Safeguard Scientifics Inc., a tech operating company that acquires and develops companies in software and IT, bought the foundering firm in 2002, anticipating that an industry turnaround would naturally right Alliance Consulting. That resurgence didn’t come, so Safeguard opted to engineer a turnaround of its own.
In 2004, Tony Ibargen, then managing director at Safeguard and chairman of Alliance Consulting, took on the task of reversing the Conshohocken company’s flagging fortunes as its new president and CEO.
Ibargen, a 25-year veteran of the IT industry and no stranger to turnarounds, moved quickly to assemble a team, analyze the 725-employee company’s strengths and weaknesses, and put a plan into action. The turnaround is still in progress, Ibargen says, but he adds that Alliance Consulting is well on its way to achieving its goal of consistent profitability and above-market growth by making key acquisitions and leveraging its existing resources.
Ibargen advises CEOs working to pull a company out of a tailspin not to become dispirited by the obstacles at the outset. With the right plan and the right team in place, he says, things will get better.
Says Ibargen: “If anyone reading this is at the beginning of the process, it’s a heck of a lot of fun at the end of it.”
Ibargen talked with Smart Business about how to engineer a successful turnaround.
How do you manage a distressed company differently from one that is in a normal growth and profitability mode?
I think in a people business like ours and I say that to differentiate it from a product-oriented company or a company with significant infrastructure our assets are really the great people and the key deliverables that we have. In a people-oriented business like ours, it’s important that we act and behave as if we were very successful, even when we’re in the middle of a turnaround.
A lot of what happens in a turnaround has to happen quickly and decisively, and I’d say that’s probably the key difference between a normal growth and profitability mode and a turnaround mode. When I first came down here full time in the summer of 2004, the decisions made about the management team, about the structure, about the direction were all made fairly quickly. And executing them has happened over the course of four quarters because you can’t do everything all at once.
How do you implement a turnaround?
The truth is, you start with having a good sense of where you want to end up. You align a team of people who are similarly motivated in terms of character and entrepreneurial spirit, performance orientation.
We did a full review of our team before I came on board, and one of the reasons I came on board was to drive some change, but many of the folks who are helping me run the company have been here a long time and were ready for a change in leadership that showed them a way to be more successful in the future.
It sounds like a lot of different things, and on any given day, those plates can be a bit overwhelming, but it reduces itself down to having a good sense of where you’re heading, having a good team of people to go there with and then working hard every day. It comes down to the individuals, the selection of the team.
If I were to provide insight to others who are in the middle of this, the selection of the management team that is going to represent you is very important.
How did you start putting together the turnaround of Alliance Consulting?
It was really a combination of assessing what the company was already good at, what we have that we had references and capabilities in, but also looking externally, taking the vantage point that I had prior to coming in as CEO, when I was chairman of the company, talking to analysts, clients, a lot of third-party folks in the industry to determine over the next five to 10 years what we saw as significant growth opportunities.
Clearly, off-shore development of applications and maintenance and support is a very hot area at the moment, and increasingly, with the pressures on corporate managers for compliance with Sarbanes-Oxley as one example, but also for increased visibility into business intelligence for better business decision-making, we felt that that was another great area that leveraged existing competencies within Alliance.
How did you move through the process?
The on-the-ground reality of running a business is that you never have the luxury of doing things serially or even in the order in which they make the most sense. Sometimes you have to take things out of order and do several things parallel.
There were many days a year or so ago and even some days now where the 11 or 12 plates spinning at one time made you wonder whether or not you could keep them all going. But in fact in the case here, we did reorganize pretty dramatically in the summer of 2004.
We brought on some new management, forced a fair amount of change organizationally and structurally, acquired this company in India, forced the reorganization of our back office operations to capitalize on the availability of our India operations to perform some of our basic services at a lower cost, moved our headquarters, got out of several leases across the country, restructured compensation program, all the while keeping everyone excited and motivated about becoming the nation’s most successful business intelligence company.
So it is part of a turnaround to make sure you can manage through those various, sometimes conflicting operations in parallel.
How do those conflicts arise and how do you resolve them?
One of the key areas that you manage through is the trade-off between that which has a compelling, long-term value proposition and the need to achieve profitability in the short-term.
So we chose to focus on our investments in these two areas, the acquisition of a key investment and putting in place people dedicated to selling those services, and the investment in creating our intellectual property to enable us to implement solutions on a repeated basis rather than do things on a one-off basis.
They were investment areas that were not going to have an immediate payoff but felt like they were consistent with our overall strategy and would help us in the mid-term, at the same time having to curtail investment or get out of areas of the market that were contributing marginally, but not going to be long-term contributors.
So that trade-off is the most important conflict to manage through.
How do you communicate to the entire company what is occurring during a turnaround?
We put in place various communications methods and tools, quarterly calls where we do an awful lot of recognition of people who are modeling the right behavior and really posting great results, great numbers. I took a bunch of folks to Puerto Rico with spouses and will do so again early next year to recognize their efforts.
We do regional and practice-level recognition as well. We’ve increased our communications, including a blog that I have now that is especially targeted at consultants that work onsite at clients who don’t often get to take time out and come to our meetings in our various offices but feel the need to be connected and aware of what their role is in the company.
Which management skills are most critical to a CEO in a turnaround?
I think keeping an even keel probably is important. I know managers I’ve worked for and worked with, great executives, emotional and fairly volatile, and that style can work as well. In our particular case, giving the people orientation of our company, having an even keel during good and bad times is important because you show things will be OK.
Constantly reinforcing that through collaborative work styles and communication, hopefully, gets people through those times when things aren’t going well for them at a personal level.
How to reach: Alliance Consulting, www.alliance-consulting.com
While it’s quite a task to keep it clean, acknowledges Ed Kilkeary, the company’s founder and president, the reflective surface makes it easier for the maintenance technicians to see when working on the aircraft. And, it sends a message to clients, says Kilkeary.
“When I walk in, I want it to look perfect because I think our clients deserve that, plus, it’s a representation of L.J.,” says Kilkeary.
Kilkeary’s attention to the image his company projects, from the condition of its aircraft to the cleanliness of its facilities and personalized service that includes, at times, Kilkeary himself or one of his two sons who are pilots at the stick, has earned the 100-employee company industry accolades and a handsome client list that includes corporate bigwigs, professional athletes and powerful politicians.
“He’s very hands-on and direct and focused,” says Kilkeary’s daughter, Kristen Rullo, who handles the company’s marketing.
A combat helicopter pilot in Vietnam, Kilkeary built L.J. Aviation at first on handshake agreements with his clients, many of whom are still with him after two decades. He has eschewed any notion of being a low-cost provider in favor of offering the highest level of service and safety to his clients. That approach has helped to place the company among the top 15 charter operators in the United States for the past 10 years.
Kilkeary talked with Smart Business about how he built his business by being selective when it comes to clients and why no deal should be a make or break for your business.
How did you get into the air charter business?
When I got out of the military, there were so many helicopter pilots that you couldn’t find a job as one. I got into the trucking business because I had been around equipment with my family; trucks, bulldozers, things like that. So I did that for a few years and did very well.
I met a gentleman who was in the coal business. He said, ‘You’re a helicopter pilot, I’m going to buy a helicopter. I said, ‘Great, good luck,’ and assumed that was the last time I’d ever see him.
About a year later, he bought a helicopter and I was faced with a dilemma. We had a brand new house and I was doing very well. Actually, we had three or four kids by then and I was really kind of torn about going back to aviation because I heard so many horror stories about guys who had gone to the airlines and, of course, it was great for awhile, then they would have these layoffs.
This was even worse, because it was working for a private individual. I went to work flying the helicopter. I started flying these guys and they were saying, ‘Boy, it’s a shame that you don’t have an airplane, we could go farther.’
So we bought a Learjet in 1981. I leased the plane to a guy who had some money. Unfortunately, he didn’t have as much money as I thought he did. After a period of about two years, he couldn’t afford the airplane.
So here I was, I had this Learjet, I have no use for it, zero, none, and at that time a fairly significant payment. I kind of got into the charter business because I had no use for the airplane.
I really wish I could say I had this great vision and I thought, if I do this well, really, it was just I’ll do the best job I can do all the time. I’ll do what I’ll say I’ll do and I’ll run impeccable equipment and, hopefully, by word of mouth, we’ll build a reputation.
How did you attract the level of clientele that you serve today?
I decided a long time ago, when I was really just kind of building the business, that I really want to be around nice people. So even if someone had the price of the ticket but they were someone I didn’t enjoy being around or I didn’t want to be with, I decided life’s too short, I didn’t want to be there.
There were always people you had to chase around, they were looking for the best price, not really the best quality. I just decided nice people, generally, if you hang around nice people, most of their friends are nice people.
When we go to see people, we tell them the truth, and a lot of times we don’t get the deal. If you lose the deal, so be it. I learned something from this gentleman I worked for in the coal business, and I’ll never forget what he told me: Don’t ever go into a meeting having to have the deal. I never walked into a room thinking I got to have this.
How have you built your business?
We’ve grown the business from the referrals and being fair. If someone called me up and said ,‘Gee, Ed, I got another price on this trip and yours is $1,000 more,’ that was never negotiable. We’ve never gone there.
We just thought our service is better, our equipment is crme de la crme, the best. The oldest airplane we have is a ’95. Our fleet age is 2002. There’s not a charter operator in the U.S. who can say that.
To have that costs money. That was just my philosophy.
What do you offer clients that sets you apart from your competitors?
Here’s an example. I did a charter last night, 4 o’clock in the morning. The operator that called me they do business out of California they had a mechanical (problem) on their airplane.
They had two big clients they had to get to New York. He called me and said, ‘You’re the only company from Chicago east that answered their phone at 2 o’clock in the morning.
I called eight companies. You’re the only one that answered the phone.’
Have you ever fired a client?
Yes, and that’s always difficult. Never for not paying. I had a gentleman who didn’t have a watch. He’d tell you he’d be back at 5. You didn’t know if he meant in the afternoon or the morning.
I just said, ‘Hey, you need to go find somebody else to fly with.’ It’s too difficult. A lot of times, the airplane has another booking within a couple of hours. He shows up four hours late ... I’m not going to let the other client down, even if I have to upgrade him to a bigger piece of equipment.
After a couple of those times, I just decided really, this is too aggravating.
How to reach: L.J. Aviation Inc., www.ljaviation.com
Since then, the bar has been raised, with companies finding they have a vested interest not only in getting household goods to their destination on time and in one piece but in making sure that entire families make a soft landing in their new location.
Bryan Putt, president and CEO of AIReS, has led the company founded by his father from a paper-based operation that essentially coordinated the shipment of lamps and couches to one that handles virtually every detail of an employee relocation, from selling and buying homes to securing visas and transporting family pets. All of it is done with employees carefully selected and honed for their jobs and with software developed by the AIReS IT team, comprising about 10 percent of the company’s 130 employees.
When Putt joined the company in 1989, he saw other businesses in related relocation services edging out enterprises like his. That threatened to relegate AIReS to vendor status in the industry, a position Putt didn’t want to be in. So he opted to build an organization that would be a soup-to-nuts service for corporations that were eager to hand off in-house relocation tasks to third-party providers.
Putt spoke with Smart Business about how he developed his own software, picked the right employees to use it and sustained their enthusiasm for demanding work.
What has driven the change in the relocation industry since you joined AIReS?
Market forces probably more than anything. When I joined the organization in 1989, the market was still very much driven by organizations going out and picking the service providers for each line of business that they were looking at, so they might have worked with a local real estate agent or somebody else to do the home sale or home purchase or with a moving company to handle the household goods movement, and they did a lot of internal work on their own.
There weren’t as many settling-in services that were being delivered. And then corporations started to look at two things. One was, they wanted to have those transferees and families more cared for, so the policies they were offering got richer, with more benefits, with the anticipated return being that the staff members were more effective.
Why did you develop software yourself rather than have an outside vendor handle it?
When I came back to Pittsburgh and joined the company, my industry of choice was the IT world. I’d been with Oracle Corp. as a consultant, so I spent a lot of my time developing systems, and when we came in and looked at it ... really, there wasn’t any off-the-shelf package that we could go out and utilize. And given my background and skill set, I thought it was a much more cost-effective solution and a much more controllable solution to build it in-house and to build the staff that we needed to develop the software initially and then to, what we thought at that point, simply maintain it for whatever period of time.
But what we found is that at every step of the way, there’s new requirements, there’s additional features that you want to add, and what we really believed in the beginning would be a couple of years of development work and then a maintenance process turned into a continuous development cycle.
How do you screen potential employees?
Our interview process, people have told us, can be really long and painful, and I say that only in the sense that when we’re hiring any senior staff members or management ... we’ll have four or five people interview that person and spend as much time sharing information about us as we spend trying to glean information from them.
We tell them right up front during the interview, ‘You’re interviewing us every bit as much as we’re interviewing you, and we want the fit to be there.’ There’s at best a 50-50 chance that it’s going to be a hit, that it’s going to work, no matter how good you are at that interview process. So I think some of it comes down to luck, which sounds horrible.
You’d like to say we’ve got this process and it’s perfect. We put people through the interview process and you can have people come out of the back end of that, and at the end of the day, it’s still not the right fit. But we’ve gotten pretty good at figuring it out.
How do you reward employees for performance?
On all of our client-facing staffers, we do post-relocation surveys, so every family that we’ve moved, we get in contact with. We get about a 72 percent response rate on our follow-ups. We actually have a bonus and incentive model that’s built on where we are in terms of those customer service scores.
So those phone calls are made, we follow up with the family, all of that information is entered into the computer. We also ask them to give us comments. We rate on a one-to-five (scale), one being not acceptable, five being over the moon.
If we ever get a two or a one ... we ask, ‘Please, could you give us comments, let us know why, what did we do that we could have done better?’
All that’s fed into the system, and then we can pull out the statistics by individual, do it by team, do it by office, and that’s all fed back into our incentive program. And then each of our other, nonclient-facing groups ... we actually do internal team ratings.
So we’ll have all the rest of the staff from the company rate the IT team as to how well they’re supporting the internal organization’s needs. Those internal team ratings are part of our incentive program as well.
How do you sustain enthusiasm among your employees?
Part of it is we’ve got a good core group of managers and staff. And it goes beyond managers. Managers can do all the things managers are supposed to do, but if you don’t have a core group of people who believe in the culture, it doesn’t matter what the manager says.
We’re very fortunate that we’ve got a lot of people deep down who believe in what we’ve doing and feel they’re bringing value to the client and, as a result, they get jazzed about that. And it’s one of the things we go through in (our) two-week training session.
We tell people, ‘Look, if you don’t wake up feeling good about what you’re doing, find something in life that you wake up feeling that way about.’
How to reach: AIReS, www.aires.com
Her experience in an earlier consulting effort and in developing the Heart Institute at Mercy Hospital augured a speedy ramping up for her business’s consulting services for hospitals seeking to develop comprehensive heart-care programs.
What she didn’t see coming when she started the company in 2001 was the economic downturn that was soon to follow, slowing the revenue flow to a trickle.
With contracts held up because of economic uncertainty, Johnson was forced to cut her staff, then replace other employees who jumped ship out of fear.
She took a hard look at her own role in the company and opted to hand over the president’s duties to another staffer, while she became chairman and CEO. She also devised an incentive plan to spur growth, control expenses and retain employees.
As a result, sales at Corazon Consulting increased 56 percent between 2001 and 2003.
Corazon has cranked up the growth engine, rebuilding its work force and scooping up contracts at a record clip on its way to a goal of $5 million in annual sales in five years. And Johnson has learned that in the long run, it’s not how fast you grow but how you grow fast that’s most important.
How did Corazon Consulting grow so quickly at the start?
If you’ve done it once or twice, you really start to figure out how you go about targeting a market you go about it in a streamlined way, not just with marketing but with operations. There were a lot of places where we could cut corners and really go to where we could get the best return.
So the first year of Corazon, we came out of the gate running and we didn’t miss a beat. We had a very experienced consulting team, they were people I had worked with ... and they knew the ropes. That was in 2001, and it really continued to soar in 2002 and exceeded any of our expectations for revenue.
Where did things go wrong?
We were caught up in what a lot of service companies were. In the last quarter of 2002 and the first quarter of 2003, we were in a slump.
We had a war going on, there was a lot of unrest. People were uncertain about whether they could spend money because we were really all on edge. For us, it was the first time we didn’t have this up, up, up.
We tried to retrench, tried to hang tight and we had to, call it rightsize, downsize, eliminate positions.
What was lacking in the organization?
Having those two wheels of the bicycle. We had that one wheel that was so intact and perfect, as far as the expertise that we were offering, the knowledge we bring as consultants, the methods that we use to do that. But the other wheel, as far as going after business, being able to create a sales process that’s more reliable, learn from it, that wheel was much more informal. It was much more my own intuitive sense of sales.
How did the business change as a result of the downturn?
It made me realize that I was the rainmaker, and that the sales engine depended on me. This was in May of 2003, and it was a wake-up call.
We brought in a sales trainer. We ran several people who were in leadership positions or consulting positions through that program. We met periodically over that next six months to educate people, have them be more comfortable being a salesperson.
Most of our consultants didn’t see themselves that way; they thought (sales) was a dirty word because we see ourselves as consultative, building relationships, but it’s something that once you understand it, you can learn and start to use those techniques.
I was probably responsible for 90 percent of the sales. Today, I’m probably responsible for 10 percent.
How did your role change at Corazon Consulting?
For me, developing a business is what excites me. Running a business, not so much understanding the financials, but day-to-day, making sure that all the pieces are coming together and people are getting the right direction and everybody has that sense of belonging I’m not sure that an entrepreneur has the discipline or interest to do that.
I love to work with people ... but I’m not the best manager of people. I think it’s classic; the entrepreneur may be the best to develop the business but they’re not necessarily the best-equipped to run it.
How do you encourage your employees to foster the growth of the company?
Every employee in the company who meets the qualifications you have to be here two years has phantom stock eligibility. So there are shareholders who have bought into the company and there is also an opportunity for anyone who works in the company to have a feeling of ownership and a return.
I think the difference it makes isn’t just in terms of growth ... but also in terms of numbers of employees. If you’re someone who’s invested in the firm, you’re very careful about how you approach using resources.
It makes us look at that long-term growth and say it is about revenue and it’s about how you’re able to add resources and pace it so you’re being smart about it so that profit margin isn’t being ignored.
How to reach: Corazon Consulting, http://www.corazon-consulting.com
The president of 2,000-employee Anthem Blue Cross and Blue Shield of Ohio faces new entries in the health insurance marketplace using cutthroat pricing to get a foothold and competition from the very hospitals and doctors that are service providers to his health plans. On the other side, his customers want more in exchange for the ever-increasing premium dollars they’re doling out.
Slater isn’t facing much that his counterparts at other health plans aren’t confronting; the difference is that instead of simply relying on grabbing membership, Anthem is using innovative methods to control costs, especially among its most costly cases. While Slater sees a place and potential for cost-paring schemes such as health savings accounts and high-deductible plans, they’re no panacea, he says.
“There’s more to it than offering high-deductible health plans and giving people options and educating them,” Slater says. “There’s a whole segment of very, very sick people you’re not going to reach with those things.”
He says helping the sickest members many of whom have chronic conditions control their illnesses can reduce overall costs more effectively. Far from a pie-in-the-sky proposal, Anthem has demonstrated that intensive case management efforts and other measures can, indeed, reduce costs while delivering quality care.
Slater spoke with Smart Business about being in the market for the long haul, where the costs are and the opportunities to reduce them, and the tough choices ahead.
How do you manage an organization that interfaces with customers and providers of every size?
I pay a lot of attention to the people and the numbers. At my level, I can’t sit in on every meeting, I can’t make every decision, so I spend a lot of time on having a very qualified team of people who report to me.
The difference between our model versus the competitors’ is that any decision in the state of Ohio can be made by me. I don’t have to go to underwriters in Minneapolis or Hartford or anywhere else. I have the absolute full authority, where with some of my competitors ... the underwriting is done in another state, and they make the decisions for every state.
What that allows me to do is pay close attention to all the things that are going on in the state from a membership standpoint, a competitive standpoint, etc. I go meet with customers, I meet with the large brokers, and I can be very flexible and adapt from quarter to quarter. I think the local decision-making is a big difference. In all of our states, there’s someone whose butt is on the line.
How do you compete in an environment where your potential customers and your competitors range from the very small to the very large?
In the long run, you’ve got to do it based on a high level of quality, a high level of service, fair initial costs. The small group is going to buy rates.
You’ve got to have competitive rates but you’ve got to be consistent in your renewals. Probably 90 percent of what we write is through a broker intermediary, and we’ve done a good job with the brokers in giving them value and consistency.
Today, you have Aetna, who has not been in the market the last four of five years, probably being somewhat irrational as they buy into it. They’re anywhere from 10 percent to 20 percent below me or United around the state, and I can’t go there.
Let them have that business, and once they raise their rates, be there to take it back.
What are your customers demanding from you?
The No. 1 thing is, what are you doing to control costs? They want two- and three-year rate guarantees if the can get them. Cost is the No. 1 driver.
Because they’re paying, be they the employer or the member who’s paying through a higher deductible or the member who’s paying through a higher salary deduction, they expect more and more for these higher levels. So the service standard that we have to attain and we’re willing to do are much higher and much different.
People want it now, and they expect it to be perfect and they expect to talk with someone live. Online services, there’s a certain segment that wants them, but quite honestly, we see a lot of people get it online, then turn around and call to verify it.
Customers are looking to me to control costs, provide a high level of service and in the plan design, they want multiple options. There is no one plan design that meets everybody’s needs, so they’re looking to me to provide multiple options that are structured to supply two, three or four levels of their employees.
They’re paying for it, they think they deserve it.
What are you doing to rein in costs?
We’ve got to eliminate all the redundancy we can. We can’t duplicate efforts that our providers and brokers make. We truly have to become easier to do business with, and that’s become a focal point over the last couple of years.
For years, we internally said we’re doing a good job, based on our standards, but what did the customer want and what did the provider think? So we’ve made some huge inroads with the doctors, with the hospitals as to (determining what) they think about what we’re doing, what we do that irks them, what doesn’t fit with their systems, timely payments to them, accurate payments to them, reconciliation payments to them
We’re trying to work with them online, give direct access to specialized people when they have questions. We have to leverage our size with the providers, (and) at the same time have a partnership with them. It can’t be a one-way street. We have to be predictable. I have to be able to go to my customers and say, this is what I expect costs to be over the next couple of years. That’s been a strength for us. We haven’t gotten into the buy low and then raise prices. We’ve been fairly consistent with our renewals for about a four-year period.
Is consumer-directed health care becoming a more important factor in the Ohio market?
It is, but it’s not the be-all, end-all. If I put in higher deductible plans and I educate people to be better consumers of health care, those people who don’t have high claims, they’re going to take a higher deductible, they work out, eat better, have a healthy lifestyle, that’s wonderful; they get to pay less.
But the fact is, 5 percent of the insured generate 55 percent of the claims, and 17 percent generate 78 percent of the claims. Putting in high deductibles for the healthy people really doesn’t change the net cost of a program. We’ve got to take responsibility at the insurance company level, at the provider level, at the government level; we’ve got to have partnerships where we really work at helping these people.
Many of them have multiple chronic conditions, and they’re not going to go away. Don’t misunderstand me. We have to have lots of those kinds of programs, HSAs, HRAs and high deductible health plans, just to compete in the market. What we’re looking at, really, is improved case management, how to help these people, because they’re the ones with the claims.
What are you doing to cut costs among that segment of your membership?
We just completed a pilot program in two places in Ohio. I don’t have the exact numbers, but I think for every dollar we spent, we recouped about $5.
We found people who weren’t taking their medications because they couldn’t afford the co-pay under their employer’s plan. So we applied for some of the Medicaid programs, went to some of the drug companies that have a generic equivalent and worked with their doctors to take away the dispense-as-written order to substitute something very close.
Maybe a pharmacy company has a specialized deal for low-income people. We have lots of little programs like that. We have a pharmacy and therapeutics committee. It’s a two-pronged committee.
One group focuses on drug equivalency, efficacy of the drugs, etc. We have another one that’s made up of all professionals, non-Anthem people, that look at the first group’s findings and determines what we should be offering in our formularies. That group determines that there are certain drugs that have no equivalents and it is critical that people have access to it.
The therapy committee might say, go ahead and negotiate the best price, the best deal possible for it. If they make a recommendation, they take it back to the first committee and the two groups talk about it to see if they can agree.
We do not want to practice medicine, and so we’re trying to put products and programs out there that the providers can support as a result of their recommendations. We leverage our size so that we can buy at the lowest wholesale we can, we leverage ourselves with the large pharmacies to try to set the lowest cost with regard to distribution and dispensing fees.
We’ve started a program, and it’s shown huge savings with regard to what’s being imaged, what setting and where. If you’re going to have it, we’re going to suggest three or four locations in a given area where you’re going to get significant savings if you go there.
How will costs be controlled going forward?
The case managers of the future have to be very proactive nurses who are calling these people and saying, ‘Have you been taking your medicine?’ They have to run data through our systems, looking for contraindications on drugs many of these people are seeing two or maybe three specialists making sure that they’re going to the optimal place for treatment versus a local hospital, when the procedure has to be done to maximize the outcome.
We have to take a much more aggressive role in helping these sick people through the system.
How to reach: Anthem Blue Cross Blue Shield of Ohio, a division of Wellpoint Inc., www.wellpoint.com
“Here’s a list of the predecessor firms and how we got to where we are,” says Logsdon, a partner with The Webb Law Firm.
Although it’s been using its current name since 1993, The Webb Law Firm officially adopted it just this year.
All of the previous names carried the names of various partners. The last was Webb Ziesenheim Logsdon Orin & Hanson, easily one of the hardest on the list of law firms to remember. The partners settled on naming the firm after now-deceased partner William Webb, a nationally known litigator and patent attorney who practiced law for 68 years. The Webb Law Firm’s partners knew that a name comprising the surnames of five partners was cumbersome and difficult to remember, so the decision to adopt the zippier moniker wasn’t a tough one. But it’s not always so easy.
Suggesting a name change can stir up a lot of emotions, whether because the name is identified with the founder or the current owner, or has just been around so long that everyone knows it, says Andrea Fitting, principal with the Fittingroup, an advertising and marketing communications firm that specializes in branding.
There’s often resistance to changing a name, whether for reasons of vanity, a fear of a loss of identity or plain old fear of change.
But as with The Webb Law Firm, the names can get in the way.
“How many names can you have on the door?” says Fitting.
If you’re thinking about a change in your company’s name, keep a few things in mind, says Julie Meder, a patent attorney with The Webb Law Firm. For one, use a team approach.
“It’s really a team effort,” she says. Getting your marketing, public relations and legal teams used to working together should smooth the process. Each has a different responsibility, but they are all interconnected when it comes to changing a name.
“Don’t wait until the name is developed before you involve the PR people,” says Nancy Wintner of GWN Associates, a public relations and marketing consultant.
Get them in on the process early on. They are the ones who will be mounting the media relations and public awareness efforts to put the new name on the map.
If your name is a little staid, consider jazzing it up. Take the opportunity to set your business apart from the rest. Says Fitting: “Why not change it to something that people will never forget?”
Once you’ve adopted a new name, don’t keep it a secret. Wintner suggests putting together a press kit that offers the media a variety of opportunities for coverage, whether it’s to reveal a new focus of your business that precipitated the name change, to explain why you’ve made the change or to describe your campaign to publicize it. And repeat the message every time you have the opportunity in all of your communications.
“Branding is no Lone Ranger,” says Michele Rothert of Esteta Communications. “For maximum impact, branding must be used consistently and repeatedly with all types of communications.”
HOW TO REACH: The Webb Law Firm, www.webblaw.com, Fitting Group, www.fittingroup.com
Her brother Kurt, vice president, handles equipment sales and wears several other hats, and brother Sean, owner of the Church Brew Works in Lawrenceville, lends his engineering expertise to the family business when needed.
That brain trust has come in handy. When the U.S. steel industry took a dive four years ago, Casey Equipment's business in the remanufacturing, buying and selling of steel mill-related equipment sagged as well. To counter the downturn, the Caseys put their heads together and opted to buy up entire mills at distressed prices, and dismantle and sell off the equipment, mostly on the international market where steelmakers were doing well.
Along with the equipment sales, Casey saw an opportunity to develop the real estate where some of the mills sat and turned sites in Ohio, Illinois and Alabama into industrial parks, leasing space to other businesses. The company also got into the steel processing business, establishing a bar finishing mill at its Youngstown, Ohio, industrial park.
Casey Equipment continues to remanufacture and take mill equipment from steel companies on consignment, displaying its merchandise and industrial parks on its more than two dozen Web sites. The company employs about 80 people permanently, but assembles teams that can number 100 or more to work on individual projects.
The family members work well together on the home front, too. Says Casey: "Because we all have families, we do some flexible hours, we cover for each other."
Casey talked with Smart Business about overcoming obstacles, finding good opportunities in bad times and what it takes to make them work.
What kind of obstacles did you face when you were going into your real estate ventures?
We're not political people. We had no experience with it. We had never had to talk to politicians; they never impacted our decision-making.
Suddenly, they're calling you, they want votes, they want jobs, they have to show that they're creating jobs. We hit legal obstacles.
We also hit new competitors, people who were in that business who don't take kindly to seeing the new kid on the block come in.
We even got some threatening letters from a local government official who wanted somebody else to get it, so they'd threaten to go after you on environmental issues.
How did you overcome the political resistance?
We found that if we educate them and tell them what we're doing, they might help you instead of hamper you. One gentleman that actually had written us a letter became an advocate and is thrilled with what we're doing.
We've been blessed in both Sterling (Illinois) and Gadsden (Alabama). The communities have embraced us after seeing how we were committed.
How do you make strategic decisions about the direction of the business?
One thing that I think we've done well is we sat down and brainstormed. We talked about what direction we wanted (the Youngstown) facility to go.
Years ago, my brothers had been at a Nucor Steel facility and they saw what's called a bar finishing line. It runs a piece of bar steel through and grinds and polishes it so it becomes a clean bar.
What we thought was, we're in the business of selling used equipment. If we sell the equipment we've sold over the years to people, they install it, they operate it and they make a lot of money on it for a long time. Why shouldn't we, since we're the experts on used equipment, install some and operate it just like these other people do?
Well, we did, and we rebuilt all the equipment ourselves. The first line we did wasn't easy. If we do it again, we will sure do it differently. It was doing really well for the first three years, and then that crisis (Sept. 11) hit in the United States and things were just terrible.
Then we thought, how can we turn this into an opportunity? We thought if we could supply people with larger bars and round out their truckloads with other sizes of bar, they could fill up a truck completely. When the truck's full, their costs come down on a unit basis.
We decided to look for equipment to do bigger diameter stock and we were successful, so now we have a line for three-inch to eight-inch bar. When we did the one-half inch to three-inch bar, my objective was how to get other tenants in. We found a company that does what I'll call transloading (holding product for reshipment to a secondary destination).
We thought that would work out but it didn't. So then we brought in a tenant that buys bar all over the world and stores it there.
We could now buy bar from our tenant, and we could finish it. That worked out really well. We had been looking at buying furnaces that could change the metallurgical structure of the bar.
We found out that they were doing it, so we decided against it. They installed that equipment in our facility, so now there's this great synergy.
We have the bar finishing, and they can treat the bar that they bring in. So now we'll look for another tenant that complements that.
How would you advise businesses owners whose companies are facing shrinking markets for their product or service and who are considering a major revamping of the way they do business?
First, you've got to look at your market and you've got to be comfortable with what you're doing. And you take little baby steps. It sounds like we've done a drastic change, but remember that everything was well-planned.
Don't be afraid of change. You've got to adjust to the market. You have to be able to anticipate change, figure out how you can continue in this market without getting hurt.
And then you always have to listen to who's paying you. Talk to your customer and find out what they need. You've got to look at your lifestyle and what you're capable of doing. If you realize something's going to involve 20 hours a day, seven days a week, and you don't want that lifestyle, you're going to fail.
What you have to be willing to do is be realistic about it and say OK, I know this is really going to be a time suck, and I'm not going to be able to do my other job. If you're not realistic about that, you set yourself up for failure.
How to reach: Casey Equipment Corp., www.caseyusa.com
So it comes as little surprise that lawyer Johanna Hambrose at first found herself erring on the side of caution when she joined Electronic Ink, the company her husband, Harold, launched in 1990.
But Hambrose says her legal training hasn't gotten in the way of success for Electronic Ink. In fact, while she concedes that she might have been cautious in her approach to the business early on -- she came on board full-time to run daily operations in 1995 -- Hambrose credits her legal training with providing her with the determination to move the company forward.
"I think practicing litigation for so many years made me very strong-minded and strong-willed," says Hambrose, Electronic Ink's COO, co-owner and general counsel.
Electronic Ink designs electronic interfaces such intranets, extranets, Web sites and free-standing video displays for clients in financial services, health care and government. Employing the talents of designers, programmers, psychologists and linguists, Electronic Ink designs interfaces that accommodate the way people respond, think and comprehend, rather than compel users to adapt their behavior to the technology.
In addition to its Philadelphia headquarters, Electronic Ink has offices in the Raleigh-Durham area and in the United Kingdom, and is planning an office in New York, where it has its biggest concentration of clients.
Johanna and Harold Hambrose have split the duties of the company in a way that complements their individual skills, forming a team that fills the needs of both the creative and the operations sides of Electronic Ink.
"He [Harold] still runs the creative side of the organization and the delivery team," Hambrose says. "I run the business side, so I guess it's the right brain, left brain cliché type fit that we have here."
Hambrose spoke with Smart Business about making the switch from full-time lawyer to entrepreneur, the challenges of working with highly skilled professionals and raising two children while building a business.
How did Electronic Ink get started?
My husband started Electronic Ink 15 years ago straight out of college to treat the design of digital products more like the design of everyday, three-dimensional products; that is, involving designers and people who understand how human beings interact with any kind of products, in this instance, technology, to give form to the product, to make it useful in the end user's hands. So he started working on the design of OS/2 from IBM (and) the design of Citibank's public access cash machines.
The company has evolved through the years, starting with product design and then adding human factors analysts, cognitive and behavioral psychologists who understand how humans interact with machines. They're trained to observe human behavior, to understand how form is interpreted from a computer screen, understand how human beings build mental models when they move through a software or technical application.
We built a technology team, and they really served as a bridge between our design and human factors team and the technology teams that our clients were using, whether in-house or a third-party vendor, to make sure that what we were designing could actually be built, that it was feasible, that we could push the technology as far as we could to get the most out of it to make it usable.
How did you come to enter the business?
I practiced law in Philadelphia for about 10 years, and as Harold's contracts were increasing in size and number, I was devoting more time to negotiating them and building the business.
I took the leap and came over and ran the business side of the company and Harold ran the creative side.
What skills that you acquired as a lawyer are most valuable to you as a business owner?
The law gave me a very good foundation. I was trained as a lawyer to never take a given situation or a given answer as the end or the truth, that there was a side to everything, and it was just figuring out how to advance your goal and your side.
I believed in Electronic Ink and what we were doing. The mission became, how do I spread this story best, how do I create the best case around this company and the offerings. At that point in my career, I had met a lot of people in Philadelphia, so it was really just spreading the word.
It was making sure that all the checks and balances were in place, creating a good foundation for the company, that the contracts were strong and protected as a company, as well as guaranteeing that what we were delivering to the client was accurate and there wasn't anything or too much left to interpretation. Harold was out working on projects, so it gave me the opportunity to really go around and try to create a heightened awareness on a day-to-day basis.
Does working with a group of highly creative and technically oriented employees pose a challenge?
It certainly does. It is everything that we do when we go to work for our clients. We understand the people we're working for and what their goals are and what they're trying to do.
I think what we've tried to do here is understand our employees and what their personal and professional goals are ... and how to support them in their professional growth, with the end goal of having them stay with Electronic Ink. As long as we keep these smart people together, we will continue to attract the most exciting and cutting-edge projects, and with these smart people and these smart projects, we'll continue to attract the talent that is chasing good mentorship and high-profile work.
How do you balance your responsibilities as a business owner and a parent?
We've owned our company and my husband and I worked together when it was small. We lived a couple of blocks away from the office.
I brought the babies into work when I needed to. I could always stop home a couple of times a day and make sure everything was OK. We make time for each other and can coordinate at any moment of any day where one can jump in and the other can back out to take care of something at home.
How did you come to establish operations in the United Kingdom?
A lot of our clients in the U.S. had parent or sister subsidiary companies in England. We were leading a lot of technology efforts here in Philadelphia.
They were introducing us to their European audiences. Harold had worked in England for several years for IBM. He had a lot of contacts there and a love of the country, and it was a very fortuitous opportunity to try to set up an office overseas and have the business and get personal contacts there to help get it started.
We're working with Barclay's, Microsoft Ltd. and the BBC and other clients we can't mention.
How did you survive the dot-com era?
I think when times were the strongest, we were able to create a strong base by attracting good talent from all over and getting truly experienced and seasoned professionals. We were working on these large systems for big blue chip companies. They were always less glamorous internal systems.
It seemed that investors and the press were always focused on the next dot-com incarnation, but I think we stayed true to what we were doing so that when that virtual bubble burst, companies were not investing in new technology as they had in the past, so they needed to ensure that their existing systems worked better and that people worked more efficiently, and that is where we were.
We were able to save technology investments by increasing usability of these systems at significant cost savings. We were actually saving on dollars that had already been invested in existing systems.
What are your challenges as you go forward?
As a service company, the key to our success is our team and the talent we are able to attract. I not only have to attract them to Electronic Ink, I have to attract them to Phi ladelphia.
Harold and I love the city, and usually when we can overcome the bad press the city has had and get people here to visit it, they fall in love. We have a vibrant culture in this city, with the restaurants and shops, new apartments going up every month. Hopefully, that will continue to support us in our efforts to attract the best and the brightest.
Attracting salespeople has always been a big challenge for us. Selling services is harder than selling product, and finding someone who is able to understand our unique service offering and articulate that to a prospect will always make finding the best salespeople for us a challenge.
How to reach: Electronic Ink, www.electronicink.com
A recent study by Financial Executives International found that companies have spent 39 percent more than originally anticipated for Sarbanes-Oxley compliance, largely due to rising costs for consulting, software and external auditors.
The burden of reporting requirements convinced the management of Robroy Industries Inc. that taking the manufacturer private after more than 40 years as a public company was a prudent move, says Peter McIlroy, chairman and CEO. Robroy Industries, with $78 million in sales in 2004, made the switch in 2001, before Sarbanes-Oxley took effect. McIlroy says the reporting requirements even before Sarbanes-Oxley were costly to maintain for the small-cap, lightly traded 330-employee company.
The number of public companies going private has declined since 2003, when nearly 100 made the switch, according to accounting and consulting firm Grant Thornton LLP. The number fell to fewer than 50 last year, mainly because of an upturn in the equity markets, Grant Thornton reports.
The number of accounting firms with the resources required to audit large corporations and ensure Sarbanes-Oxley compliance is limited to the very largest, while the demand for audit services has ballooned in response to the act. The result has been fatter auditing fees, as well as smaller clients forced to look elsewhere for services.
Bill Troup, managing partner of Sisterson & Co., a Downtown accounting firm, says it's a rare week that his firm doesn't get a request for proposal from a potential client.
But for companies seeking to raise large amounts of capital in one swing, public offerings remain one of the best ways to do it.
For Portec Rail Products Inc., going public in 2004 was the best way to raise the funds it needed to make acquisitions required to grow the company. While the costs associated with Sarbanes-Oxley are considerably more than what was required to operate privately, being prepared before its IPO has made compliance easier.
"We kind of ran our private company almost as if it were a public company, so when it came time to go public, there was a lot to do, but there was an awful lot done," says John Cooper, president and CEO. "We did benefit from the fact that we carried into this company some reasonably good financial records, procedures and habits."
Ironically, Sarbanes-Oxley is providing private companies and nonprofits with opportunities to improve their internal controls and management accountability. Troup says nonprofits have been particularly active in adopting some Sarbanes-Oxley provisions, particularly those dealing with board responsibility.
"I think virtually all of our nonprofit clients have addressed some parts of Sarbanes-Oxley, and I see a fair number of our private company clients that are selectively looking at it," says Troup, who also serves on the board of UPMC.
Troup says the UPMC board is bringing some of its procedures and policies into line with Sarbanes-Oxley, a process that will take at least a year. Along the way, says Troup, the board discovered that it might reap an unexpected benefit from the changes -- an improved rating on its debt.
"Early on, we got the impression that it would be viewed very favorably by the credit community," says Troup.
Troup also points out that any organization can implement some Sarbanes-Oxley requirements, including ethics policies, conflict of interest policies or audit committees at a reasonable cost and with the result of an improved accountability and oversight.
Says Troup: "There's no downside to understanding the benefits that can come from selectively adopting parts of Sarbanes-Oxley."
Witherell's company, iMeet, a Web conferencing company, merged with Boston teleconferencing firm Netspoke in 2002. Now operating as Netspoke, Witherell serves as its COO.
The merger has been a success, Witherell says -- Netspoke will double its size since the merger to 100 employees by mid-year -- but concedes that there were some rough spots. Combining two seemingly complementary products into a seamless offering was harder than either side anticipated. Just as thorny were the corporate culture issues.
iMeet was a group of mostly young technology geeks used to sending two-page e-mails to communicate with their colleagues in the next cubicle or with outsiders and using instant messaging to make arrangements as simple as lunch plans.
The folks at Netspoke, on the other hand, were mostly sale-s and marketing-oriented, glad-handers who were more likely to call a co-worker on the phone or pop into their office for a chat about a business issue.
Another cultural problem, Witherell says, was that management didn't pay attention to some of the details, such as differences between the companies in vacation time policies and benefits packages, items that loomed large for some employees.
Netspoke solved the problem by encouraging both tribes to adopt the other's techniques to communicate. E-mailers and instant messaging zealots learned to use the telephone more, and the sales folks learned to embrace e-messages. The result, says Witherell, is a work force with a better balance of communication skills and an appreciation of the power of both.
Says Witherell: "If you pick your spots, you can be very effective at using the mix."
Witherell talked with Smart Business about blending two cultures and how to keep an eye on the details without losing sight of the big picture.
Why hasn't Netspoke grown as quickly as you first thought you would?
I think it took us longer than we anticipated to merge the two products into one. We could see there was a need in the marketplace for a simplified, integrated conferencing product. We said, 'Let's put that together as quickly as possible, let's add some staff, let's grow and let's take this integrated product out there and blow the doors off the competition.'
That was challenging, though; to put two products together that were built for very different worlds is a hard thing. The audio world and the Web world are very different. That was more challenging than we grasped in the early stages, so we had to go slower and take our time.
How did the corporate cultures at Netspoke and iMeet differ?
We had two cultures that were very, very different in some ways. They were both young, vibrant, excited companies. But the Pittsburgh culture, the iMeet culture, was the communication culture, was all technology focused, so it was e-mail and, even more so, instant messaging.
That's how people communicated, internally and externally. We were a Web conferencing company, so everything's online, to the extent where we would be in the room -- and this happened every day -- we had people working in the same office, the same small room, who would not turn around to talk to someone five feet away, they would instant message them.
Then we were merging with a company that has almost no instant messaging and did everything by phone. Every communication was over the phone or face-to-face; again, a very sales-oriented company.
They liked to be very direct, talk to you about whatever the problem was, whereas this other culture, if there was a problem, they'd be sending a two-page e-mail about their feelings about the problem. You'd have someone in development talking to sales. One is trying to hunt the other down on the phone and the other is crafting a three-page e-mail, and never the twain shall meet. But you really learn that there are benefits to both.
Now we have companywide Windows Messenger, and people use it; instant message has become pervasive, and certainly between two offices, it's a great, great tool. On the other hand, to a person in Pittsburgh, they're much better, if there's an issue, at picking up the phone and getting someone in Boston. So we use a combination, and it's very effective.
When you realized there were two distinct communication styles within the company, what did you do?
There are things at the top that you can do, so we made the decision that we were going to use instant messaging corporatewide, and so we made a big effort to have instant messaging on everyone's desktop in Boston; they hadn't had it before, or very few people had it.
From a management perspective, we had to lead by example and guide some employees. So when they had an issue and it was urgent, you were there to encourage them to pick up the phone. Between the two offices, we decided to have three-digit calling.
These are all minor things, but they all contribute to changing the behavior of the cultures to sort of bring them into the middle, but you have to give them the tools to do that. We spent a lot of time getting people physically together.
In retrospect, could you have avoided some of the obstacles or was it something that you had to endure?
It's a little bit of both, I think. That knowledge that you gain can help you avoid problems. That's part of the learning. Some of them you can't avoid, but you certainly can learn how to get through them more quickly, with less pain.
What did you learn from the experience?
One is the culture consciousness. Any time you're looking at a merger or a strategic partnership of any kind, you need to be really conscious of the cultures and the differences or similarities that exist.
I think it's very important and maybe overlooked because you're focused on how this product is beneficial to us. But you're going to be investing a lot of time and money into that relationship, and it's going to fall apart if you don't think about the cultures.
No. 2 is the concept that the devil is in the details. You can think about everything on the high level, but certainly one of the lessons we learned is you've got to go through and handle the details in the right way. The details can be mundane-sounding things, like health insurance, like vacation policy, that all feed somehow into the cultures that have arisen in both entities.
Those details become very personal to each employee, so it becomes vital that you handle them well.
How to reach: Netspoke Inc., www.netspoke.com