Ray Marano

Tuesday, 26 November 2002 08:43

Medardo Monzon

Out of college, Medardo Monzon began his career by starting a small specialty chemical company. Twenty-five years and stints with three multinational companies later, the Colombia native has come nearly full circle.

Monzon has taken on the job of CEO of Nanova LLC, a spin-off of Nanomat Inc., a North Huntingdon company that develops nanomaterials. Nanomaterials are substances that are restructured at atomic and molecular levels to alter certain physical characteristics, making them more efficient for use as ingredients in a variety of products.

Nanomat was formed to manufacture and market two nanomaterials, NanoTalc, derived from talc, and NanoCalc, made from calcium carbonate. The materials are used in a variety of products, from paint, where they can improve coverage, to plastics, where they can increase strength-to-weight ratios or reduce permeability.

Monzon worked in research and development and management positions for Dow Chemical Co., Equistar Corp., and most recently for International Paper Co., where he managed its specialty packaging division, a $450 million operation with about 1,200 employees.

His initial tasks at Nanova will be to formulate a business plan to secure funding for the new company and to identify a location for a 250,000-square-foot manufacturing facility.

While the rewards of working at multinationals are considerable, Monzon says he is looking forward to the responsibility he'll have for building Nanova virtually from the ground up. In a large company, responsibility can be spread around and it's not always clear who holds it.

Says Monzon: "My view is that the level of ultimate accountability is not as significant as in a situation like this, where you're starting up and every decision counts."

What is your business background?

I've worked in the chemical and allied products industry for about 25 years. Half of my experience has been in an R & D environment and the other half has been in the commercial environment -- business management, marketing and sales management and, most recently, general management.

I worked for three companies: Dow Chemical, Equistar, the largest producer of polyethylene in this country, and for the last eight years with International Paper Co., primarily in its chemical division, Arizona Chemical. For the last two-and-a-half years, I was the general manager of the specialty packaging business of International Paper.

How did you come to the opportunity with Nanova?

A friend saw an ad on Monster.com and he knew of my interest. I've always seen myself as a product of the chemical industry, and my career at International Paper took me to a paper-type business.

I always wanted to come back to the chemical industry, and I wanted to come back to the forefront of it. When I saw what this was about ... it seemed like a great opportunity.

What's the relationship between Nanomat and Nanova?

Nanomat is a technology incubator company which was established in 1995 and has become a leader manufacturer of essentially custom-made nanomaterials, a wide variety of nanomaterials, tungsten coated with nickel and cobalt, gold, boron, you name it.

The business model is to continue to develop technology, nanomaterials essentially, and when they believe that they have something of relevance that can be taken to the marketplace, they will spin off one or more product families into a company. So the mission of Nanomat remains that of technology development and not immersed in the commercial aspects of the business -- building plants, and organization, etc.

Nanova's going to commercialize two products, two families of nanomaterials that are very, very well-known to industry on a nano scale. One is talc, NanoTalc, and the second is calcium carbonate, NanoCalc.

The addressable market for these two nanomaterials on a global basis is $2 billion. There are a handful of competitors, so the opportunity to build a business is significant.

This opportunity is significantly different from your experience with large companies.

That's a large part of what attracted me to it. Right out of college, I owned my own business, a small specialty chemical laboratory in Bogota, Colombia.

So I've always seen myself as an entrepreneur at heart, and always wanted to start something. This is a tremendous opportunity to build something from scratch, this ability to bring value to an organization and build an organization. That's an experience I haven't had here in the United States.

I've worked in the well-established companies. When you think about it, yes, you get a lot of experience in those companies, but I would submit that the degree of freedom and risk that you can take are a lot less. Everything gets approved three or four times by 10 different people, different committees.

My view is that the level of ultimate accountability is not as significant as in a situation like this, where you're starting up and every decision counts. You can't afford to make a wrong decision. I thought quite a bit about what it would mean, rolling up the sleeves and doing things that other people in the big organizations would do.

I guess the other element was that I got a bit tired of large corporate America and wanted to find something where the independence is tremendous. There's a lot of reliance on myself to get things done, and to me, the size of a corporation's not that important.

What is necessary to make Nanova successful?

We need to raise funds, so the majority of my time has been spent putting together a credible business plan that we can take to both strategic investors and venture capitalist firms to raise the capital required to get the company off the ground.

I think the key challenge is, can I create enough value and can I deliver the materials at a cost that is sufficiently low to generate a good return for everyone. How to reach: Nanomat, www.nanomat.com

Tuesday, 26 November 2002 08:40

(Don't) follow the money

A panelist at an event I attended recently related a story about a technology company offering a new product that it had demonstrated could save hospitals hundreds of thousands of dollars a year and improve patient care.

Early on, the sales manager at the company noticed that all of the sales closed were at hospitals that were losing money. Seeing where the real opportunities were, the manager threatened to fire any sales rep that called on profitable hospitals.

Why? Because the boss realized that a profitable hospital could toy with a proposal for months, only to kill the idea. If things were going pretty well, the administrator had little incentive to take a risk on a new idea, even if it held the promise of saving money. The executive at a money-losing hospital, on the other hand, needed fast economic relief and was more likely to take a risk.

The sales manager's point is well-taken, particularly in a sluggish business environment when lots of businesses are looking for ways to cut costs and gain an edge on their competitors.

When I worked in the food industry in the late 1970s, it became clear that customers were looking for value pricing to combat the effects of a collapsing local economy, lots of unemployment, rising fuel prices and double-digit interest rates. Our response at the time was to be the first in town to introduce generic products, low-priced groceries that gave customers an alternative to higher-priced brand name items.

The downside of selling generics was that the low prices and thin profit margins meant that the more we sold, the tougher it became to retain profitability. The upside, however, was much more critical to our long-term survival as a business.

We were able to retain our customers and even attract new ones that would stick with us until times got better and they were ready and able to spend more freely. At some point, generics faded from the scene as demand dropped off. Those same customers, however, stuck with us when better times returned.

So if your prospects seem to be doing well but aren't buying from you, perhaps you should be looking for someone who is hurting. It might make both of you feel better.

Thursday, 31 October 2002 10:37

Bad prescription

Prescription drugs were once considered a small piece of overall health care costs. But with double-digit annual increases over the past few years, prescription drugs are now viewed as a major contributing factor to health care cost increases.

Not surprisingly, many employers are considering steps to mitigate costs. Among the factors driving higher prescription drug costs:

* Plan design, such as co-pays and coinsurance, not keeping pace with prescription drug cost increases

* Research advances, fueling new, more expensive drugs

* Advertising aimed directly at the consumer, and an increasing demand for higher-priced drugs

* An aging work force -- more workers are relying on prescription drugs to treat a growing number of age-related medical conditions

Employers should avoid short-term solutions that could result in long-term losses, says Barbara Hawes, a pharmacist and national pharmacy practice leader at benefit consultant firm Towers Perrin.

"Such solutions may decrease pharmacy costs in the short term, but significantly increase medical costs over the long term," she says.

"Simply cutting costs without knowing what type of effect it will have on your employee population is a prescription for disaster," says Alan Spiro, a physician who heads Towers Perrin's clinical consulting services. "Efforts to cut prescription drug costs need to be carefully evaluated to avoid increasing long-term medical costs."

Hawes says the first thing employers should do is analyze their company's pharmacy data.

"This will help them understand the medical profile of their employee population," she says.

Then employers should consider one or more of the following actions:

* Introduce prescription drug plan design changes, such as coinsurance, that will increase employees' awareness of drug costs and motivate them to opt for less expensive generic drugs.

* Initiate Web-based components of consumer-driven health plans that encourage consumerism and provide employees with information and decision support such as health information and disease management tools, health risk assessments and drug efficacy and pricing information.

* Work aggressively with pharmacy benefit managers to ensure the best contracting, pricing, due diligence auditing and quarterly monitoring of program cost components.

* Counter prescription drug advertising by giving employees the unbiased information they need to make prudent, cost-effective decisions about the prescription drugs they use.

* Consider tailoring formularies to better meet the needs of the employee population. How to reach: Towers Perrin, www.towers.com

Friday, 30 August 2002 10:27

Taking it hard

 

Mid-sized employers were hardest hit by last year's double-digit health benefit cost increases, according to an analysis released by Marsh Inc.

Across the country, employers with 200 to 999 employees absorbed a 17 percent increase in total health benefit costs, which reached $5,144 per employee -- an average surpassed only by employers with 20,000 or more employees. Small employers (10 to 199 employees) kept their average cost increase down to 10 percent by slashing benefits, while those with 1,000 or more workers -- helped by their size and sophisticated cost management tools -- reported an average increase of 12 percent.

Drawn from a national, scientific survey conducted by Mercer Human Resource Consulting, the survey "Mid-sized Employer Health Plans 2001" is based on responses from 1,352 employers with 10 to 999 employees.

In the Mid-Atlantic Region, which includes Pennsylvania, New York, and New Jersey, mid-sized employers participating in the study saw their costs rise 10.4 percent to reach an average of $6,120. This includes costs for medical, dental and any other freestanding health plan offered. These employers expected their costs to increase 11.6 percent in 2002.

At the local level, employers in Pennsylvania, and specifically Western Pennsylvania, saw their costs rise at a slightly slower pace to reach an average of $5,216 per employee.

"Mid-sized employers are in a double bind," said Beth Essey, practice leader for employee benefit services of the Marsh office in Pittsburgh. "They need to offer a benefit package that is comparable to those offered by large employers, with whom they compete for labor, yet they have neither the purchasing power of large employers nor the resources to devote to benefit cost management."

The nation's small employers are coping with cost increases by cutting benefits. In the most common type of medical plan, the PPO, the median deductible amount jumped from $250 to $500 in 2001 -- and that's for employees using the preferred provider network.

Even more telling, the number of small employers requiring a deductible of $1,000 or more is approaching one in five. Deductibles of this size are rare among mid-sized employers -- fewer than one in 10 among those with 200 to 999 employees.

Says Essey: "The message is pretty clear -- for some small employers, the choice is to shift cost to employees or terminate the plan." How to reach: MMC, www.mmc.com. Marsh, www.marsh.com

Friday, 30 August 2002 10:19

A bonding experience

 

From all indications, Judith Reynolds isn't someone who has trouble adapting to new situations.

Reynolds has had a wide and varied career that includes working as a nurse in an acute care hospital, a nursing home, a home health care agency, a prison and with mentally handicapped adults. She's also worked as a private secretary and an emergency medical technician, as well as at a variety of other jobs.

Clearly, dealing with the new and unfamiliar isn't something she would shrink from.

"Obviously, she's a very bright, knowledgeable woman, particularly about her industry," says Bernie Sussman, a counselor with the Service Corps of Retired Executives who has helped Reynolds through some business challenges, including one that nearly squashed the expansion of her business.

When Reynolds decided to expand her personal care business, the primary challenges appeared to be finding a location and getting the $500,000 project financed.

Reynolds, a Pittsburgh native, came back to the area from New York to care for her ailing elderly mother in 1993. An aunt, too, was in poor health, so she moved in with Reynolds as well. Later, an acquaintance asked her if she would take in a family member, and she found herself virtually in the personal care business.

However, to meet state regulatory requirements, Reynolds would have to be licensed to take in a fourth resident. She saw the situation as an opportunity to start a business, expanded her Dorseyville home with an SBA loan to accommodate eight residents and got a license to operate a personal care home, Cedarwood Personal Care.

By 2000, Reynolds was able to generate enough business to expand. She purchased the vacant Russelton Elementary School building in West Deer Township, got a tax abatement on the property and put together a plan to build a new facility, Cedarwood Circle, on the parcel.

Under state regulations, small personal care homes can house a maximum of eight residents. Any home with more than eight residents is subject to more regulation by the state.

"When you go into large personal care, you have a whole different set of regulations," says Reynolds.

Reynolds brought Sussman in to help her with the project. To avoid additional regulations, she decided to build four separate buildings on the site, each with enough space and facilities to accommodate eight residents.

The project was moving along until Reynolds hit an unexpected snag. While her lender was comfortable with the deal, the SBA at the eleventh hour insisted she take out a performance bond for the contractor, a stipulation that would have added about $30,000 to the cost of the project. Reynolds says that would have stopped the deal dead in its tracks.

"The bond would have sunk the deal," says Reynolds.

She was up against the clock with the contractor, who would have to go on to another project if financing wasn't in place by a certain date. So she turned to Sussman to try to find a way to make the deal work. Reynolds hoped he could help her through the red tape and around the roadblock.

"It looked like the whole deal was going to fail at that point," says Sussman. "I just started making a lot of calls to see if there wasn't a way to get around this regulation."

Sussman found a recently retired SBA employee who thought he might be able to get the agency to bend on the requirement for the performance bond.

Sussman's associate did some investigating and found several prominent individuals for whom the contractor had done work to vouch for him. Their testimonials, the SBA decided, were sufficient, and it waived the performance bond requirement.

The contractor broke ground for the first building on Cedarwood Circle last year, and it was completed on schedule in January, within 1 percent of the contractor's estimate. By April, it was fully occupied, and Reynolds is looking forward to completing the additional three buildings, one designed for hospice care that will be staffed by the nonprofit Peaceful Dwelling Place.

For Reynolds, the motivation to operate small personal care homes that have a family atmosphere rather than an impersonal feel comes from her experience as a nurse.

"I think when I set this up, it was out of wanting to do what I didn't have the time to do when I was a nurse," she says.

In addition to Reynolds' broad experience, drive and determination, Sussman attributes her success to being "very coachable" and knowing what she wants to achieve.

Says Sussman: "She has a great vision as to where she wants to be and how to get there."

And how to get the help she needs to do it. How to reach: Cedarwood Personal Care, www.timeforcare.net; Service Corps of Retired Executives, www.score.org, U.S. Small Business Administration, (412) 395-6560

Monday, 22 July 2002 10:10

Ladies first?

Ladies first?

By Ray Marano

If Sam Jack thought that women in general were less able than men to handle the rigors of running a business, his attitude wasn't all that unusual. Men of his generation commonly observed primogeniture as the rule, and handed the reins of their companies over to the eldest male child. If there was no direct male successor, a nephew or other male relative might have been the one to take charge.

But the oldest male child may not necessarily find himself in the top position when it comes to succession in the future. Women, as well as younger siblings, are more often finding themselves taking over when company owners retire, even though the barriers haven't been broken down completely.

"I think there's still a lot of resistance to that, but I think it's starting to change," says Ann Dugan, director of the Family Enterprise Center at the University of Pittsburgh's Katz Graduate School of Business. "People are starting to think that it can be someone other than the oldest son."

And, Dugan points out, with a growing number of family-owned manufacturing and other old-industry firms in Western Pennsylvania poised to be passed onto the following generation, more companies are likely to have women sitting in the CEO's seat.

Sunday, 21 July 2002 20:00

Heritage at stake

No one is quite certain why Sam Jack-the third generation to run S.W. Jack Drilling Co.-walked into the shower one day in 1990, put a .357 Magnum-caliber pistol to his head and pulled the trigger. Certainly a string of dismal years and an unpromising future for the natural gas industry meant the business he had poured his life into would be a long time, if ever, recovering. And a man whose behavior was characterized by ebullient joy one day and deep, dark lows the next could easily be inclined to commit the ultimate act of controlling one's destiny.

Christine Jack Toretti, his daughter and now president and CEO of the Indiana, Pa.-based company that he tried to keep out of her hands, speculates that the man who idolized Gen. George S.Patton and ran his company like a draconian field commander had become despondent over the downward spiral the business took in the anemic gas industry of the 1980s. His age-he was a month shy of his 65th birthday when he died-may have signaled to him the beginning of the end of his life, the final stage of which promised to reveal itself as all too dark as his company continued to decline.

Those close to him knew that Jack was obsessed with being in control of every detail of his business, his life and even his death and what was to transpire after it.

"My father wouldn't let anyone make a move without him," says Toretti.

Try as he might, though, his intentions were circumvented by a daughter whom he was convinced was incapable of carrying on his business. But she was, and she did carry on-to the point of restoring her father's dying company.

The road back hasn't been an easy one. Since she took over in 1990, she has had to regain the confidence of customers and employees, introduce a more nurturing management style and substantially reduce the company's workers' compensation losses. And she has had to endure her share of personal and professional crises along the way-including a divorce.

But in fiscal 1997, Toretti's efforts began to pay off. The company broke even for the first time since she took over. Moreover, she has doubled the size of her workforce to 350, thanks in part to two acquisitions and a strategic alliance accumulated since 1990. And Toretti herself has built up her own prominence in the process, becoming known for her active leadership role in Republican national politics and in her industry. Indeed, she has come far since facing her father's tragic death and the formidable business challenges left in its wake.


Sam Jack left no real succession plan, save some life insurance and detailed written instructions to his wife, Nell, and Toretti, their only child, as to how to divest themselves of the company and its assets after he died. Toretti says her father likely saw liquidation as more profitable than a sale of the company, given that the natural gas and gas-drilling industry was foundering at the bottom of its cycle at the time. And the prospect of bringing in someone from the outside to run it wouldn't have sat right with Jack, she says.

All told, Toretti recalls, it became clear to them that Jack had intended that the company not survive him. His wife had had little involvement in the business. Toretti, at the time 33 and the mother of two with a third on the way, was chief financial officer, but she hadn't had nearly the preparation that a successor would need.

Besides, she concedes, it was quite clear that her father had little confidence in her ability to take over, and perhaps not without reason. Jack simply had not been inclined to groom her as his successor.

Yet, to be fair, Toretti's father's sentiments weren't much different than those of many others, including her mother. Nell Jack was skeptical about letting her daughter take on the business and, until relatively recently, even refrained from expressing her pride in her daughter's efforts to jump-start the stalled company.

"A lot of people were convinced that there wouldn't be a company," Toretti says now. The industry wasn't showing any signs of recovering, many of the company's assets had been sold off, and Jack's successor had never inspired the confidence of her father enough to be groomed for the takeover.

"I encouraged her to sell the company," says James McElwain, now the company's chief operating officer for a second time, when he heard of Jack's death. Sixteen months before Toretti hired him, Jack had fired him after the last of many heated arguments between the two.

But Toretti was determined to keep the business going, saying she felt an obligation to the people who worked for S.W. Jack Drilling-many of whom would be hard-pressed to find jobs in the industry.

"I asked my mom if she would give me two more years and bet on me," says Toretti. She eventually convinced her mother, who had inherited her husband's company initially, to give her a chance.

Robert Duggan, chairman of S&T Bank, where Toretti serves on the Indiana, Pa.-based bank's board, says he views Toretti as the person the company needed at the time.

"There's no doubt about that," he says. "She made a commitment and dedicated herself to making sure it got done."


Starting at the bottom

The company Toretti took over was in dismal condition, indeed, wracked by the blows suffered by the gas industry since the mid-1980s. The Tax Reform Act of 1986 had stripped oil and gas companies of some of their tax advantages and the stock market crash in 1987 took its toll on the overall economy.

The stagnant years eroded much of the company, as business dried up and customers fell into bankruptcy. Gone were not only the two corporate helicopters and jet, but also the 2,200 wells which S.W. Jack Drilling had once operated in the Appalachian region, then sold when the price of gas no longer justified the cost of pumping it out of the ground.

The company retreated to operating only contract-drilling jobs, but its clients, too, had little incentive to open up the ground because of the depressed prices. Moreover, Jack had driven such hard bargains with customers-in an industry where everyone knows each other-that few were inclined or in a position to break his fall during the company's descent. S.W. Jack Drilling was in anything but optimum shape as an acquisition target.

Still, Toretti describes her father as "brilliant in what he was able to achieve." Jack took the drilling company from four rigs when he took over in 1954 to 25 rigs operating seven days a week, 24 hours a day in the boom years of the 1980s.

Clark Nicklas, president of Vista Resources Inc., a gas exploration company, and a 20-year veteran of the gas industry, knew Jack and describes him as someone who was tough but fair.

"He was tough, but the thing was, you knew where he stood," says Nicklas. "You don't mind someone who's tough as long as you know where they're coming from."

Others describe him as a driven man with boundless energy who knew every detail of his business, from the financials to the drilling rigs. They say he was an entrepreneur who was just as likely to turn up at a drilling site as the company's offices in Indiana.

Whatever his demeanor, Jack had been much more generous over the years than his tough hide would have revealed. He could go on a tirade and have a dozen people fired or get into an acrimonious battle with a subordinate or a customer. But, McElwain says, he would just as readily open his wallet to Penn State or Indiana University or any number of charitable causes. "All through Indiana and Clarion counties," says McElwain, "there are backstops that Sam's money built."

Toretti's management style, meanwhile, is in many ways in sharp contrast to her father's.

"Chris is more of a team-builder," says S&T Bank's Duggan, who has known her for nearly two decades. He describes her as an executive with a knack for striking a balance between employees' needs and the requirements of the business, and, he adds, she has been an important board member when it comes to scrutinizing the acquisitions that S&T has made in recent years.


Rebuilding relationships

When Toretti finally bucked her father's wishes and mother's concerns, her first order of business was to get on the phone and assure customers that the company was going to continue in business. In a market where drilling companies were scrambling for jobs, it was essential that existing customers be assured that work would go on uninterrupted, says Toretti.

Although she had been the company's CFO since 1984, Toretti was shielded from many details of the business and made few decisions without consulting Jack.

"My father walked around with everything in his head," she says.

Among her first changes was the creation of a system that would more accurately determine costs. Now, she says, S.W. Jack Drilling can tell what drilling costs will be with precision wherever a rig is placed.

Toretti knew that other things would have to change as well if the company was to survive in both strong and weak markets. Take, for instance, her father's autocratic style. She quickly decided it wasn't going to work for her, so she began to decentralize control, giving her managers and the field teams more autonomy and freedom to make decisions.

"He was right," says Toretti of her father. "I couldn't have run it the way he did."

The decentralized control, Toretti admits, by no means became the company's end-all panacea overnight. At first, she says, employees reacted with uncertainty and tentativeness-especially the "drill pushers," the supervisors who ran the field crews. Eventually, though, they saw that their new boss was serious about a new way of doing business, so most of the employees began to open up. The changes were not without fallout, however, and some employees who were used to the old ways wound up leaving the company.


New safety and savings

Another serious area of concern for Toretti had been worker injuries. Worker injuries had taken their toll over the years, she says, pushing the drilling company's workers' compensation rates through the roof. Well drilling is rife with risks anyway, but a strong market for gas had given the industry a drill-them-as-fast-as-you-can sort of philosophy, one that Jack had embraced as well.

But with insurance rates soaring, Toretti says she realized that the company couldn't continue to sustain the level of workers' compensation losses that it had in the past if it was to become profitable. So one of the first things she did was initiate a comprehensive safety program for the field employees, including team and individual financial incentives for good safety performance.

Crews get $1 a day for every day a rig goes without a lost-time accident, and a safety-awards bank, and full-page ads in the local paper congratulating workers who have avoided accidents recognize adherence to safe work practices. Those efforts likewise have paid off, with costs pared by 75 percent over a three-year period.

Now, ongoing safety training keeps workers aware of hazards on the job, and a tough drug-testing program that offers rehabilitation for workers who test positive keeps impaired workers-potential hazards to themselves and their fellow workers-off the rigs.


New loyalty and trust

Toretti says the company's core customer base that stuck with S.W. Jack Drilling through the transition was key in getting the company through the early years of her tenure. Veteran employees, too, were instrumental in keeping the company going.

"The better employees could have found someplace to land," she says, but many chose stick it out.

That loyalty and trust in the company paid off dramatically in 1995, when Penn Virginia Corp., one of Jack Drilling's customers, approached Toretti with a proposal for a strategic partnership, a development that she cites as a turning point of her tenure as CEO.

"They approached us, and it was in a buyer's market," says Toretti. The deal involves S.W. Jack Drilling taking on as much of Penn Virginia's drilling work as it can handle. That show of confidence, by a company that had come to S.W. Jack Drilling not as a previous customer but because of its reputation in the industry, has led other companies to seek similar arrangements, says Toretti.

Another testament to the positive change taking place at Jack Drilling is McElwain, the company's chief operating officer. McElwain had taken a job in the health-care field after his stormy break with Jack, but he stayed in touch with Toretti from the time she took over. Knowing that McElwain had a depth of understanding of the drilling business, she asked him to return.

On the Monday in January 1995 that McElwain returned to S.W. Jack Drilling, gas prices hit rock-bottom. But what he found was a company that was better run and a CEO who had been tenacious enough to keep the company going through a string of difficult years.


Growth by acquisition

The fallout from the gas industry's sustained bad times over the past 15 years continues to haunt the business today. Hundreds of thousands of workers have left the industry, and equipment is in short supply.

"You can't buy new drilling rigs today," says Toretti. "They're just not available."

So to gain additional growth capacity, S.W. Jack Drilling has acquired two West Virginia-based drilling companies s. The purchases have brought additional skilled workers into the company as well as needed drilling gear. The acquisitions, as well as growth of the company, have allowed S.W. Jack Drilling to double its workforce, a prospect that seemed unlikely when Toretti took over.

In a move that is perhaps as indicative as any of the company's rebound, Toretti has put S.W. Jack Drilling back into the gas production business, an enterprise it had abandoned nearly a decade before. Now, with Toretti and McElwain forming partnerships with other firms in the industry, the company drills about 15 wells a year, a tiny fraction of the more than 2,200 it owned during its boom years, but a clear sign of the "cautious optimism" that is emerging in the industry, says McElwain.


The challenges ahead

The gas industry faces future challenges that are different but no less critical than those it encountered in the past. A shortage of qualified labor and drilling equipment and a need to come up with new ways of finding and extracting natural gas will mean critical strategic decisions for S.W. Jack Drilling and its industry peers.

"All the easy stuff is over," says Toretti, indicating that deposits which were the most accessible have, for the most part, been exploited. In the future, she says, drillers will have to make some difficult choices as to where they want to put their resources to make the best use of techniques to tap harder-to-reach reserves. New technologies which allow horizontal drilling are available, yet will require significant capital investments.

And seismic processes are available to reveal more accurately where gas deposits are located, but again, they require large capital commitments. Furthermore, drillers will have to decide whether they want to invest in gear that will allow them to drill deeper into existing wells, where additional unrecovered reserves may exist.

The company is now in the process of attempting to map out how it will do business in the future and where it should make investments. For now, Toretti sees its nearer-term interests in West Virginia.

Overall, Toretti describes her ability to survive the tough years this way: "I never knew until I had a child the limits of what I could endure," she says. "I knew I had enough self-discipline to stay the course. No matter how hard it got, no matter how much abuse I had to take from customers, I kept looking at the big picture and kept going. I had my mom's future and my dad's heritage at stake."

Christine Toretti's more measured approach to stress

By Ray Marano

The way Christine Toretti runs S.W. Jack Drilling today isn't the only striking contrast between her and her father. She also seems to have a strikingly different approach to coping with the stresses and strains of the executive suite.

While her father could react to the ups and downs with an outburst of anger or outlandish joy and exuberance, Toretti seems to take a more measured approach.

Toretti left her studies at the University of Virginia before finishing her degree, uncertain of her future and what she wanted to do. During that period of soul-searching, she decided to engage in an EST seminar, Erhardt Sensitivity Training, a faddish self-discovery technique that popped up during the 1970s which involved keeping participants awake for a 24-hour session, depriving them from basic activities like visiting the restroom, and participating in exercises designed to increase self-awareness and insight.

At the end of the session, you either "got it" or you didn't. The "it" was never really defined very concretely, Toretti says, and she notes that she isn't sure if she "got it." But shortly afterward, she says, she did come to the realization that she wanted to return to school and finish her degree in finance. In hindsight, that no doubt became one of her greatest assets as she became involved in and eventually responsible for the management of S.W. Jack Drilling.

Later, the search for relief from the pressures of being a mother, wife and corporate executive led to a life-changing experience for her and a number of her peers.

"About four of five years ago, I had just had it," Toretti recalls. "I felt like I was my mom's mom, my kid's mom and my husband's mom."

The pressures of holding down the job of chief executive officer and fulfilling her responsibilities as a mother and wife were stretching her to her limit. And to make matters worse, after several years of trying, things weren't looking much better at S.W. Jack Drilling than when she took the helm.

"As a female CEO, your girlfriends don't know what you're going through, and you have few peers who understand what you're going through," she reflects.

And she found there were few places to turn for help. Her response was to marshal the help of her peers through the Young Presidents Organization, a national group of youthful chief executives. Toretti contacted the women members of the YPO and organized a retreat, attracting 28 of her peers to the gathering. Since then, the group has held a number of retreats, and Toretti says the camaraderie with women who face similar sets of issues, both personal and professional, is of great benefit to the women who attend.

Those efforts, as well as her active role in her industry, politics and education-she is Republican national committeewoman for Pennsylvania, a board member of two major gas industry groups and a member of the governor's task force on education-earned her the Woman of Spirit Award from Carlow College this year.

Her busy schedule and experience as a business executive have given her keen insights into the challenges that women face as business owners.

Says Toretti: "I want to provide support to women who have gone through life-changing experiences and are searching for strength to come out better, more confident and willing to give in return."

Sunday, 21 July 2002 20:00

Video gains

Anyone who has tried to close a big deal, hire a key employee or smooth out a serious glitch in a project knows the value of meeting face-to-face with the parties involved. If they're in a different city, though, such meetings can mean costly and time-consuming travel.

Teleconferencing can bring people together, but it doesn't necessarily provide the ideal environment for communication.

Between the expense of travel and the shortcomings of teleconferencing lies videoconferencing, which allows parties to meet face-to-face, if not in the same room, and absorb most of the subtleties of the communication that might otherwise be lost in a telephone conversation.

"The weakness of teleconferencing is if you have five or six people in a teleconference, there are inevitably two or three people who get tuned out," says Robert Berthold, who manages the Pittsburgh franchise of Interactive Videoconferencing Centers, a Braintree, Mass., company.

The perceived advantages of videoconferencing to businesspeople and other professionals has encouraged four Pittsburgh investors to put up $50,000 to set up the second franchise nationally of IVC, a company that offers a package of videoconferencing services.

As Berthold points out, the cost of airline tickets, hotel rooms, rental cars and meals can make videoconferencing look like a cost-effective way to do business. While charges vary, use of the Pittsburgh office's large conference room comes to a little less than $600 an hour.

The company's first franchise set up shop in Philadelphia. IVC hopes to have locations in 60 cities by the end of the year, Berthold says.

Lawyers gathering expert testimony or deposing witnesses, sales organizations, and deal makers negotiating over long distances are all the types of clients that IVC expects will use its videoconferencing services.

For our money, anything that does away with those annoying speakerphones is a giant leap forward.

Monday, 22 July 2002 10:07

Trucking past Y2K

Computers, it could be persuasively argued, have increased the pace of modern business, not to mention contemporary living on every level.

Thanks to billions of computer chips directing everything from communications networks to banking systems, the potential for catastrophe—or at least chaos—in the business world seems anything but remote when Jan. 1, 2000 arrives. That, of course, is when computer programs written to recognize two-digit dates read “00” as the year 1900.

Ward Trucking Co., an 800-employee commercial trucking company, stands among those who hope to sidestep that pending confusion.

The Altoona-based company recognized the problem early and has taken most of the steps needed, company officials say, to confront the problem.

“I, for one, believe that by addressing it now, we are positioning ourselves for a positive transition down the road, unlike many of our competitors,” says Dave Crean, vice president of operations for Ward Trucking.

Mike Zupon, Ward’s director of management information systems, says Ward Trucking should have all of its Year 2000 issues resolved by the end of this year.

Ward Trucking is hardly alone in its need to address its Year 2000 situation. Doug McCloskey, director of research for Infoliant Inc., a consulting firm that helps computer users gauge the compliance status of their software, says that virtually every company with a computer needs to be concerned.

The problem, now dubbed “Y2K,” originated because of the cost of data storage in the 1960s and 1970s. To minimize data storage costs, information technology projects cut down on the amount of stored data required by an application. In time, programmers adopted as an industry standard the practice of using two digits to express the year.

Despite the fact that storage space became less expensive over time, relieving the necessity to express dates with two digits, programmers have continued to write applications using two-digit dates. In fact, McCloskey warns, while programmers have long recognized the Y2K situation and its potential impact, some software written even in recent years—some of which might be sold currently—isn’t Y2K compliant.

For Ward Trucking, as with most other companies, its own Y2K compliance is only a part of the solution. That’s because customers who fail to come into compliance could cause headaches for Ward Trucking.

“There is a chain reaction that can potentially occur if vendors and customers alike are not ready for the changeover,” says Zupon.

Obviously, Ward is concerned that its customers and vendors are in compliance, too. If a major client’s computer system crashes and burns, billing systems could fail and payments could be delayed.

To minimize that possibility, Ward Trucking has undertaken a campaign to alert its customers and vendors to the Y2K issue. A team of six managers is coordinating a communications campaign directed at vendors and customers that describes Ward Trucking’s efforts and encourages them to prepare as soon as possible.

The telephone system’s on-hold message, for instance, discusses the Y2K issue, explaining what Ward Trucking has done to come into compliance and pointing out the issues customers and vendors should consider. The company newsletter, Ward-Wide News, contains articles on its Y2K compliance efforts. Additionally, letters and personal phone calls have gone to customers to remind them of the need for Y2K compliance.

Businesses with off-the-shelf software probably shouldn’t expect individualized help to fix their packages, but McCloskey suggests that the manufacturers’ Web sites may provide assistance.

Those who have customized software, as Ward Trucking has in some of its applications, should find their software vendors able to provide some assistance with compliance. This may be a good opportunity to make some bigger decisions, like whether to scrap a current platform in favor of a new one, which will be 2000-ready.

Ward Trucking, for instance, saw an opportunity to replace its auto-rating system, the one that creates automatic billing for about 80 percent to 85 percent of its customer base, with an updated, more efficient one.

The trucking company started its compliance project in May of last year, and Zupon estimates that it took about four months of his time to complete it, and a five-month period to complete the programming. He says he has been able to accomplish the task with his existing MIS staff, although some companies may find it necessary to add staff to accomplish the additional programming needs.

Zupon estimates compliance costs for Ward Trucking at about $150,000. As demand for services increases with the impending approach of 2000, the cost of compliance likely will increase, McCloskey cautions.

McCloskey suggests that businesses take several steps to ensure Y2K compliance:

  • Determine which part of your operation is most vulnerable, then remedy the applications that affect that segment first.

  • Take an inventory of all hardware and software assets and assess their readiness.

  • Test any changes that the hardware and software manufacturers recommend.

  • Develop an implementation plan for compliance, taking into account which departments might have to shut down for the changes.

  • Fix all issues, then test to make sure that they are working.