bottling line, they didn’t find anything for less than $30,000. “We didn’t want to spend that kind of money,” says Dan. “But bottling by hand was very time consuming and unprofitable. So we decided to build our own machine.”

It took just $10,000 and a few months time to put something together. It took even less time—but more money—to figure out that the contraption wouldn’t work.

“We just kept throwing money at it,” admits Pat. “We shouldn’t have done that, but we were trying to grow slow. Finally, we bit the bullet and bought that $30,000 machine.”

They’ve since added a faster line, but the homemade machine still has an important job at Great Lakes Brewing: It serves as a reminder of the mistakes the Conway brothers are capable of making.

“It’s still upstairs in the corporate offices,” says Dan, “with a potted plant in it.”

Last year set an important milestone for Great Lakes Brewing. Not only did the beer business grow larger than the restaurant business, the company entered 1998 with plans to brew about 15,000 barrels—the top capacity, according to the Institute for Brewing Studies, for a microbrewery.

It completed the year with the ability to brew twice that amount, officially putting it in the industry category of regional brewers—a title the Conways will have to be satisfied with unless they can figure out a way to make and sell more than 2 million barrels.

But that, the brothers insist, is not in their plan.

“We’re convinced this is not a national deal,” says Dan. “It’s a regional one.” The Conways define the Great Lakes region as Minnesota to Western New York, and as far south as Cincinnati.

They have plenty of work to do before they cover it all, and if they succeed, it will be one city at a time.

They’ve hired an ad agency to help develop a strategy for making Great Lakes beer a household name in their target markets and they’ve started looking for distributors to handle their fresh, chilled beer.

And if their record holds up, they will succeed. Great Lakes will become the best-known, most-purchased craft beer around the Great Lakes.

It’s just going to take some time. You can plan on that.

Monday, 22 July 2002 09:56

Turning scrap metal into money

Midland Aluminum Corp. didn’t like turning away business and upsetting long-time customers, but the specialty cuts they wanted were putting a strain on the bottom line. It wasn’t part of the company’s repertoire, explains President Chuck Pariano Jr.

Not only did it cost more to do the work — transactions pass through at least five different employees’ hands — but the custom orders created scrap metal, which Midland had nowhere to sell. “It wasn’t cost efficient to pull one piece of metal out from a 1,000-pound bundle to cut a single six-inch piece,” he says.

So it wouldn’t lose money, the Cleveland bulk metals distributor had to charge for an entire piece of metal when they requested a custom cut. That didn’t sit well with Pariano’s customers. “We were irritating them,” he says.

Last year, Pariano decided he’d had enough. Rather than continue to upset his customers — many of who had been loyal to the company for 30 years — Pariano opened a subsidiary, Midland Xpress Metals, to handle customized orders.

The subsidiary also solved a different problem. Explains Kurt Tarkany, manager of Midland Xpress, “We’d get calls all day long from people looking for small things, much smaller than we’d normally carry. There was no way to justify the cost of pulling a large sheet or pipe of metal from Midland’s stock, then cutting it down just to fill a single small order from a new customer.”

Midland’s problem isn’t unique. Many bulk distributors find themselves pigeonholed into servicing just one group of customers. The subsidiary solved that problem as well.

Since Midland buys its aluminum, brass, copper and stainless steel as part of large orders, then sells it — as is — whatever customers didn’t buy was left over as odds and ends in the warehouse. Now, those leftovers become part of Midland Xpress’ inventory. And the inventory grows regularly.

Tarkany says while Midland Xpress now handles the parent company’s special orders, the subsidiary’s real focus is on smaller companies, which need only a few metal pipes or bars, and do-it-yourselfers. The odd-sized metal produced from each custom cut finds a home in a different bin in the company’s inventory.

Tarkany says Xpress transactions require only one person instead of several departments worth of people.

“It’s a better use of our resources,” he says.

How to reach: Midland Xpress Metals (216) 267-7893

Monday, 22 July 2002 09:55

The management game

Scott Madzia, manager of corporate accounts for Nextel, demands a lot from his top sales people. “It’s tough sometimes to manage great sales people,” he maintains. “They’re often arrogant and cocky.”

It is the attitude of those overachievers, however, that separates them from the ones who struggle to meet their monthly quota.

“I treat top performers harder than others because the expectations are higher,” Madzia says. “It’s a pitfall for some managers, though, because other reps see all the attention they get and feel shortchanged.”

Madzia is not alone with his dilemma. As any supervisor who manages superstar talent knows, there is a fine line between giving top performers what they need and ignoring the rest of the staff. The last thing you want to do is neglect young sales people who may need, or want, a little extra help to get them over the hump.

The balancing act means ensuring the stars don’t rest on past laurels and let their numbers fall.

“I don’t want my top guys to get comfortable,” Madzia says. “I want them to keep their edge.”

Keeping that edge is what helps drives superior sales numbers month after month, maintains Joe LaGuardia, regional vice president of Ohio Sales for Anthem Blue Cross and Blue Shield.

“Fire in the gut is what keeps salespeople in the top 20 percent,” he says, referring to the commonly held perception that 20 percent of your sales force produces 80 percent of your revenues. “It’s like Vince Lombardi said, ‘If you’re not fired up with enthusiasm, you’ll be fired with enthusiasm.’”

It’s why LaGuardia gives his top people as much of his time as they need.

“I tell them I’m available from 6 a.m. to midnight, seven days a week. That way, they’ve got my attention if they need it.”

LaGuardia combines that access with extensive freedom, letting his most consistent performers make command decisions without micromanaging.

“They know what needs to be done without me,” he says.

When his input is required, it is usually to land a major account or lend his expertise to a large-scale project.

But not every sales manager subscribes to the let-them-loose-and-see-what-happens theory.

“They have to be coachable,” says Paul Hanna, president of Meritech Blue. “Sales people are not born, they are developed. There is no such thing as a natural born sales person. They have to be trained. That’s not to say they don’t start with those talents, but they have to be brought out and developed properly. I’m a firm believer of constant training.’

At Meritech Blue, sales people — even the top ones — undergo weekly training sessions to keep them sharp. “I preach one thing,” says Hanna. “A disciplined, well-trained, highly motivated sales force.”

Despite any difference in philosophy, the desired result is the same — production.

So what happens when your sales people hit upon a formula that works and duplicate it over and over? Madzia says at that point, it’s important to devise new challenges to keep their competitive spirits active.

“I’ll challenge my guys to come up with new applications for existing accounts or other ways to improve their numbers,” he says.

Another school of thought is to give them more responsibility, such as tutoring other sales people.

“We’re a team,” explains Michael Faix, manager of sales and marketing for Great Lakes Computer Corp. “Individual accomplishments are part of a bigger whole. The very best sales people are those who not only meet and exceed individual goals, but also assist others in meeting their goals and improving themselves.”

At Sprint PCS, district sales manager Chuck Schiffhauer offers his top sales people the opportunity to get involved in the planning process.

“It’s motivational,” he says. “A smart manager knows when to jump in and assist when he sees his top guys’ eyes starting to wander. I’ll get them to start thinking about ideas which can help improve our entire organization.”

But no matter what your philosophy for managing top sales people, one constant remains: Do whatever it takes to keep them performing.

“Sales is not an easy profession,” Schiffhauer says. “And you have to treat every person in it differently.”

Monday, 22 July 2002 09:55

In the line of hire

There’s a quote next to Chuck Schiffhauer’s desk that reads “Failure is not an option,” and every member of Schiffhauer’s nine-person sales staff at Sprint PCS is indoctrinated.

When the company launched its Northeast Ohio operations last year, Schiffhauer painstakingly interviewed more than 120 people.

“I wanted people with winning attitudes who you’d never hear say something won’t work,” he explains. “I probe very carefully when I’m interviewing to make sure the person I’m getting is what’s advertised.”

He has developed a carefully crafted set of interview questions, which he uses to build a profile for each prospective hire. The questions cover six areas: work standards, energy, resilience, initiative, change agent and motivational fit. In 15 years of sales management, Schiffhauer has found a common thread among every successful person he’s hired through this process: “They have blind optimism in their own abilities. There isn’t anything that would prevent them from being successful.”

And if there is a consensus among other sales managers about the search for the best of the best, it’s that sifting out the wannabes from the real deal is an art unto itself.

“Everyone we interview is sky high,” explains Paul Hanna, president of Meritech Blue. “He or she tells me they plan to conquer the world. But unfortunately, for some of them, that’s the peak of their career — the interview.”

The interview process is a chess match. On one side, the interviewer tries to discover the prospect’s true character. On the other, the prospect’s goal is to land the job — no matter what it takes. “The best sales people make the right decisions when they’re under pressure,” explains David Browning, general manager of CB Richard Ellis. “And that includes when I’m grilling them in the interview.”

Ned Bergen, sales manager for Northcoast Business Systems, looks for the three Ds — drive, determination and desire — when he’s sitting across from a prospective hire.

“I want someone who has a pure unwillingness to quit,” he says. “And they have to be someone who wants to go out and light the world on fire. You can tell from how they carry themselves during the interview what kind of person they are.”

And once the decision to hire is made, how long should you wait before demanding results? It depends on the industry ... and your patience.

“The first 60 days are critical,” says Scott Madzia, corporate accounts manager for Nextel. “Some find success fast and then coast. Others struggle out of the gate and never catch up. But the best ones start strong and keep giving you that effort.”

For Mari Sloan, vice president of sales for OBM, the timeline calls for six months.

“You’ll know by then whether they’ll ever be a top performer,” she says. “If you see their results aren’t improving, then you have to question whether they’re able to handle the job.”

At the far end spectrum, Browning says it takes up to five years before “you see someone who you know hits the ball out of the park.” That, he explains, is a combination of three years to learn the real estate business and another two years to develop consistent superior performance.

Often, top performers sparkle from Day One. For example, after Schiffhauer hired account rep Aaron Gonzales, his sales results grew every month. By Gonzales’ third month, he set a company record with 203 phones sold. “It’s an obsession with me,” explains Gonzales, who says he once made a pitch while watching a baseball game at Jacob’s Field. “My wife hates it. I’m always looking for opportunities to sell.”

Adds Schiffhauer, “The sales person who isn’t will never succeed.”

Monday, 22 July 2002 09:55

Grill test

Every interviewer asks tough questions. But Chuck Schiffhauer at Sprint PCS has made difficult an art form. Here are 10 questions he uses to cull the cream from the top of the candidate barrel:

  • n Tell me about the most memorable time when you weren’t pleased with your own performance. What did you do about it?

  • In your current position, how do you define doing a good job? Are you doing a good job? How do you know?

  • Tell me about a time when your job demanded extensive effort. How did you handle that demand?

  • What job activities do you find require the most energy? What did you do to maintain your energy level?

  • Tell me about a time when you were competing with another person and lost. What was the situation? How did you respond?

  • What have you done differently from your peers in your organization? Why have you done things differently?

  • Have you made any recommendations to your manager recently? Give me an example. What happened to the idea?

  • Describe a situation in which you had to adjust quickly to a change in organizational, departmental or team priorities and how that change affected you.

  • Discuss a time when you had to meet a deadline while your work was being constantly interrupted. What made this difficult?

  • Tell me about a time when your work contained a lot of challenging situations. How satisfied were you with that and why?

Monday, 22 July 2002 09:52

The art of giving

A few weeks ago, I had lunch with a friend who owns a small business to discuss the hot trends in his industry. The conversation shifted to the issue of philanthropy, and for the next half hour, we debated the merits of business leaders getting involved in charitable giving.

My friend explained that he didn’t serve on any boards, but his company donates thousands of dollars each year to various organizations. His employees, he added, volunteer their time for worthy causes. They help build houses for Habitat for Humanity, hold food drives for the United Way and dole out meals at area homeless shelters.

“What about personal involvement?” I asked. “Do you donate any of your own time or money to worthy causes?”

My friend nodded. He said he was a volunteer for a local nonprofit agency. I asked what motivated him.

“Because I strongly believe in what they do.” he replied.

His answer made me think about other reasons corporate leaders get involved with charity. Do some do it out the goodness of their hearts? Do any do it to make their companies look good in the eyes of the community?

Lacking an absolute answer, I turned to an expert. My fiancée, Laura, has been a professional fund-raiser for nonprofit agencies for the better part of 10 years. I put the question to her, and she explained that she’s found three reasons why CEOs and other business leaders get involved in philanthropy:

  1. To be good corporate citizens.

  2. To contribute something back to the community and support the people who support them.

  3. Because they truly believe in a particular cause.

All sounded like reasonable answers, but being a journalist, I had to explore the subject further. Over the next few days, the issue of corporate philanthropy became a sort of philosophical quest. I was going to determine once and for all why business leaders give back to the communities they live and work in, and I wouldn’t rest until I was satisfied with the results.

One colleague suggested I look to Spanish rabbi and philosopher Moses ben Maimon (Maimonides) for an answer. Maimonides, he reminded me, developed an eight-rung ladder which ranks the various levels of giving, from the most virtuous to the least virtuous.

The most virtuous, Maimonides espouses, is a gift that prevents another person from becoming poor by providing him with a job or by lending money to help him through a difficult time. At the other end of the spectrum is charity which is given grudgingly.

Interesting, I thought. But still not a complete answer.

Later the same day, I received a letter which contained the results of a survey of business executives on the subject of community involvement. Now we were getting somewhere. According to the Institute for Educational Leadership, here are the five main reasons executives themselves cite:

  1. Giving something back

    They note their obligation to help those who have been left out of society’s riches, particularly children.

  2. Going beyond philanthropy

    Direct personal involvement provides more satisfaction, they say. And it provides greater value than simply writing checks.

  3. Making things work

    Giving back provides the opportunity to pass along effective business principles to help rebuild poorly functioning public service systems.

  4. It’s good for business

    Improving life for people in low-income neighborhoods is good for business. It results in a better-qualified work force and healthier neighborhoods.

  5. Advocacy

    There’s something to be said about believing in — and working toward — a cause. Your heart is in your work.

I spent the next hour reviewing the survey results and all the notes I’d made during my short-lived quest. And here’s what I’ve learned about the art of giving:

  • Don’t get involved because you feel obligated; get involved because it’s what you want to do.

  • Choose something about which you’re passionate. If you don’t care about the cause, it’s not worth your time or effort.

  • Finally, the bottom line is that community involvement is one of those rare decisions that benefits everyone. Nobody loses. And those are, without a doubt, the best — and smartest — decisions any business leader can make.

Dustin S. Klein (dsklein@sbnnet.com) is editor of SBN. He donates his time to serve on the PR committee of Achievement Centers for Children and as editor of The Press Club of Cleveland’s monthly newsletter, the Byliner.