Jim Vickers

Monday, 22 July 2002 09:44

Grow your own leader

More than 40 percent of the upper level managers William C. Byham works with will be eligible for retirement within the next 36 months.

They come to Byham, president and CEO of Pittsburgh-based Development Dimensions International, because they want to prepare their companies for the executive shortage expected to dig its claws deeper into American businesses over the next 10 years.

Part of the shortage is due to the fact that nearly every company nationwide faces difficulty finding qualified workers. But another, more compelling reason is the simple fact that the number of people between the ages of 25 and 44 is decreasing and will be 15 percent lower than it is now by 2015.

Despite this pending leadership crisis, Byham says many executives fail to consider who will be their company’s next generation of managers.

“A lot of business leaders are in denial,” he says. “This is a big deal and it’s going to be a long-lasting deal.”

Some executives have already started grooming employees for future leadership positions. That’s not a bad idea, given the fact that Byham’s research shows that 70 percent of promotions to upper management positions come from within a company. Moreover, nearly half of the executives hired from outside end up failing.

These figures have convinced more than a few executives that they should start looking within their own ranks for future leaders. Byham suggests four ways to get started.

Create a pool of candidates

Identify employees who would make good leaders based on job performance and experience. Byham says only about half of the executives he works with tell their employees when they have been placed in one of these acceleration pools.

There are drawbacks with either choice. If you don’t share this information with employees, they may leave the company, believing their careers have stalled. On the other hand, since a promotion is never guaranteed, employees are periodically bumped out of this pool of future leaders, leaving managers with the task of explaining why.

It is crucial, then, to be selective when deciding which employees to include, so upper managers can maximize the time and attention the process demands.

“I believe you can only get a one-to-one ratio in a mentor or coach relationship,” explains Byham. “You only have so many people who can offer this mentoring role in an organization.”

Analyze strengths and weaknesses

Determine the competencies and weaknesses of the employees in your company’s acceleration pool. No matter how the process is handled, Byham urges executives to make sure the process is free of workplace biases.

These assessments are often handled by outside companies that operate assessment centers and are contracted to provide one-on-one, neutral evaluations of employee management skills.

“We’re dealing with people that haven’t had a chance to perform at (the executive) level,” Byham says of employees tabbed for future leadership positions. “That’s what an assessment center does best.”

Provide opportunities for growth

After determining in which areas employees need improvement, assign projects and responsibilities that help develop those skills by using real world experiences rather than training. It is commonly believed that time is the ultimate teacher, but Byham says experiences are more valuable than the amount of time served on the company’s payroll.

“What you want to do is make that development have the most impact as possible,” noting that it should also happen in as short a time as possible, he says. “People assume you have to take two or three years. You can do it a lot quicker.”

Review employee progress

Regularly evaluate the status of the company’s work force and, at the same time, check to see how candidates tabbed for future leadership roles have improved. The process depends on the size of the company, but Byham says ongoing involvement by management is one of the most crucial steps to the success of a leadership growth program.

“If you’re a company that has three divisions, you visit each division and go over manpower decisions,” he says. “At the same, you should be looking at acceleration pool members to see how they are progressing.”

How to reach: Development Dimensions International, (412) 257-3998

Jim Vickers (jvickers@sbnnet.com) is an associate editor at SBN.

If you think you’ve got a can’t-lose e-commerce idea, chances are someone has beaten you to it, because along with the raft of compact disc peddlers, sporting goods vendors and electronics retailers are the lesser-known entrants to the world of online sales.

One doesn’t have to look much farther than www.cufflinks.com, which sells, well, a variety of cufflinks, or www.animalwrappers.com, one of dozens of sites selling clothing for dogs, to see that people have wasted no time staking out their own little corners of the e-commerce universe.

Eighteen months ago, Bill Levy, the owner of Levy Media Group in Cleveland, was toying with an idea of his own. He wanted to launch a “hometown foods” portal on the Web, which would allow people across the country to buy their favorite hometown brand of chips, pickles and cakes from thousands of miles away.

“If you live in Dayton, Ohio, and you move to Los Angeles and you want Mike Sell’s potato chips, what do you do?” explains Levy. “How do you find your hometown favorites?”

He was sold on the idea. So sold, in fact, that he visited a snack industry trade show and asked a number of vendors whether they would be interested in such a venture. At the same time, Levy hired Scott Rafferty, president of Sagamore Hills-based Rafferty Market Research, to evaluate the viability of his e-commerce idea. It turns out there were already sites on the Web ,such as Homesick Gourmet and Home Town Favorites, that offered similar services.

Ultimately, Levy abandoned his food idea and invested in a new video streaming Web venture, www.flashstream.com, which more closely ties in with his media company.

“The report was actually positive,” says Levy, of his hometown food idea. “But, there’s only so many hours in a day you can do this stuff. So I decided I wasn’t going to go along with it.”

Rafferty, who has worked with everyone from small business owners to executives for large corporations such as Key Bank, says what people often forget when it comes to developing e-commerce applications is the fact there is always a chance of failure.

“Just because you put the Web site up doesn’t mean it’s your field of dreams,” he says. “Just because you build it, people aren’t necessarily going to come.”

Rafferty suggests three steps for business owners to take before watching their e-commerce dreams, not to mention money, go up in cyberflames.

Decide on a niche

If you do jump into the always-uncertain waters of e-commerce, Rafferty advises you to stick with products or services that stand out from the pack. Selling Nike shoes will likely end in failure against the dsports.com’s of the world. Custom-made jewelry or antiques, on the other hand, may be more likely to find a receptive and loyal audience.

“There are pockets of small companies that are making money on the Internet,” says Rafferty. “People who sell antiques are making a tremendous amount of money auctioning them off over the Internet. If you look at some of the people who are spending millions of dollars, they probably aren’t making a profit yet, but if people kind of have a homegrown idea, chances are they probably are making money.”

Do your homework

Before moving forward with your e-commerce idea, Rafferty suggests checking out the competition. Most companies that sell online will be listed with popular search engines such as Yahoo!. Evaluate the aesthetics and pricing structure of competitor sites, says Rafferty, to see if there is a way to gain a competitive edge.

“Here’s my evaluation of how well they are doing it,” he explains. “Is the site secured or not? Is it easy to navigate? Does it look good? Does it flow well?”

Ask questions

One part of the equation that cannot be ignored when selling on the Web is designing the site with customers in mind. That means inviting people to evaluate how customer-friendly your site is before you spend your marketing dollars. It also means determining whether your target audience even likes your e-commerce idea.

“Find out their needs in terms of how comfortable do they feel doing it,” says Rafferty. “Just because you set up a Web site doesn’t mean a purchasing agent for an engineering firm is going to feel comfortable doing it over the Internet.”

How to reach: Levy Media Group, (216) 861-6778; Rafferty Marketing Research, (330) 468-7773

Jim Vickers (jvickers@sbnnet.com) is an associate editor at SBN.

Monday, 22 July 2002 09:43

Pulling up the stakes

Tom Rocks feared the consequences of moving his company, Wood Dimensions Inc., to the suburbs from its Cleveland home. As a business that created high-end, custom cabinetry, losing skilled workers was a worry, but an exhaustive search of the city for existing sites had brought few results.

Then Rocks found a 45,000-square-foot facility on West 150th Street for sale. With the help of the Greater Cleveland Growth Association, he landed an Ohio Regional 166 loan to help defray the investment cost of nearly $700,000. He also received a 4 percent interest rate on the loan because the property was in one of the federal government’s designated “empowerment zones.”

Rock turned the new location into a financial advantage, a move that business owners should consider when entertaining thoughts of whether to buy an existing facility or build one from scratch. Bill Ragaller, an architect with Cleveland-based KA Inc. Architecture says there are also other vital factors to consider.

Here are six issues that can make or break relocation.

Physical location

When buying a new home, finding the right neighborhood is crucial. The same holds true when finding a new home for your business. Consider whether the road system can adequately handle traffic in the area. Research whether projects now in the planning phase will help or hinder that situation.

“Consider what’s there now and if there’s anything in the works planned that is perhaps going to widen the road or add (traffic signals) or if it’s going to set up future limitations for that site,” says Ragaller.

Utilities

If you plan to build on a vacant parcel of land and have heavy-duty utility needs, ask whether the local government will help with those costs in exchange for your business.

“You want to get an idea of what the availability is for utilities if you need to bring in major utilities,” says Ragaller. “That’s something you’re either going to end up picking up or perhaps end up negotiating with the city involved.”

Local government

Research whether there are local regulations governing the preservation of green space. In some instances, the allowable size of a company’s parking lot is based on how many acres of land are bought to leave undeveloped.

“Depending on the community, you could find you’re dealing with having to purchase acreage over what you’d have to purchase in another community just to satisfy the governmental agencies involved,” says Ragaller.

Also consider whether city leaders will offer you tax abatements on equipment or property in exchange for the employment you will bring to their city. Most city leaders have realized that granting tax abatements is a necessary evil of luring new industry to their communities.

However, tax deals can vary widely and local leaders will many times sweeten the pot to provide a better deal than their neighbors have offered.

Employees

In today’s tight labor market, you cannot ignore what a move will mean for the health of your work force. A drastic move could eventually weed out employees tired of a long commute. If you must make a big move, make sure there is a strong enough labor base in the area. For example, if you own a manufacturing company, it is important to find a location with a good base of blue-collar workers who can get to your facility without excessive travel time.

“That issue works both ways,” says Ragaller. “Somebody who has a really high-tech white collar labor force is going to want to look for those areas that are going to bring those type to the building quickly.

“You need to look at where your labor force is coming from.”

How to reach: KA Inc., Architecture, (216) 781-9144; Wood Dimensions Inc., (216) 251-5509

Jim Vickers (jvickers@sbnnet.com) is an associate editor at SBN.

Monday, 22 July 2002 09:43

Measure of success

Joseph Keithley does some of his best thinking in the water. Four days each week, the CEO of Keithley Instruments religiously treks downtown to swim laps in the Cleveland Skating Club’s massive pool.

It is a ritual of sorts for Keithley, who admits it is not just a way to stay in shape, but also a chance to ponder his business highs and lows. Lately, he’s had a lot to think about.

First, there is the company’s stellar financial performance during the past year. Between March 1999 and the last day of February 2000, Keithley’s stock jumped from less than $10 to a record $58 a share.

Then there is the bigger question of how, in an age of multimillion dollar Internet start-ups, a 53-year-old company that manufactures high-tech measuring instruments for the telecommunications and semiconductor industries emerged as Cleveland’s biggest business success story of the new millennium.

It is no mystery to Keithley, who has been the diligent architect behind the company’s move from military contracts and general measuring devices to the burgeoning private telecommunications industry, which has him routinely dealing with the likes of Motorola, Lucent and Nokia. It is a distinct change from the way his late father, Joseph F. Keithley, built the $100 million company from a meager wooden-floored workshop.

It was soon after the younger Keithley stepped into the role of CEO in 1993 that he realized the industry was evolving and his company would have to change with it. He also realized there were fundamental differences in the way he and his father approached the company, once telling a reporter he was more suited to the role of businessman than that of scientist.

“I’m sure what I meant was my father was interested in making a contribution to measurement science, while I’m interested in trying to make a lot of money,” Keithley says with a chuckle. “I’ve found that the companies that are really successful in making a contribution to customers are also very profitable. Customers reward them with sales because they have the best approach.”

Finding that approach, however, has resulted in intense struggles for Keithley over the past 10 years, especially with the softening of the Asian economy in the late 1990s. That, in turn, upset his company’s crucial new business with the semiconductor industry.

But a mix of perseverance, business guts and a little luck has put Keithley in position that has other CEO’s salivating.

Where one might expect a hard-nosed business attitude, Keithley is just the opposite. He is personable and serene when talking about the company.

The comfortable conference room adjacent to his office is decorated with watercolor paintings and a brilliantly illustrated Japanese screen that stretches the length of the room’s far wall. When asked about his interests outside of business, he is quick to share tales of hiking in Munich and his love for traveling.

Then, when it comes time to talk business, Keithley’s words take on a steady, almost deliberate, cadence.

“I think people don’t know of our good performance,” he says. “And the reason they don’t know about it is because it seems to have been so instant. We’ve got to prove to people we’re not just a flash in the pan, but that this is something really different from what we’ve done in the past.”

After spending time talking to Keithley about the company’s recent success, two points become clear. The first is, although the company’s skyrocketing stock price seems a type of overnight phenomenon, it would never have happened had it not been for some shrewd business decisions on Keithley’s part during the company’s rocky times.

The second is the fact that Keithley does not look at the company’s current level of success as any sort of summit. On the contrary, he truly believes it is just the beginning of the climb.

Face adversity head on

During the fall of 1993, a mini-panic slowly filtered through halls of Keithley Instruments. After marching steadily upward for more than 40 years, the company’s annual revenues had dipped for the third straight year.

In 1991, annual revenue stood at $100 million. By 1993, however, it was $95 million. The customer base the company had served for many years appeared to be slowly drying up. Keithley also suspected the company’s divisive organizational structure was not helping matters.

His father had built the company by employing a holding company approach, where the managers of individual product lines treated their corner of the company’s operation like a separate business, with little regard for how other lines were performing.

The theory was if individual units were charged with worrying only about their own success, the entire company would reap the rewards. The only problem was one had to look no farther than the decline in sales to see it simply wasn’t working anymore.

“What I wanted to do was get it growing again and everybody else in the company wanted it, too,” recalls Keithley, who started tinkering with the formula soon after he became CEO. “It wasn’t as though I hadn’t been part of the company here, because I started here in 1976, but it was my first chance to really do some things I could put my stamp on.”

Keithley hand picked a team of eight people, including the company’s CFO and several younger managers, to spend a large portion of their time finding an answer to a straight-forward yet complex question: “Why aren’t we growing and what do we need to do to grow?”

What Keithley Instruments had in its favor was the fact that its measuring device technology was needed by high-growth electronics markets as much as by the ones that had grown stagnant. The decision for Keithley was where to place his bets. Ultimately, he decided the telecommunications and semiconductor industries held the most promise.

It was during those early days at the company’s helm that Keithley decided to finally break down the company’s organizational barriers. He quickly discovered there were inefficiencies he could correct with a functional organization strategy. But more important, he says, were the psychological benefits for his work force. With a new strategy in place, everyone could work toward one common goal.

“If you want to have an organization where everybody’s working for the same objective, don’t have it organized so people can’t work together,” he explains. “Don’t have it set up so that each person’s compensation is for him as an individual contributor as opposed to having some group goals.”

Learn from the masters

At age 33, Elton White was the youngest officer of NCR and a notoriously aggressive salesman. He had been responsible for the company’s sales in the Middle East and Africa when one government banned White from bringing any of his company’s products into its country.

Despite what seemed a crushing obstacle, White somehow found a way to meet his sales goal.

“He came up with four different ways they were able to generate revenue even though the authorities wouldn’t allow him to put any new computers in the country,” Keithley says, telling the story with a wide smile on his face. “He’s a fascinating, inspirational guy.”

Today, White sits on Keithley Instrument’s board of directors. Keithley cites his father as his major business influence, but quickly points to White’s veracity and never-say-die attitude as another of his greatest inspirations.

“He does not know barriers, so when you and I might say enough is enough, he’d just blast through,” explains Keithley. “He demands of himself. He demands of others. He has an intensity about him. When he talks, it is always very fact-based and powerful.

He has really helped me hone my skills in management and in what I should strive to achieve.”

White, who has been on the company’s board of directors since 1993, credits Keithley with being a willing student. The CEO always considers board members’ opinions, explains White, and never assumes he has all the right answers, even though he owns a majority stake in the company.

“The first quality that comes to mind when I look at the success of Joe and the success of Keithley has been Joe’s willingness to be open and learn,” says White. “Here is someone who has control of over 50 percent of the shares of the company. He could pretty much do what he wanted to, but he’s been very open to suggestions and thoughts from the board.

“He strives to search for the right thing to do ... But, you can’t just be open, you have to organize the troops inside and execute the plan. He’s done a good job at that.”

Interestingly, Keithley also cites the founders of a competitor as another influence on his business style. Hewlett Packard’s new Agilent spin-off is one of his company’s biggest competitors in the high-tech measuring device market, but Keithley looks at the lives of HP founders Bill Hewlett and Dave Packard and sees businessmen who were, at one time, not much different than his father.

“They did it with a sense of integrity, a sense that they were going to grow because they were going to come out with something that does better this time than it did the last,” says Keithley. “I just admire their ability to attract very good people and to have them stay for a whole career and have them rise and cause such change and growth and change.”

Don’t be afraid to change the status quo

In October 1997, Keithley announced the sudden retirement of several of his senior managers. It was a move that surprised many inside the company, but reinforced a message he had been trying to impress upon his managers and workers for the better part of a year: the company needed a fresh outlook.

Changes made during his first 24 months as CEO were good in the beginning, but the quest for new markets had by 1997 once again resulted in a splintered company stumbling over itself in a race to grow.

Work leading up to the surprise October announcement had started the previous January. With the consent of his executive team, which also believed change was necessary, Keithley hired an outside firm to gauge employee attitudes and beliefs about where the company should be headed.

His reasoning was logical. When the big changes finally surfaced several months down the road, he wanted everyone to know they had a stake in the company’s direction.

“The remaining people knew that I wasn’t just kidding around because the people who retired were fairly senior in the organization or had been there for a long time,” explains Keithley. “These were clearly moves away from the status quo, moves to reinforce what I was telling them.”

The company was also stinging from a string of bad luck. First, its $3.3 million investment in IBM’s Quantox software for testing semiconductors was not proving as successful as Keithley had hoped. It was well received by a number of customers, but the volume of orders needed never came through. Then, the Asian economy began its downhill slide, which took a heavy toll on the semiconductor industry. Despite the uncertainty, Keithley’s staff held strong, a fact he credits to involving them in the process of change.

“There are lots of people in a company who have definite opinions but are busy chattering by themselves and with one another about what ought to happen, whether or not you include them,” says Keithley. “And lots of them are important to the success of whatever decision you make ... I got that buy-in and I think most managers are uncomfortable doing it that way. I think it accelerates the acceptance.”

One of the most radical changes following his October announcement was Keithley’s decision to rotate the leadership role in several key departments to a different person as a way to spur innovation.

“I rotated some managerial responsibilities to get some new eyes,” he explains, “some new thoughts.”

Other changes were a little more difficult. Keithley whittled down the company’s product offerings, discontinuing two product lines and selling off two others. The liquidation took a toll on both the company and the employees’ emotions.

Although the jettisoned product lines were small, the revenue they generated helped pay the salaries of workers in other departments. Without them, Keithley was compelled to reduce his work force by one-third.

Keithley is the first to admit it was a difficult decision, but a move he believes everyone eventually realized was necessary. “We had a very painful experience somewhere between January 1998 and January 1999 of going from 750 people down to 500,” recalls Keithley. “In some cases, they were employed by the new company. In other cases, they just had to leave us because we had to achieve a different cost structure.”

After such monumental changes, Keithley still believed his work was only about 80 percent complete. He expected he would have to modify his new plan six to eight months down the road. He says today, however, that most of the changes made during this crucial period have stuck.

Part of the reason may be the fact that soon after this difficult period, the Asian markets and semiconductor started to recover.

“We had the good fortune that virtually all the choices I made worked,” says Keithley. “It was like a good strategy, good implementation and then the wind shifted. But instead of blowing in front of us, it started blowing from behind us.”

Keep an eye on the horizon

Keithley Instruments made the Jan. 25 edition of TheStreet.com — The Wall Street Journal’s online investment publication. In the article, the company was painted as a dark horse, “ho-hum” firm that successfully latched on to the wireless telecommunications market and benefited greatly from investors initially interested in Agilent, who found a much more reasonable stock price in Keithley Instruments.

“Well, it’s interesting,” Keithley says of the article. “I don’t like the way (writer Marcie Burstiner) treated Cleveland. I thought that was unfair. She seems not to have a lot of respect for manufacturing companies, people who make things.

“But if you look at our sales over the past 10 years, I think we deserved everything she said.”

Keithley truly does not consider his company simply a manufacturing operation that churns out a commodity. Instead, he considers Keithley Instruments as primarily a development firm that supports the needs of the flourishing and ever-changing telecommunications and computer industry.

He explains that every time a cell phone or computer gets smaller, the tiny electronic parts inside of them get increasingly difficult to test for quality.

The challenge is investing in expensive research and development that will allow Keithley Instruments to not only to keep up with the rapid pace of miniaturization, but also be a primary supporter of high-tech, high-growth industries.

So far, Keithley Instruments has handled this task particularly well. The only reason the company has been able to swim in the same tank with powerhouses such as Agilent is the quick response that a smaller company can offer customers.

“Turns out in our business, even though Agilent is $9 billion and we’re $100 million, that they have to look and feel like a $100 million company to be successful,” explains Keithley. “That’s how we’ve been able to do it. We can be more responsive, because it’s really specific applications that need to be addressed and we’re better equipped to pursue the smaller ones.”

As he heads toward the future, Keithley knows great challenges and great opportunities will increase at an incredible pace as computers and communication devices become more prevalent, as well as smaller and more convenient. Being able to react to that change, will be Keithley Instruments’ ultimate test.

“If you look at the relative importance of our manufacturing versus our ability to work with the customers or have this specialty technology, that’s where the magic is for us,” he says.

“The development engineering people, the marketing people, they are the soul and the future of the company.”

How to reach: Keithley Instruments, (440) 248-0400

Jim Vickers (jvickers@sbnnet.com) is an associate editor at SBN.

Monday, 22 July 2002 09:42

A time to let go

The offers were nothing new. As the owners of Cleveland’s National Paper and Packaging, Jeff Grover and his brother, Brent, had fielded them for years.

This time, however, was different. A Pennsylvania businessman wanted to buy the company, yet leave its day-to-day operations untouched.

If they accepted the offer, the brothers would still manage the company, no one would lose their jobs and the business would retain its longstanding name. In an age of consolidations in which the identities of family-owned businesses are often destroyed, the offer was intriguing.

The only question was whether the brothers could hand over the 85-year-old business to a complete stranger and end a tradition that stretched back to 1914, when their grandfather founded National Paper and Twine in a Detroit warehouse.

“You don’t take something you’ve literally grown up with and just divorce yourself from it,” says Jeff Grover, the company’s executive vice president. “I feared I may be taking from my children the chance to perpetuate the business. I asked myself, ‘Is this something my father would have done?’”

The offer inspired some serious soul searching and left Jeff and Brent with the monumental task of deciding whether it was time to sell. After consulting with his wife and children, Brent, the company’s president, returned with an answer: He believed it was the right time, and Jeff agreed.

While attorneys hashed out the details, the brothers were quickly faced with other choices, such as how to break the news to their suppliers, distributors, and, most important, their employees.

“Because of our culture, because of our ability to maintain very good people, we’ve developed a familial loyalty,” explains Jeff. “You cannot walk around poker faced and get away with it. People over the years know you so well that, even if you’re saying one thing, if the body language doesn’t match, they know.”

Last May, Jeff called his managers together for a closed-door meeting to discuss the specifics of the purchase offer. He was eager to see how they would respond, and whether there were concerns that needed to be hammered out before the deal could proceed.

He explained that Bill Leith, CEO of Pennsylvania-based SupplyONE, had offered to purchase National Paper and Packaging as part of a national consortium of industrial packaging, equipment and supply companies he was assembling. He had already purchased two other companies and had an aggressive acquisition campaign lined up for the next several years.

“We actually gave them the option of telling us if this was something that wasn’t suitable,” Grover recalls of the management meeting. “We wanted to get their support and we were also willing to hear if there was anything we were missing ... You’ve got to be willing to let other people within your company, who got you where you are, to be part of the loop.”

When a letter of intent to sell the company was signed three months later, Grover called all 100 employees together to formally announce the sale and answer questions about the ownership change. There was risk in such an open approach, especially since the sale would not be official for two more months, but Grover saw greater peril in trying to orchestrate the sale without his employees’ knowledge.

“I think the reason this worked is it precluded people saying, ‘You guys are doing things for your own Machiavellian reasons,’” says Grover. “You have to be mindful that, in our case, we’re not only dealing with 100 employees, we’re dealing with 100 families. You must have a conscience.”

Two months later, on a mid-October morning, Grover was on the floor of an industry trade show in Chicago. It also happened to be the day that the sale to SupplyONE became official.

He used the opportunity to connect with many of National Paper’s suppliers to tell them about the sale and explain that everything would be business as usual despite the ownership change.

“It was amazing how fast news got out on the floor,” he says. “After a while, it was like wildfire. But I had a chance to talk about it to them face to face. It was just a coincidence that it all happened to be timed with a trade show, but it was great. It was serendipity.”

In addition to his work at the trade show, Grover sent 7,000 letters announcing the sale to distributors and suppliers in the National Paper and Packaging database. Jeff and Brent then sat down at their telephones and called executives at the 30 firms they did the most business with to answer questions and calm concerns about the change in ownership.

Publicly, Grover wanted to keep a lower profile. He feared the media might make a big deal out of the fact that a family business with such a long local history had been sold. On the morning of Oct. 13, National Paper and Packaging released a simple statement announcing the sale and the positive changes that would be made now that the company was part of the SupplyONE network.

“We wanted it to be very low key and it was,” says Grover. “We didn’t want it to be something like, ‘85-year-old company sold. Disaster hits!’”

Today, almost six months after the sale, Jeff and Brent Grover are still tied to National Paper and Packaging, but the company is no longer tied to them. Despite the huge changes that have taken place behind the scenes, Jeff says his job as executive vice president has not changed much.

“I still think I own the company sometimes,” he jokes. “Maybe it’s time for somebody to tell me I don’t.”

Grover prides himself on the fact it really has been business as usual for National Paper since the contract was finalized in October. He does know, however, that selling the family business is not for everyone, because there is a sense of loss connected with the experience.

“You deal, obviously, if you’re a family person, and even if you aren’t, with change,” he says. “If your ego is tied into your business to the point where you have to say that you own it, you’re probably going to have difficulty.”

Grover says a lot of the decision to sell came from simply getting the right offer at the right time.

“Nobody had ever made a compelling reason for us to want to sell,” he says of offers that filtered in during the early 1990s. “It wasn’t just the compensation, it was the question, ‘What is (the company) going to look like?’ The ability to keep the business intact was a big factor in the decision to move forward with the sale to SupplyONE, as well as the advantages a national company brings to the table, like expanded geographic reach and e-commerce applications.”

Never far from the surface of any business sale are assumptions that the owners were obviously influenced by the handsome payoff of selling a successful company. Grover mentions this, then promptly bristles at the notion.

Instead, he’s thankful that he could sell the family business in a controlled environment that was free of warring family members, waning business or just a simple inability to cut it anymore in a competitive market.

“Obviously, people do things for different reasons,” he says. “I’m only grateful we did not have to do this. We weren’t forcing ourselves because we were running out of time or our customers or suppliers were leaving, or one of our principals was dying or we were just flaking out.

“It was just the optimum time.”

How to reach: National Paper and Packaging, (216) 621-7522

Jim Vickers (jvickers@sbnnet.com) is an associate editor at SBN.

Monday, 22 July 2002 09:41

Checking up on the docs

When Mark Parianos entered the information management business, he sold data about everything from criminal records to credit reports to private sector businesses. But it soon became apparent that this shotgun-style approach was holding his small firm back.

So in 1994, Parianos changed gears. He founded Cleveland-based Innovative Data Solutions with plans to carve out a niche in supplying data to the health care industry — a sector that was in dire need of accessible information, but had no existing structures in place to collect and categorize the data. Specifically, physician credentials verification proved an especially lucrative market.

“We felt comfortable, we had the idea and we had the backing, so we sat back for a good 12 months and went into an R&D mode,” says Parianos. “We came in every day and basically talked about what we could do to make this concept better.”

The first hurdle was finding a way to categorize and store the information so it would be easily accessible. That resulted in the company’s customized Credential One software, which provides clients with continually updated information on physicians, dentists, registered nurses and other health care professionals.

As business migrated to the Internet, IDS did the same, trading the stacks of paperwork routinely delivered to clients for a password-protected Web site, www.idsconnect.com, where credentials can be checked in just a few minutes. Parianos believes it is the first system of its kind on the market.

“Our clients are dealing with thousands of doctors with numerous fields of information on each applications,” he says. “When all the information is verified, the file of each professional is usually about an inch thick.”

This market niche seems to be working well for the 20-employee firm. IDS is doing business with health care organizations in all 50 states and has landed contracts with heavy hitting clients such as the Cleveland Clinic Health System and Cole Vision Corp. Meanwhile, Parianos expects the next quarter will see IDS realize several more deals, which are currently being negotiated with big name organizations.

“There are a lot of larger companies that want strategic partnerships with us,” he says. “It’s kind of nice to be the small guy and be wanted because you always have that fear of whether what you’re doing is good enough and whether you’re doing what it takes.”

How to reach: Innovative Data Solutions, (216) 587-9440

Jim Vickers (jvickers@sbnnet.com) is an associate editor at SBN.

Monday, 22 July 2002 09:40

Visit from the drug bus

When your employees drive trucks emblazoned with huge, looping Coca-Cola logos on the sides, you’d better be sure they’re clean and sober.

Any accident with a driver under the influence of drugs or alcohol behind the wheel would be a liability nightmare and an attorney’s dream.

Tim Finnerty, division safety manager for Coca-Cola Bottling Co., understands this. In 1991, the Ohio Department of Transportation instituted mandatory random and post-accident drug testing for drivers of vehicles weighing more than 26,000 pounds. Eventually, the Akron-based bottling company expanded the reach of its random drug testing policy to all drivers of company-owned vehicles and anyone involved in a work-related injury as a way to cut down on state workers’ compensation premiums.

Even after the company moved to a self-insured program a few years ago, drug testing policies remained in place. Finnerty looks at it as a little ammunition in the event that the company is ever hauled into court to face accusations that one of its employees was under the influence of drugs at the time of an accident.

“Actually, most companies are going beyond what they have to do anymore,” he explains. “It’s very helpful when you get into litigation and a plaintiff’s attorney would like to imply your driver was on something, that you can show immediately after the accident that the person was tested and found to be clean.

“If nothing else, it shows a judge and jury that we’re proactive.”

In the HR white paper study sponsored by SBN and conducted by the Employers Resource Council, 44 percent of respondents said they have pre-employment drug screening programs in place, while only 9 percent test employees randomly. Some of this disparity is due to the different types of businesses taking part in the survey. Another reason may be the sheer expense of putting a drug-testing policy in place.

The cost of testing alone isn’t the problem, but it is made worse by the loss of productivity as employees wait in hospital lobbies for their tests. Those hours add up, especially when there is no foolproof way to make sure your employees aren’t eating lunch or running errands during their time away from the office.

Then there is the concern that employees could use the time away to ingest one of the dozens of products on the market today that will corrupt a drug test.

The cost, complaints and cracks in the system have forced some companies to screen their work force only if the law requires them to do so.

But as the problems are worked out, a new industry is popping up around the concept of mobile drug testing. A quick Internet search finds dozens of companies across the nation offering business owners the opportunity to have the screening done at their workplace rather than sending employees to a nearby lab.

Twinsburg-based Zenza Mobile Medical Service is a local player in this new mobile drug testing and medical services market. Company owner John R. Morris founded the company after running into routine drug-screening headaches at his Tri-Mor Inc. road paving company.

“He was sending guys out, but they’d be gone for three hours,” says Zenza sales manager Tracey Skorman. “They’d stop by home, go to lunch. He didn’t know where they were. He didn’t know what they were doing, and they would come back and say that they were waiting there the whole time.

“It was just really a nightmare to keep track of everybody.”

Bound by state requirements, Morris was forced to put up with the hassles, until he realized the incredible potential for a business that offered mobile drug testing that would take five or 10 minutes per employee instead of the hour or two wasted on a lab visit.

“They just thought of it on a whim,” explains Skorman. “A month later, we had a couple units and we just grew and grew from there.”

Today, Morris has a fleet of seven RVs he sends to businesses across Northeast Ohio. Affectionately referred to by some as the “drug bus,” Zenza also offers other types of medical testing mandated by state law for various industries. The company’s core customer base is in Northeast Ohio, although it is working to establish a presence in Columbus.

The mobile concept is fairly simple. For random-testing programs, Zenza receives a list of employee names and periodically draws a few upon the owner’s request, drives to the company and notifies the employees, who are tested a few minutes later. The whole process takes about 10 minutes per person.

Finnerty’s company is a Zenza customer, and although mobile testing is initially more expensive, he believes it saves money in the long run.

“If you save two hours in wages, you more than compensate the difference in the test,” he says. “Plus, by doing it on site, you have better control of the people that have been picked. They are not going to stop off somewhere on the way to the clinic.”

And, as he points out, the whole concept behind drug testing is to weed out employees who are more likely to have the most absences and who are the biggest legal risks when it comes to workplace accidents. Sometimes, the only indicator that a drug-testing program is successful is the fact that the tests keep coming back negative and the number of workplace accidents drops, something Finnerty says he’s noticed in the nine years his company has had a program in place.

And that is good news for business owners who do not want to end up defending their workers in court.

“If you have a driver involved in an accident, it’s going to cost you major dollars,” he says. “You pay what you have to for the drug tests, but it keeps your employees clean. From a liability standpoint, I think it’s a savings in the long term.” How to reach: Coca-Cola Bottling Company, (800) 221-2653; Zenza, (330) 963-5175

Jim Vickers (jvickers@sbnnet.com) is an associate editor at SBN.

Monday, 22 July 2002 09:40

Image is everything

It’s hard to argue with more than 50 years of success, but Ron Cellura decided a few years ago that his family business needed a healthy dose of change.

It had operated under the Western Furniture Company moniker since 1947, but Cellura thought the name conjured images of cowboys and campfire songs more than it did the high-end custom furniture for which the business was known.

“The name made us sound like we made Conestoga wagons,” he says, only half in jest. “We found from a marketing perspective the name wasn’t a good representation of what we did.”

So in 1997, Cellura and his three business partners launched an image makeover. The entire process took a little more than a year to complete and cost several thousand dollars, but Cellura contends it turned out to be both an educational and profitable move.

Although he declines to discuss specific numbers, he says the change boosted the firm’s annual revenue and has “brought a new respect” to the company.

“You wonder sometimes, when you make such a drastic change, are people going to remember you? Are they going to be confused by it?” Cellura says. “We were pleased it went over very well.”

For those thinking about making changes of their own, Cellura shares his strategy for a successful image overhaul.

Choose your name wisely

Instead of building awareness from scratch, Cellura and his partners decided to fuse the industry-proven family name with the company’s new identity. They settled on Cellura Designs, a name that was instantly recognizable to long-time customers and worked for practical reasons as well.

“You run into less problems as far as registering a trademark when you use your own name,” explains Cellura, who says the name change also brought a new energy to the company’s small staff, which is largely composed of family members. “You find when you put your name to something, you have a little more interest in it. It’s not that we didn’t have an interest before, but you know your name is on it now and you want to make it right.”

Don’t get fancy

Coming up with a name was the easy part compared to the hand wringing that accompanied the selection of a new company logo. Cellura wanted to walk the line between too traditional and too contemporary, and hired a local graphics firm to design several logos for him, with mixed results.

“We paid out the money — which was thousands of dollars — to have it done,” he says. “When we all sat down and passed them around, we came to the one we all liked the most, which we didn’t like at all. It wasn’t bad, it just wasn’t what we were looking for.”

After dumping all of the designs, Cellura found a solution to his quandary in an unlikely place. During a visit to his sister and brother-in-law in Connecticut, he explained his problem and they offered to sit down at their computer and design several logos he could take back with him to Ohio.

In the end, it was one of the designs from that trip that was chosen as Cellura Designs’ new logo.

Make it an event

Cellura wasn’t willing to dump loads of money into a marketing campaign to announce the name change, but he didn’t want it to slip by unnoticed. Instead of buying advertising, he used the company’s longevity in Northeast Ohio as a way to generate media interest in the changes at the Bedford Heights-based business.

A few newspapers quickly bit on the story, while Cellura worked to make sure long-time customers received personal notice of the change before they read about it.

“We did direct mail to our client base announcing the change,” he says. “I think we actually sent them press releases that we were going to give out to the media. So our clients knew what we were doing as we were doing it.”

Create a recognizable product line

Once the bulk of the work behind the name change was complete, Cellura started work on a new project he hoped would help propel the company’s new high-end image. He commissioned a designer with whom he had worked before to design a new furniture line that would kick off a “Cellura Signature Collection” line of products he hoped to use to expand the company’s reach.

The response to the first series has been positive and Cellura expects to commission a second designer in the next several months. The hope is that this signature series will help establish an image for Cellura Designs and build business in markets outside of Northeast Ohio.

“We’re a company trying to grow,” he says. “We are looking for a specific product line that had a wide appeal to it.

“By showing people we could do the high-end, sophisticated product, it gives our company the connotation that we generate original designs — that we’re a company of innovators.” How to reach: Cellura Designs, (216) 464-6600

Jim Vickers (jvickers@sbnnet.com) is an associate editor at SBN.

Monday, 22 July 2002 09:40

Candid management

When Jergens Inc. stumbled across the hold-ups that so often accompany a major construction project, executives at the Cleveland-based manufacturer did not cower in the background while the rumor mill went full tilt.

Instead, they called their 150 employees together and shared the information.

“Instead of having people guessing what was going on, we gather everyone together in the cafeteria and just take 10 minutes and say, ‘OK, this is what’s happening,’” explains Jergens HR Manager Kathy Puskas. “We told them this is where we’re at in the construction process. These are the hold-ups we’ve had.”

A year ago, Jergens moved into its new Cleveland facility, about a mile from its former location. Puskas credits the company’s open management style for the smooth transition.

The companywide meetings are only part of the initiative to share information with employees. There is also a monthly newsletter and a state-of-the-company luncheon each December, at which information, such as percentage increases in revenue, is shared.

“I think it makes the workers feel more comfortable with their job and they feel they are seeing something of their contribution,” Puskas says of her company’s efforts to keep employees in the loop. “For me in HR, it’s a big help because no one is guessing.”

Although Puskas is sold on the advantages of an open management style, the opinion of its effectiveness seems to be split. Just under half of the companies which responded to the HR white paper survey conducted by the Employers Resource Council for SBN said they do not meet with employees on a regular basis to review financial information, the state of the company or go over company policies.

Michael J. Smith, director of sales and marketing for Cleveland-based Gallo Displays, believes it’s a touchy issue at best. He should know. Before the company moved to an Employee Stock Ownership Program in 1996, former company CEO Jim Gallo employed a sort of open management style that Smith says wasn’t entirely effective.

He points out that a common pitfall of sharing information about the company’s performance is that employees tend to make assumptions about the company’s spending that are not always correct.

“The down side is that people interpret the results the way they will,” he says. “Certainly, you don’t reveal your executive payroll, but those kind of assumptions are made based upon how people interpret numbers. How many people in this company know what our light bill is every month? I’d guess probably nobody. So how they can take a number and dissect it and determine who’s making off with all the funds is anybody’s guess.”

However, Smith points out that sharing information with employees is not necessarily a bad idea, but there must be clear-cut goals from the start.

“This should be just one component of some bigger picture,” he says. “If there is a business plan in place or a strategic plan that states one of the goals and objectives is to make employees feel like they’re more part of the organization, then this becomes a component of it. It’s not a good idea or a bad idea on its own merit.”

Mike Dietry, vice president of Mayfield Heights-based Victoria Insurance Group, says his company has shared information about financial performance with employees for the 15 years he has been there. For an insurance company, which is required to publicly disclose financial records, it was not such a difficult decision to share the information with employees. However, Dietry says it is sometimes difficult to do it in a way that is meaningful to workers.

“The big challenge is that the typical employee doesn’t understand, and in many cases, doesn’t really care,” he says. “All they really care about is what do I have to do from 9 to 5 to get my job done.”

The question may not be so much whether you are going to employ an open management style, but how you are going to share company information so it’s meaningful to employees from day to day.

“I think you need to somehow bridge that gap, whether it be some sort of meaningful profit-share initiative, and reduce the financial information to terms the average employee can understand,” says Dietry. “Then I think you start to get that ownership and that buy-in that’s very important.”

How to reach: Jergens Inc., (216) 486-2100; Victoria Insurance Group, (440) 461-3461; Gallo Displays, (216) 431-9500

Jim Vickers (jvickers@sbnnet.com) is an associate editor at SBN.

Monday, 22 July 2002 09:40

A legal Web

The brave new world of electronic business has launched dozens of legal dilemmas in its relatively short existence.

The courts will take years to hash the out the specifics, and you don’t have the luxury of waiting to see how it ends. Instead, you seek advice, take some chances and hope for the best.

“The interesting thing about legal issues is it’s a kind of catch-up game,” says Russ Austin, an attorney for Arter & Hadden who gets a lot of calls from business owners and Internet start-ups trying to find their way in this new economy. “Businesses aren’t going to stand still and wait for legislators to make laws. They are going to move forward.”

Waiting until the smoke clears before you launch that e-commerce initiative you’ve been mulling over in your mind isn’t such a great idea. Chances are, there is going to be plenty more smoke before the courts are able to put out all the fires. But you don’t have to step into the world of e-commerce blindfolded, either.

Austin says there are steps you can take to avoid trouble when it comes to selling on the Web. Here are five legal pitfalls he’s seen all too often and ways you can avoid them:

Intellectual property

It sounds simple and it’s been said before, but legally protecting your online business venture is the most important step in any e-commerce strategy. Check to make sure you are able to trademark your online name and logo, then register them before going public with them. If you are bringing a unique or unusual business process to the Web, you may also be able to claim a patent from the government for your creation.

If you question the importance of such a move, look no further than Amazon’s enforcement on a patent for its “one-click” shopping system, which essentially capsized online competitor Barnes & Noble during last year’s holiday shopping season.

“For Internet businesses, there is this whole area of business process patents,” says Austin. “It’s more likely now, more than ever, that a way of doing business or a method of doing business may be patentable.”

Austin points out that even though it’s gotten a fair amount of press, many people new to the Web still do not fully understand the importance of protecting their e-commerce initiatives.

“If you miss the opportunity to protect your intellectual property,” he says, “you may be gone forever.”

Privacy policies

Worries about privacy and confidentiality keep many people from buying into the idea of shopping online. Every site should draft a detailed privacy policy that visitors can read to decide whether it fits their comfort level. Austin says establishing an identity as an online business that protects its customers’ private information is a solid way to build brand recognition on the Web.

However, many companies have stumbled when it comes to living up to their privacy policies. Several years ago, Geocities was hit with fines and adverse publicity when the Federal Trade Commission investigated the way the popular personal Web page business handled customer information.

“I think the real simple rule is be very careful with information you are gathering through your Web site about visitors, and only do with that what you tell them through a privacy policy you’re going to do,” Austin says. “It’s probably better to give them an opportunity to opt out of those uses.”

Terms of service

For some types of e-commerce ventures, your customers are bound by terms of service when they use your Web site. Terms of service basically outlines what is expected of them as a visitor and what your responsibility is as a site operator.

Traditionally, this has been done with a lengthy legal document that requires users to sign off by clicking a button before entering sensitive portions of the site.

That’s started to change. Some Web companies have switched to a one-line disclaimer that use of the site indicates that you are in agreement with the terms of service, which is usually provided via a link.

Austin says both have become accepted forms, but if you want airtight legal protection, stick with the legal form that users are forced to at least scroll through.

“That what we’re telling people to do,” he says. “And that’s what most people, who view the terms of service as a critical part of the relationship, are doing.”

Confidentiality and letters of intent

Once you have your e-commerce initiative hammered out, you may need money to make it fly. Join the club. However, the competition for investors has given way to many businesses and Internet start-ups opening themselves up to unnecessary risks.

When talking to potential investors, make sure they sign a basic nondisclosure agreement before you spill the beans. Also, make sure that if you sign a letter of intent, it doesn’t include conditions that could hinder the success of your Web venture.

Sometimes investors will demand the start-up talk to no other potential investors until their negotiations are complete.

“That’s an extremely unreasonable provision and one that basically ties the hands of the new company,” says Austin. “They’re stuck. They can’t talk to anybody else.” How to reach: Arter & Hadden, LLP, www.arterhadden.com

Jim Vickers (jvickers@sbnnet.com) is an associate editor at SBN.