Morgan Lewis Jr.

Friday, 19 July 2002 06:10

Tax terror

To attract and retain young, high-tech talent, many savvy employers offered Incentive Stock Options. Employees watched as stock prices reached feverish heights, only to plummet unmercifully later.

As if that weren't bad enough, employees who exercised those options while the market was hot now must pay taxes on profits they may never see, thanks to the Alternative Minimum Tax.

"It's been in the law for a number of years, and the theory behind was, at a minimum, all taxpayers should pay a certain level of tax," says Robert Burak, partner in charge of tax services at Grant Thornton LLP in Cleveland. "The AMT system is designed at scaling back the incentives in the tax code today. That's essentially what they're aimed at doing."

For example, let's say the fair market value of the stock when the Incentive Stock Option was gifted was $10 per share. You exercise your option, get the stock, and it's worth $20 per share, even though you only paid $10.

For regular income tax purposes, you don't have to declare that additional $10 until you sell the stock. However, if you apply the AMT, it recognizes the extra $10 as income and the government gets its cut.

"Basically what AMT income is, is the difference between the fair market value when that option was granted and what it was when you exercised it," says Edward Decker, a senior associate at SS&G Financial Services in Akron. "It's something so small you don't know it until it happens to you."

In theory, the AMT was created as a prepayment on income a stockholder would earn when he or she sold the stock. The stockholder can earn credit down the line on taxes paid now, but due to the convoluted nature of the law, few taxpayers can claim much more than $3,000 a year in AMT credit.

It's not just the dot-com millionaires who are getting hit by the AMT this tax season. Taxpayers who itemize and deduct state and local taxes from their federal income tax return could find themselves triggering the AMT -- especially if state and local taxes are high in their area, Decker says.

"We see it a lot, and it's not necessarily the high-income taxpayers," he says. "State and local taxes are not allowed as an itemized deduction for AMT purposes. That's the biggest adjustment we normally see. Maybe going forward, we're going to see more of the Incentive Stock Options going on."

What can you do? Obviously, consult a tax adviser, although it is a little late to do anything about it this tax season. Those who have exercised their Incentive Stock Options should definitely seek help before an unexpectedly large tax bill lands in their mailbox.

Selling the stock before year-end is usually an option, but some Incentive Stock Option plans prevent the employee from selling shares in the same year the option is exercised.

"Everybody's facts and circumstances are much different," Burak says. "It all depends on the number of shares being issued, the fair market value of the stock, the level of other income the individual makes.

"But the key point is, don't wait until year-end to do it." How to reach: Grant Thornton LLP, (216) 771-1400; SS&G Financial Services Co., (330) 668-9696

Morgan Lewis Jr. (mlewis@sbnnet.com) is a reporter at SBN Magazine.

Friday, 19 July 2002 05:54

An award of their own

Barbara J. Danforth is appalled.

Perusing a list of the 53 highest paid CEOs in Northeast Ohio, she arrives at the bottom with one glaring fact leaping off the page. It's not that the CEOs' salaries are way out of control or that so few people could earn so much money, but that the list does not include one woman.

"This may sound a tad sexist, but when a woman really makes an accomplishment, I think her accomplishments in some ways are superior to those of men because she's got one additional life balance that most men don't have full responsibility for, and that's for their home," Danforth says. "Yes, men are husbands and fathers, but really, the day-to-day operation and management of the home often falls to the women.

"So not only is she managing the home, she's managing some very responsible jobs and she's out in the community, giving back to the community as well."

Danforth, former chief prosecutor for the City of Cleveland and current executive director of the Cleveland YWCA, knows a thing or two about women not getting their deserved recognition in the workplace. That's why she's so proud of this year's five winners of the Women of Achievement Award, which honors women who have not only succeeded in their profession but who have made a commitment to their community.

"Typically, when you see awards being given in this community, they're given to a group of men who are in that group of 53," she says. "Even though women have made enormous strides, women are not receiving the kind of recognition that they are due for the wonderful things they are doing in this community. They are often the unsung heroines of this community, and that's why the YWCA believes it is very important that in a very large public forum these women are recognized."

The Greater Cleveland Women of Achievement Award is celebrating its 25th year on May 7 with winners from the areas of government, law, finance and art. It dates back to a time when women climbing to the upper echelons of corporate America were very rare, almost unheard of in Cleveland. The award was first known as the Woman of the Year, but the name was later changed and expanded to reflect the growing presence of women in the business market. There have been as many as 10 awards presented in a year and as few as one.

The event gives companies the chance to recognize women within their organizations with the Women of Professional Excellence Award. Winners are selected by company owners and awards presented before the Women of Achievement Awards.

"Oftentimes within corporate America, within businesses of America, there are women that are doing outstanding work," Danforth says. "Now they may not be the CEO and they may not be within the prominent or visible position; nonetheless, they're doing some pretty incredible work within the organization. So we offer businesses the opportunity to identify these women and have them honored at a very, very large, visible, prestigious event."

Leaders in the community

The Women of Achievement Award not only recognizes women for accomplishments in their professions, but for a proven commitment to their communities as well. The dedication must reflect the Cleveland YWCA's mission "to empower women and eliminate racism," a motto the organization adopted in 1971.

"If we do not have people who have time, talent and treasure to give back to our community, our community suffers," Danforth says. "As my mother used to say, 'To whom much is given, much is expected.' Again, that is a philosophy that the YWCA operates under. For women who have much to give, there is some expectation that they will be willing to open their hearts and their minds and their purses to give back to their community."

Likewise, the Eleanore M. Sutler Equality Award is presented to a company that has shown a commitment toward promoting women and minorities within its organization. This is the sixth year for this award, although it's only given if a company has proven itself in the eyes of the YWCA's independent panel of judges.

This year, it will be presented to The Plain Dealer.

And the award goes to ...

Heather Roulston Ettinger, a principal at Roulston & Co., a Cleveland-based investment management firm, is one of this year's Women of Achievement Award winners.

She co-founded the Women Managing Money program for the Women's Community Foundation and manages the Solutions for Women program. Both are values-based education programs focused on investment management and charitable giving.

"It helps women become advocates for their money and make sure that they are not only smart in terms of managing their money but also in the way they give it away," Ettinger says. "They have to ask themselves, does it support their values? Is it consistent with what their priorities are?"

Ettinger's rapid climb from an equity sales trader in Boston to principal at Roulston shows she has paid her dues in the male-dominated field of investment banking. She therefore doesn't mince words when discussing the differences between men and women in the business world, and the contribution women make.

"Women are agents of change," she says. "If you look at, for example, in the workplace, when women started getting more vocal about maternity leave, that led to not only maternity leave, but paternity leave and family leave. In the not-for-profit world, it's very much the same thing. Women tend to be focused on not just treating what the current ailment is, but looking at what's causing the disease, what's causing the problem and trying to be focused on that."

This year's other Women of Achievement Award winners are Inajo Davis Chappell, Ulmer & Berne LLP; Nancy C. Cronin, government liaison for the Cleveland Port Authority; Marcia L. Fudge, mayor of Warrensville Heights; and Phyllis Seltzer, artist. How to reach: Cleveland YWCA, (216) 881-6878

Morgan Lewis Jr. (mlewis@sbnnet.com) is a reporter at SBN Magazine.

Friday, 19 July 2002 05:30

911 for your IT

Acting like a paramedic squad for your PC or network, companies such as Middleburg Heights-based Response Time are cornering the growing market of servicing companies' emergency computer system problems.

With one phone call, Response Time's technicians can swoop in with a new hard drive and get it up and running or fix a network glitch or hook systems back up to the Internet. Thanks to the demand, the company reported double-digit growth in the last few years.

Launched in 1987, Response Time's revenue is on the upswing again due in part to a reworked business plan. Previously, it serviced only broken PCs and printers, but in the 1990s, when PCs became as cheap and disposable as safety razors, company president Bill Russell knew a strategic change was in order.

In response to the changing technology landscape, the company began focusing on overall system maintenance, and it paid off.

"The profitability has been on a steady increase, and right now, we're starting to pick up again," Russell says. "The networking and software support is growing quite rapidly because there are a lot more computer problems that aren't related to an actual malfunction of a piece of hardware breaking."

Due to the company's success, Russell went from working alone to employing 15 technicians and office support staff. Following are a few simple tips to help prevent a computer system meltdown and a subsequent employee meltdown.

Don't fix it yourself

What starts out as a small glitch can turn into a complete meltdown when frustrated employees try to fix problems themselves. It's usually better to let a professional solve a major computer problem, not only to prevent damage to the system but to save hours of wasted productivity.

"The company doesn't see that cost," Russell says. "It's not like writing a check to an outside company, but all of a sudden their office manager or their bookkeeper, or it might be one of their engineers, is spending half of their time tinkering with computers and not doing their full-time job."

Protect against viruses

Thanks to DSL and always-on Internet, the computer virus has re-emerged as a newly fortified threat to computers and computer systems. Vigilance is the key. Update your computer system's virus protection software at least every three months, says Russell.

"It's something you have to go and do. Some software updates automatically, but it's not terribly common."

Keep up with printer maintenance

Even with the trend toward paperless offices, many offices still live and die by the laser printer, one of the items for which Response Time gets the most frequent emergency repair calls. Russell recommends preventive maintenance for your printers, especially before busy times of the year.

Printers usually give warning signs a technician can spot before they malfunction.

"We have several of our larger customers who do it on a regular basis and they just don't have the emergencies anymore." How to reach: Response Time, (440) 243-8080

Morgan Lewis Jr. (mlewis@sbnnet.com) is a reporter at SBN Magazine.

Friday, 19 July 2002 05:02

Evolution

Mo Saedi doesn't have the same problems selling wireless phones that he did 16 years ago.

When the concept of a portable phone was still a novelty, Saedi struggled to convince a wealthy Cleveland doctor that he could indeed drive along I-480 and talk to his grandson in Germany at the same time.

It's a comical image, especially considering that today, every other driver seems to have a cell phone glued to his or her ear. But back in 1985, the good doctor wasn't swayed by Saedi's sales pitch.

"He thought I was some sort of con artist," Saedi says in the soft Persian accent of his native Iran. "So he and I got in my car and made a call. He talked to his grandson, and then he believed that, yes, it was happening. Today when you go to a restaurant and a phone rings, seven or eight people reach for their phone."

Few could have predicted today's wireless phone boom back in the early 1980s, when Saedi joined in. At the time, industry analysts predicted that, at most, there would be between 1 million and 1.5 million wireless phone users in the United States by 1999. Instead, was closer to 100 million users. Many companies, including AT&T, followed the analysts' advice and steered away from the burgeoning market, only to spend billions playing catch up in the 1990s.

But Saedi knew that mobile phones -- like all technology -- would increase in quality and become affordable to the average consumer. Progress was slowed, though, because in the early 1980s, there were only two cellular phone service providers in the Cleveland area -- GTE and CellularOne.

The two companies held a duopoly over the area and offered almost identical services, quality and prices. Saedi was one of the few competing entrepreneurs in Northeast Ohio excited about the new industry.

"It was incredible how this thing could make a huge change in your life," Saedi recalls. "As an early user, I realized I don't have to wait on a pay phone for two hours. I don't have to search for one only to find out it's not working. Plus, the useless time suddenly became useful time.

"Then I started to really push it, and in the early stages, it was very difficult."

By the late 1980s, cellular phones were primarily installed as car phones for busy, wealthy executives. The first truly mobile phone manufacturer to hit it big was Motorola when it released the MicroTec flip-phone, ranging in price from $1,700 to $2,500 and weighing at about 15 pounds. Before that, the first portable phone was $4,500 and was called the "brick" phone, for obvious reasons.

Saedi displays one of the first versions in his Valley View office headquarters.

Because of its tremendous cost, Saedi leased the bulky phones to customers for between $29 and $59 per month.

That changed in 1989, when the price of mobile phones dropped from between $799 and $1,000 to nearly half that amount. Saedi recalls when his company, then called Call Comm Inc., ran a newspaper ad one Sunday advertising the new, lower-priced phones. The response was overwhelming, and not just from wealthy clients.

"We thought it was a big revolution," Saedi says. "I'll never forget that day. The following day, we had a six-line phone and all lines were busy. People were coming in (to buy it). It became the phone that everybody wanted to have."

That response prompted Saedi to change his strategy. He realized cellular phones were no longer a luxury item only the privileged could afford. They were a tool that could not only change the business world but also how everyone communicates.

"We needed to become more of a consumer product as opposed to just a B2B product," he says.

By the early 1990s, Saedi was meeting regularly with other GTE cellular phone retailers in the area to discuss a possible merger. Five companies were involved in the original talks, but only three -- Saedi's Call Comm, Spectrum Communications Inc. and Cleveland Systems Cellular Inc. -- eventually joined forces in 1996 to become United Wireless.

The deal put United Wireless on the map with seven stores across Northeast Ohio. Soon after the merger, one partner dropped out. A year later, despite rapid industry growth, the other partner exited. Saedi was left as sole proprietor.

"It's always difficult to match three cultures," Saedi says. "It takes a long period of time because everybody does things differently. But I believed in the product and the technology. I also made a commitment to the people who started to work here.

"We had a plan and we said we were going to execute it. You cannot let people down. That is probably most important to me."

In wireless phone terms, 1998 was the year when Cleveland changed from a two-horse town to one of the industry's most sought-after regions.

Suddenly, six companies were battling for consumers' airtime. Few other cities of Cleveland's size have as many cellular and other wireless phone carriers available.

"It's a very competitive environment, and the carriers want to protect their turf as much as they possibly can," explains Brett Dodridge, general manager of sales operations for United Wireless.

With so many new carriers in the region, Saedi saw value in offering products from other providers. Up until then, he'd focused his efforts on GTE. So in 1999, he began negotiations with GTE to allow him to carry other carriers' products. It was one of most difficult sales jobs of Saedi's career.

"It's typical in a business case that you want to control your distribution," Saedi says. "And they controlled me for 14 or 15 years. But it came to the point where the market changed their attitude. It was a matter of sooner or later, and they were smart enough to do it sooner.

"We really sold them on the vision that if we offered the customer everything out there, then the customer is going to be happy. And hopefully, you'll be able to get your majority share of the business."

Saedi's prediction proved correct. When United Wireless became a multicarrier provider, Saedi flooded local radio airwaves and ran newspaper ads offering deals not just from GTE, but from Sprint PCS, Nextel, Cingular (formerly Ameritech), AT&T and Alltel. The marketing campaign was a success.

Last year, he opened his 15th store in Northeast Ohio and begin plans to expand into other regions of the state.

"(Our carriers) also recognize the vision that Mo had that by having a choice, you can attract more customers to your locations, thereby having a greater opportunity to reach more customers through your distribution point than if you only had one product," Dodridge says. "It has proved out in every case. Now our carriers that we partner with embrace that philosophy. Initially, some of them resisted it."

Saedi is not alone in offering a choice of carriers, and he knows it.

The big box electronics retailers usually carry more than one provider, as do supermarket and discount store chains. Saedi believes his edge over competitors is his employees.

He has an on-site trainer to regularly update his staff on the latest advances in technology, new airtime rates and special offers.

"We have probably the clearest and most knowledgeable sales staff that you can find in this market, and I'm very comfortable to say, in the state of Ohio," Saedi says. "We'll put our company against any mass merchandiser or direct carriers themselves, or any agent."

Despite his confidence, Saedi refuses to rest on his laurels. During one of the company's strategic planning sessions a few years ago, he highlighted training as one the company's core competencies. But he also pointed it out as one of the business's competency gaps. He says he recognized without continuous training and retraining, United Wireless would fall behind the trends.

And that, he says, would be the first step to closing its doors.

"On a daily basis, we look at how we can improve that training so that when a consumer walks into one of our stores, we can answer every question," he says.

Saedi's dedication to his people has resulted in twice being named a "North Coast 99" award recipient, recognizing United Wireless as one of the region's best places to work. The company also received an Outstanding Achievement Award in the area of Training and Education.

But at the end of the day, it's all about the products Saedi is able to offer his clients. The wireless phone of 15 years ago looks nothing like today's small, light, high-speed offspring. To predict what the devices will be like in another 15 years is almost impossible. There are already prototypes of handheld devices that allow users to join a videoconference while they change their schedule, download an .mp3 file and burn a small compact disk right in the handset. And that's just within the next few years.

"We have something exciting here," Saedi says. "I feel it's in its infancy. We are between the second and third generation of wireless, and I think that we can be a force in this market and really influence the consumer market."

And to think that less than 20 years ago, Saedi could barely convince somebody that he could call Germany on one of these things.

How to reach: United Wireless, (216) 573-9000

Morgan Lewis Jr. (mlewis@sbnnet.com) is a reporter at SBN Magazine.

Thursday, 18 July 2002 13:10

The business of play

Michael Ziegenhagen may be almost 50 years old, but as he strolls through the aisles of his Pepper Pike toy store, Playmatters, it's as if four decades suddenly disappear from his age.

And who could blame him? Ziegenhagen's three lively toy stores on Cleveland's East Side are decorated to dazzle the eyes and hearts of even the most grizzled adult. Each store has the same fire engine red carpet, brightly colored toys and boxes artfully displayed on wood shelves, with small, kid-sized kiosks bursting with the season's hottest toys.

Today, that toy is the Rocket Balloon. Basically, it's a bicycle tire pump with a specially designed balloon you attach to the end. When the balloon is inflated, you let go of the open end and the balloon flies around the room, air squealing out of it, all to the sheer delight of 2- to 6-year-olds.

While it's not the most educational toy the boutique store offers, it has been flying off the shelves, says Ziegenhagen.

"This is our No. 1 selling outdoor toy, ever," he says, while inflating the multicolored balloon. "You never know where it's going to go."

That uncertainly mirrors Ziegenhagen's life. Ten years ago, when he was a new product developer for Philip Morris International in Lausanne, Switzerland, Ziegenhagen couldn't have guessed he would end up the boutique toy store king of Cleveland. A Wisconsin native, he spent more than 10 years living abroad in Switzerland, France, Germany, the Netherlands and Greece, honing his unique taste in toys.

But it wasn't until the Nuremberg Toy Fair in 1992 that he fell in love with the idea of selling them.

"In the traditional German market, they're really into product aesthetics," Ziegenhagen says. "They really have an acute sense of product design and product display, color, lighting, so it's a very, very visual experience. You're looking at stuff that's more than toys; it's almost as if you're looking at art.

"It's hard not to have a real strong emotional reaction."

Toys just helped solidify his vision. Ziegenhagen was already thinking about going out on his own after his tenure in the marketing department for Philip Morris and later, at American Greetings and Bonnie Bell, both in Cleveland.

Weary of the rules and bureaucracy of the corporate world, Ziegenhagen realized in the early 1990s that he wouldn't be satisfied unless he was his own boss. The question then became, did he want to buy a franchise, buy somebody else's business or tackle the most challenging option and start his own venture.

"Finally, after looking into it for quite some time, I realized I wasn't going to pay somebody a franchise fee and I wasn't going to pay somebody their inflated price of their business," he says. "I decided to create my own business, which would be a whole lot better than a business anyone could sell me or franchise me."

At the time of the 1992 toy fair, Ziegenhagen was the father of three elementary school-aged daughters. All parents know the frustrations of dashing from store to store looking for that "must-have" toy, only to find it sold out.

But it was even more difficult for Ziegenhagen to find the quality, developmental toy that perhaps the child doesn't know about. The type of toy Ziegenhagen remembers from his childhood. The toy he calls "heirloom-quality."

"We had sort of this outrage as parents of going to Toys R Us and seeing the mountains of plastic, but we couldn't find the things that we had bought and had been given as young parents in Switzerland," he says. "As a young parent, I was objecting to the toy that you bought today but which you relegated to the garbage in a week."

Knowing what products your customer wants or needs is a skill every business owner must possess. But what if your average end-users are 40 years younger than you? Although they may not fork over the cash, children certainly drive the demand at Playmatters.

But don't expect Ziegenhagen to unveil a detailed, bullet-point chart that breaks down his method for choosing his more than 10,000 items of inventory. It's really more of a sixth sense than a learned skill, he admits.

"You might say it's as intuitive or subjective as finding a spouse," he says. "It's based on your taste. It's based on what you know to be the needs of your customers, but the good toy really jumps out at you.

"When you discover that one item, it almost literally stands up and says, 'I am the right toy!'"

Along with his sixth sense, Ziegenhagen has benefited from good timing. The year he opened his first Playmatters store in Pepper Pike, two big names in the toy industry closed their doors.

Children's Palace and Kiddie City both crumbled beneath the powerhouses of Toys R Us and Kay-Bee Toys. The big box toy retailers had a lock on the Greater Cleveland area, or so it appeared until Ziegenhagen started chipping away at the other stores' market share.

"I was very fortunate in coming to Pepper Pike for our first location because I met with a very highly educated and very discerning consumer," Ziegenhagen says. "I met with a consumer who understood what I was about and appreciated the mission I had given this business and wanted that type of product and service in the life of their child or grandchild."

Ziegenhagen can cite several customers who have been with him since the beginning: The grandfather who sends his grandson in Phoenix a toy every month and has done so since the first store opened. The Egyptian-immigrant pediatrician and father of three who selects all his children's toys -- a duty more often relegated to the mother. The grandmother who spoils her only grandchild with toys selected by the store's staff -- an increasingly common occurrence today with fewer grandchildren per grandparent.

These customers, and thousands of others, helped Ziegenhagen open his second store in Shaker Square in 1995 and his third in uptown Solon in 1998. Although it may look like he's on a three-year store-opening cycle, Ziegenhagen says he has no plans yet to open a store this year because he hasn't found the right location.

"We don't just sort of show up in shopping centers or large malls," Ziegenhagen says. "We tend to niche ourselves in strip centers that have an identity with the community or the neighborhood that they serve. I can't overemphasize the importance of a successful, distinctive retail concept like Playmatters is really based on encountering the right consumer audience."

Ziegenhagen doesn't need to look any further than across his dinner table for his advisory board. His wife, Darlene Shibley-Ziegenhagen, is vice president of Yours Truly, a chain of distinctive family restaurants in Northeast Ohio.

"We do a lot of sharing and brainstorming together," he says. "I'm able to really to benefit from her daily operation in running a small chain of restaurants. Staffing issues, system issues, advertising, leasing, they're reoccurring all the time."

Shibley-Ziegenhagen, who runs the chain of six restaurants with her three brothers, says that when the couple moved back to Cleveland with their children, the growth of Yours Truly helped spur her husband to open Playmatters.

"It really worked out well because it was a time when Yours Truly needed the fourth person," she says. "Michael really loved the fact that they excelled as a family-run business and that they would always be a good sense of motivation for him."

That hands-on experience with customers kept Ziegenhagen from leaping headfirst with his competitors into full-fledged e-commerce as the preferred method of selling toys. Headlines declaring the demise of eToys.com, Toysmart.com and RedRocket.com, all online toy retailers, showed that the Internet is not the smartest way to sell toys unless the shopper knows exactly what he or she wants.

Although he does have a Web site where customers can search the catalog and place orders online, Ziegenhagen knows his customers oftentimes need advice, the kind they're not going to get online or at a big box retailer.

"No matter how well the image is depicted in full-color on the screen, and no matter how extensive the accompanying copy is describing the product, you must be able to pick it up, to feel it and to see what the toy can actually do," Ziegenhagen says. "We greet and we actively interact with customers, suggesting toys that are appropriate for the child's age, interests and abilities, and to some extent, season.

"There are very few stores today that provide that level of service."

By the way, Ziegenhagen has never had a store manager leave in his nearly 10 years in business, and his part-time sales staff members only leave when they graduate from high school or return to college.

"I don't overmanage people, and I guess I know from the corporate world what it's like to be stifled by too covetous management structures," he says. "My expectation is that they will maintain a colorful, friendly, engaging atmosphere, and I do all the buying myself. They're given a great deal of personal freedom to run their operations independently."

Playmatters' steady growth has reached somewhat of a plateau with its three stores, Ziegenhagen admits. He believes that opening a new location would require another layer of management, a move he's not sure he's ready to make. He might just wait until his oldest daughter, Libby, 19, is ready to run the business, which she says she intends to do.

"Everyone wants to tell a growth story; the question is, growth at what cost? What are you losing?" he says. "I think a lot of people have said, 'I've leveraged my way and I have 80 locations,' but the truth of it is, a lot of them are surviving on helium.

"My concern is I would be dealing with people who don't share the same love and commitment that's really critical to nourishing and really making the business successful." How to reach: Playmatters, (216) 464-2424

Morgan Lewis Jr. (mlewisjr@sbnnet.com) is a reporter at SBN Magazine.

Thursday, 18 July 2002 13:06

Coach, don't manage

Robert Evangelista was riding high.

He was on a bus on the way back from Lake Placid, N.Y. The hockey team he coached, made up of teen-agers from inner-city Detroit, had just done the unthinkable and won the prestigious Can/Am Challenge hockey tournament against some much better-funded powerhouse teams from Canada, New York, California, Massachusetts and Michigan.

That success garnered national attention. Countless newspapers, newswires, television stations and cable networks ran stories about Evangelista's team. Yet on the drive back to Detroit, the euphoria disappeared.

Evangelista felt a gnawing pain in the pit of his stomach. Even though his team was a success on the ice, at work, his team was on a losing streak.

"I was all gung-ho, but I struggled," Evangelista says. "I struggled for quite some time. And I always had success as a manager and as a leader, so it was really frustrating for me."

Evangelista was promoted to manufacturing manager of a General Motors engine plant at the age of 29. He soon found that everything he had learned about managing was not working at his plant, which had 120 employees and an annual budget of $35 million. His management style quickly devolved into "barking orders and pulling my hair out when things didn't go right," he says.

Meanwhile, he started coaching an inner-city youth ice hockey team called the Detroit Rockies. He says his first glimpse of the team on the ice was amazing.

"The boys had terrific speed and agility," he says. "They loved to play physical, and they all shared the same fire. They just didn't know how to play as a team. We needed to start building a game plan and work it."

Evangelista's success on the ice jolted him to the realization that the same techniques he uses to organize, direct and motivate his hockey team could translate to the engine plant. The plan worked. Under his new management methodology, he reduced operating costs by one-third, increased production by one-half and improved quality nearly 40 percent.

The dramatic improvement prompted him to research the management styles of other successful coaches. He delved into the sports wisdom of football legends Vince Lombardi and Lou Holtz and basketball coaches Pat Riley, Dean Smith and John Wooden. He interviewed hockey coach Scotty Bowman, who not only holds eight National Hockey League Stanley Cup championships, but who also won them with three different teams.

He used these coaches' lessons, along with his own four-part management formula, to write "The Business of Winning: A Manager's Guide to Building a Championship Team at Work." The bottom line? Be a teacher, not a boss.

"What I realized was I was spending too much time in the day-to-day details," Evangelista says. "I had to let go of the details and I had to step back. I had to become a teacher."

Here is Evangelista's four-part formula for winning at corporate leadership, which follows the guidelines that winning coaches have used to lead their teams to the Final Four, the Super Bowl and the World Series.

1. Create and focus on a game plan

The game plan encompasses everything the team is about. It ranges from generic issues such as a team's overall vision or its playing style to the specific moves the players will execute to counter another team in a game. The game plan is a catalog of everything that is taught, reinforced and eventually executed.

2. Develop the players and their roles

With an adequate game plan in hand, the focus needs to turn toward the teaching, training and motivation of the players or employees. Training needs to apply to the job at hand and to the role of each player.

3. Execute at game time

Game time begins with the kickoff or first pitch in sports, but it might not be so clearly defined in business. Basically, the game is the moment when the team must deliver, Evangelista says. The coach needs to watch, possibly make adjustments and keep track of what's going right or wrong. But now is not the time for teaching; that just distracts the players.

4. Learn from the game after the game

After the game is when the game plan is so crucial, Evangelista says. "A coach can say, 'We've been talking about the game plan every day and what you need to do, and last night in the game, you didn't do it. We've got to work on it today, what are we going to do differently.' There's this consistency, so it's no surprise to a player." How to reach: "The Business Of Winning: A Manager's Guide to Building a Championship Team at Work," by Robert Evangelista, CEP Press, $18.95, (800) 558-4237

Morgan Lewis Jr. (mlewis@sbnnet.com) is a reporter at SBN Magazine.

Thursday, 18 July 2002 12:47

No more rubber stamps

When a company board of directors used to meet, its members politely listened to the officers' reports, talked about all the good things going on in the company, agreed with the CEO's recommendations and went back to their real jobs.

Not anymore.

Today's boards are informed, confrontational and unapologetic. At least they should be, according to a group of prominent area CEOs and board directors who spoke at Cleveland State University's James J. Nance College of Business Administration Executive Development Center.

"The pressure is on outside directors to be much more critical, much more demanding, much more involved," says John Ong, chairman emeritus of BFGoodrich. "Largely, I think that's been a positive thing. At the same time, any human institution can't exist based on friction, hostility and suspicion inside the institution itself; you'll have an unhealthy institution."

Indeed, a board of directors that does nothing but argue is a problem. But don't limit your outside directors to those with a business-only background. Diversity is paramount. The only real criteria are intelligence, good problem-solving skills and a willingness to learn.

"Rubber-stamp boards, buddy boards, old network boys, old buddy boards, all they are doing is taking away shareholders' rights," says Jack Kahl, CEO of Manco Inc. "A real good board member is a guy who has the guts to be a good board member. If you can get a good director that has guts and can challenge the CEO and still build his friendship by challenging and not by succumbing to the buddy system, then you get an active board."

Michael Feuer, founder, chairman and CEO of OfficeMax, agrees, to an extent. He admitted that in OfficeMax's start-up days, he liked his directors to be a little less obtrusive.

"When you're a start-up company, you want 'nodders.' If you nod, they nod," Feurer says. "As the company evolves and becomes a larger company, you want board members that have other skill sets or a variety of skills."

Board size is shrinking

The days of 17- or 18-member boards are long gone, except for at very large corporations. Even some of the multinationals have boards in the range of only 12 to 13 directors, mostly culled from outside companies or organizations.

Experience has shown that the smaller size allows for more open conversation, while keeping the meetings at a reasonable length.

"I can remember Dow Chemical had about three outside directors on a board of about 17 or 18 people," Ong says. "That's changed dramatically. I think that's primarily been influenced by the explosion of high-tech companies, dot-com companies, and if you invested in some of those, like I did, you get these proxy statements and there would only be five guys."

Hire a CEO

A board that can't work with or doesn't trust its CEO is doomed to failure. The most important decision a board of directors makes is the hiring and evaluation of the company's CEO.

"It's such a factor that it's out there 50 lengths in front of everything else," Kahl says. "If you get that right, the rest of the job, which is to protect shareholders' rights, becomes easy."

Once a board hires the CEO, however, it's important that the directors stay informed about the business, know the problems that are going on and are available to meet if there needs to be quick action.

"I tend to have more meetings when times are tough, so I've been having a lot of meetings recently, but that's a different story," quips Feuer. "The reality is, a well-informed board is a more effective board, and also it takes a little bit of pressure off the CEO."

Meet before the meeting

Smaller companies can usually be productive in the one day allotted for the regular board meeting. Boards for larger, diversified companies should at least meet the night before the regular meeting, formally or informally, to discuss important aspects of strategy, business trends and developments.

"You can really get into the heart of the opportunities and the hearts and problems in an open atmosphere," says Richard Pogue, senior adviser for Dix & Eaton. "You're not quite as likely to open up and say things that are arguable or dubious or questionable if there are 20 people sitting around you in a room as opposed to 10 or 12."

Pay in equity

Directors need to have a stake in the company. Not only does equity give more weight to the decisions they make, it sends the message to shareholders that their directors have their faith and money in the company as well.

"Requiring them to have a certain level of stock is a good business practice," Pogue says. "It always looks terrible in the proxy statement where a board member has zero in stock. It just looks awful." How to reach: Cleveland State University's James J. Nance College of Business Administration, (216) 687-6925

Morgan Lewis Jr. (mlewis@sbnnet.com) is a reporter at SBN Magazine.

Friday, 28 June 2002 06:51

Wired education

Leave it to a machine shop owner to pioneer online vocational education.

Academics, consultants and technology experts have written books about the best way to train workers on the Web, but they had no vested interest in whether their plans were effective. Jack Schron did.

Schron, president of Tooling University Ltd. and metal tool manufacturer Jergens Inc., created Tooling University to help manufacturers like him survive to the next generation.

He combined the Old World concept of apprenticeship programs with Internet technology to create Tooling University Ltd., an online education system that provides manufacturing classes and lessons on a variety of subjects.

Schron and his staff had the expertise to design classes for building metal tools and machine parts but didn't have the familiarity for subjects like drilling, metal punching, differences in materials and how to read blueprints. That meant he had to request content from other trades, which was a tough sell.

"The biggest challenge was to get people to buy into the concept that you could do online training for industrial subjects," Schron says. "But we got them to buy into it, and once we had some classes and some momentum, then it became easier to get the next guy and the next guy."

The program was launched in spring 2001 and today offers 35 classes. Schron's goal is to have 120 to 150 classes. Students can take classes from a home PC or at work during a long manufacturing run. Most take less than an hour.

The site charges a per-person subscription fee starting at $399 for a year, which includes hundreds of hours of instruction.

"We had to spend some money to do it," Schron says. "Only time will tell whether this was a good concept or not. Nobody else was out there doing it, so as a result of taking a risk, we're two years ahead of anyone else." How to reach: Jergens Inc./Tooling University Ltd., (216) 486-2100 or www.toolingu.com.

Friday, 28 June 2002 06:45

A star is born

It wasn't the best time to start a new business in 1984 when Jim Fisher came home from work and told his wife he was going to start his own multimedia production company. They had $1,200 in the bank, a second child on the way and two cars that wouldn't start.

"You have to overcome your fear of failure," says Fisher, who is today president of Web development and software firm IdeaStar Inc. "Other entrepreneurs quit because of that. You're going to be faced with tremendous pressures at times that you can't leave at the office."

Fortunately, Fisher never failed. His first company, ProShows Inc., thrived from 1984 until 1999. That firm produced and staged audiovisual presentations for major corporations like Scott-Fetzer, Rubbermaid, Eaton and TRW. When Web site development was added to ProShows services in 1995, Fisher realized he needed to make a change.

Fisher closed ProShows and opened IdeaStar in 1999 to focus solely on Web site and marketing software development. It was the second hardest decision of his career, behind the choice to launch ProShows. Not only would he have to drop the well-known ProShows brand, he'd have to charge into the unpredictable IT market.

"It's always a roller coaster," Fisher says. "You have to be willing to keep moving. When things are getting difficult, that's when you have to act, even if you don't know if it's the right direction. If you stand still, you're dead."

Sticking with what he knew, event planning and Web site construction, Fisher developed several successful Internet-based applications. IdeaStar's flagship application, GalaxyBuilder, helps company's build branded Web or intranet sites for users with no programming experience. Its CorpMeetings application is an online tool which helps companies e-mail invitations, track responses and register people for company meetings and events.

Both applications, as well as several others, sold quickly. IdeaStar's sales have grown 60 percent since its inception, and it employs 20 people after starting out with four.

"We're now being asked to make proposals to clients," Fisher says. "We've opened more new customer accounts in the first quarter of this year than we did all of last year. It's an exciting time." How to reach: IdeaStar, (216) 587-9300

Tuesday, 30 April 2002 06:57

Man in motion

It's easy to mistake Glazen Creative Group's offices for a hip Warehouse District bar.

Bright orange girders jut from the walls. Unpolished truck tire-sized corrugated steel columns provide a stark contrast to the walls, painted lime green, orange and magenta.

There is a 70-pound blue canvas Everlast heavy bag suspended from the ceiling. Epiphone electric guitars hang on the walls. And track lighting is carefully positioned throughout to illuminate the black leather armchairs and sofas.

But you won't find a bar among the eclectic offerings, which, by the way, aren't located in the Warehouse District. Glazen's offices are situated next door to Jacobs Field.

Like a tavern, however, Glazen's offices are designed to induce relaxation. Relaxation promotes creativity. And Glazen Creative Group, founded in 1972 by Alan Glazen, is creativity in motion -- film, video, CD-ROM and Web pages. Moving images are its business.

Glazen is more of an independent film studio than a marketing firm in the way it approaches projects. Its producers and editors create award-winning documentaries, marketing and corporate training videos, and commercials. Its clients include some of the largest companies in the world and several of the region's neediest nonprofits. Both breeds of organizations get the Glazen treatment: Polished, professional, and slick -- in the best sense of the word.

It took 30 years to reach this point.

When Glazen started out, he ran a traditional advertising agency that produced print ads, brochures, annual reports and the like. Over time, however, the advertising industry -- like banking, accounting and law -- saw small- and medium-sized firms consolidated into larger competitors. By the late 1980s, Glazen was leaving client pitch meetings to discover executives from major firms like BSMG and Wyse Landau waiting in the lobby.

At the same time, the mystique of marketing began to disappear. More companies followed the lead of major corporations like Nike and started moving marketing and advertising initiatives in-house. Manufacturing was outsourced. Small ad agencies suffered.

"The clients had their own internal account services. They knew their own research, they knew their own marketing needs and their own sales goals," says Glazen. "They didn't need an outsider to come in and do that. But what they didn't have inside, and what you can never have inside, is the artistic capabilities."

Artists or "creatives," as some firms call them, are a fickle bunch, says Glazen, dressed much like a downtown artist in all black with stylish angular-framed glasses. Artists like change. They like trying new things. And they can't work for the same company for too long.

Glazen knew he needed to change. He recognized that his new firm would require a team of artists. But he wondered what kind of art the big agencies didn't already dominate. He found the answer in nearly every American living room: Video.

Before starting his firm, Glazen was a media relations officer at Case Western Reserve University. Part of his job was to promote faculty to Cleveland-area television stations.

During his visits to the studios, Glazen, barely in his 20s, was fascinated as he watched technicians put together television shows. He was much more impressed with the power of the moving image than with still photographs and text.

The feeling lingered as he grew his firm, and rose to the surface when he reinvented it years later.

"Alan loved the idea that he could create this hybrid between a production facility and an ad agency, but stripped of all the politics of an agency so it was only about the work," says Ron Goldfarb, partner and president of Glazen Creative Group. "He also realized that print was never his strength. Billboards, brochures, still photography; it didn't really interest him."

After working several years in Toronto directing commercials, Glazen in the early '90s launched his new communication strategy and video production company in Cleveland armed with one camera, a few lights and one digital editing suite. The local market didn't know what to make of him.

"When we heard about what he was doing, we laughed," says Tony Weber, Glazen partner and COO. "Now we work for him."

Few laughed when they heard the companies that comprised Glazen's client list: KeyCorp, National City Corp., OfficeMax, Progressive Insurance, Sherwin-Williams and Parker Hannifin, among others. Many were already Glazen clients and remained so under the firm's new business direction.

John Hoynock, director of human resources for industrial manufacturer Parker Hannifin, was at first wary of working with Glazen. He thought the corporate and creative cultures wouldn't mix. Not only did his apprehension vanish after his first meeting with Glazen, he was surprised by how entertaining the project, a new employee motivational video, turned out.

"I didn't want the same stale corporate video, where you watch the people's eyes move across a TelePrompTer," he says. "It was refreshing, fast-moving, informative, and it really captured our story."

Producers at Glazen pride themselves on their nontraditional, documentary-style of corporate videos. That approach has won them numerous awards, including one in March, when Glazen picked up a Telly Award for a documentary series for the public broadcasting network WNET in New York called "The Ethnic American Spirit." It featured ethnic groups living in New York City, including Koreans, Dominicans, Filipinos and Chinese.

The Telly Awards recognize outstanding television commercials, video productions and films.

"It's the same type of research a writer would do if he was going to write a script; we just bring the camera along and do that interview live," Goldfarb says of Glazen's production style. "I think our real talent is interviewing all these people and piecing together a story that's compelling."

Glazen borrows its approach from some of the most popular nonfiction shows on TV today. Flip through cable TV channels and you'll find "Behind The Music" on VH1, "Biography" on A&E, and even "True Hollywood Stories," on the E! Channel. These shows have a devoted following and receive national acclaim -- E! and VH1 were nominated for Emmys for their shows. Each of the programs employs the same live interview documentary style Glazen uses in its work.

Obviously, the videos Glazen produces for its business clients are not usually aimed at the same audience as these TV shows, but the comparison is appropriate.

"Any time you're expecting your audience to view something on television, whether it's a television commercial or a short film about your company, you're competing with (their expectations of) television," Goldfarb says. "It's the same screen. We feel we have an obligation to that audience to make programming look as good as it possibly can, and not like something from 1981."

Suzanne Sutter, president of the personalized gift store chain Things Remembered, worked with Glazen to produce a 20-minute customer education video sent to more than 5,000 of her store managers and employees. Like Hoynock, she was impressed with the polished but informal feel of the production.

"It was really a fabulous piece," she says. "It was all nonscripted. That's one of things I like about them, because they're very good at directing and making them look very interesting and interactive. I have great trust in them, and if they say it's not right, they'll tell us. They don't just rubber stamp what we want to do."

For a National City videoconference, Glazen was faced with the task of combining live Internet video feeds from 23 sites in six states into a short video. Mimi Shenk, National City vice president of recognition and community relations, says Glazen's producers were even able to correct sound and technical errors that happened during the conference for the final product.

"They are a terrific partner," Shenk says. "When you go to them, you're usually talking about something conceptual, and they make it a reality. They find the right mix of people, places and emotion and message."

One aspect of Glazen's business that has remained the same from the early days to today is his work for nonprofit groups. Half of Glazen's clients are nonprofit and charitable organizations that need the polish of a Glazen production but don't have the funds of a KeyBank or Progressive Insurance.

Projects for child welfare groups like Annie E. Casey Foundation, Applewood Centers Inc. and Providence House; drug and alcohol centers like Recovery Resources; and shelters like the Center for Prevention of Domestic Violence and dozens more receive services at a reduced cost or for free depending on the need of the group.

"Most of the nonprofits we run into need our kind of services -- a lot," Goldfarb says. "We all enjoy working on these kinds of programs. If we could make a living only doing nonprofit work, we would do that. It gives people a chance here to do something that's really making a difference in people's lives."

Due to a long-term contract with public television station WNET, Alan Glazen commutes to New York regularly to work in the firm's smaller SoHo offices, near Ground Zero. The area was quarantined for days after the Sept. 11 attacks.

"We couldn't get to our offices," he says.

From his cell phone, Glazen says reinventing himself and his firm should not be unique to him or his industry. Any company leader must be ready to change direction before the market demands it. By that point, it is too late.

"People keep saying I have reinvented myself a number of times in my career," Glazen says. "It used to be a criticism. Now I see it as a compliment.

"Will we reinvent ourselves again? Hell, yeah. But it won't be a complete reinvention; it will be a continued evolution." How to reach: Glazen Creative Group, (216) 241-7200 or www.glazen.com