During the first few weeks after David N. Myers College announced it would offer courses at its downtown campus to help professionals prepare for the rigorous two-day Certified Financial Planner exam, more than 100 prospective students requested enrollment kits.
That pales in comparison to the number of messages that flooded Elizabeth Plaxs office during May from professionals curious about what the CFP licensing process entailed.
Every time I checked the voice mail, it was full of people calling in, and its a whole variety of people, says Plax, who is serving as the director of the colleges Financial Planning program. Its brokers, its insurance agents, its bankers, its attorneys, its CPAs the whole gamut.
The response is a local indicator of a nationwide trend in the financial industry. As both personal and business finances grow increasingly complex for the individual, droves of financial professionals are seeking out a CFP license.
Major national brokerages and insurance companies such as Charles Schwab Corp. and Metropolitan Line Insurance Co. are pushing their employees and associates to snare a CFP license to grab the attention of consumers looking for financial expertise.
Financial planners have become the quarterbacks the people who create the individuals game plan, says Plax, who has held a CFP license for 15 years and is president of the Northern Ohio Society of The Institute of Certified Financial Planners. We look at the big picture. Our broad background enables us to deal with the entire spectrum of financial management. It really has more and more become a designation of choice.
David N. Myers College is just the third institution in the state to offer classes to prepare for the CFP licensing test, and the second in Northeast Ohio. The University of Akron and the University of Dayton both offer programs endorsed by the Certified Financial Planning Board of Standards.
The national accrediting organization requires CFP candidates to pass an arduous two-day test that focuses on investment planning, tax planning, insurance planning, estate planning and retirement. CFP licensees must have three years experience in a related field, pledge to an industry code of ethics and standards and take part in continuing education to retain the license.
There are 750 CFP licensees in Northern Ohio and 33,000 in the United States. Diane C. Savage, a benefits educator for the human resources consulting firm of Watson Wyatt Worldwide, is one of them. She believes it is an important designation because it is the only way to provide the public with a solid measurement of a firms financial planning skills.
I think a lot of people are looking to have some way of assuring their clients or their potential markets they are dealing with that they have been exposed to the information, says Savage. It lets a client know that this person should have a broader perspective of what they do and maybe that will make them a better server.
Gregory P. Althans, a CFP licensee with The Hickory Group, says the designation is not so much a selling point, since the investment firm deals mainly with referrals. However, he believes the license adds to the companys image and gives peace of mind to the consumer.
I think it is one more thing that gives them a comfort level with what were doing here, says Althans, who is also a Certified Public Accountant. They may not come to our particular firm because we have CFPs on board, but it gives them additional comfort in the services we deliver. I think thats a positive, although we actively dont even market it.
As the baby boom generation closes in on retirement, some with a large amount of wealth, Plax says the number of people turning to financial planners for retirement planning is expected to rise. She expects the number of financial professionals seeking out the CFP designation will also increase.
If people have saved appropriately through a retirement plan or their own personal savings, they are finding themselves right now with a lot more money than they had anticipated ever accumulating, Plax says.
The question for them is, How do I know Im making the right decision both in terms of planning my own retirement as well as what I can do for my children? What a CFP does is bring to the table a breadth and depth of expertise that people have come to recognize. For more information: Contact David N. Myers College, (216) 696-9000, ext. 527
In 1980, Edward J. Davidson was charged with the task of relocating 1,200 employees and their families from Cleveland to Dallas. It was an experience that revealed vast inefficiencies in the relocation industry and enormous potential in improving the process.
Davidson noticed that there was tremendous disappointment on both the part of the employees and employer, and decided to take steps to challenge the well-ingrained institutions that dominated the relocation industry.
A year later, Davidson started Homepool L.D., and created a new service to help corporations and their transferred employees sell homes quickly. In addition to the industry powerhouses, Davidson faced a depressed residential real estate market during the company’s early years.
Davidson worked a full three years getting the company on its legs before taking a regular salary, but the efforts paid off with steady growth and a national reputation for the company’s new aggressive home marketing concepts.
“If there’s one thing in particular, it’s the power of our products and services that go way outside the box,” Davidson says of his Mayfield Heights company’s success. “The growth of the company has been by providing services in the relocation industry that no one else has ever thought to do. We give our clients benefits that nobody else gives them.”
Homepool eventually diversified, taking the name Cooperative Resource Services, and offering more products to help the company gain a larger share of the market and compete with the industry’s dominant full-service firms.
During the last four years, revenues and earnings have both more than doubled each year, putting the company in a rare situation where profits are growing as steadily as sales. The number of employees has increased about 100 percent in each of those years, with the company now employing more than 450 people nationwide.
While a majority of the industry sells virtually the same traditional products and services, Davidson focuses on innovative concepts. It started with the company’s creation of the first relocation mortgage home loan program, then the first buyer advocacy program to aid transferred employees in purchasing homes.
One of the products created by Cooperative Resource Services that Davidson is most pleased with is a “riskless relocation” plan that takes the burden of moving employees off of a company’s shoulders. The question of whether a home will sell and quirky tax laws that apply to relocation are often major concerns of corporations that move employees. It is the only home-purchase program on the market to offer full tax and risk protection to the company’s clients.
“When corporations move their people, there are lots of risks, many of them financial,” Davidson explains. “There are risks of extremely expensive moves if employee homes don’t sell. We bear the risk. We’ve also taken away the tax risk.”
The unique approach to relocating employees for businesses combined with the “think tank” environment of the company are keys to Cooperative Research Services rapid growth. The company’s environment is driven by Davidson’s “Natural Law” management style that empowers employees, pays them for their performance and allows them to be continually involved in improving the company.
An innovative “lab” interview hiring process helps the company determine which candidates will ultimately succeed. New hires are trained through a process in which they receive constant feedback on performance, while managers include employees in the creation of operational procedures, then constantly monitor the execution of the new processes.
The company’s compensation structure is set so 30 percent of compensation is based on performance, with an employee attrition rate of just 4 percent.
In recent years, the company has taken steps to snare a larger share of the relocation market by expanding its operations. In 1997, it opened CRS Canada to begin marketing cross-border relocation services. In 1998, the company acquired two industry competitors US Relocation Services Inc. of Denver and Corporate Transfer Service of Minneapolis.
The company currently has four new products in development and hopes to grow by generating more profit from each sale, forging alliances with other companies and reaching the estimated 500,000 employees who are moved each year with limited relocation.
Judge’s comments: “(The winners exhibit) a combination of a visionary function and a clock building function. Ed Davidson is a perfect example of having both pieces. He took a business that he started thinking was one kind of business and then changed it twice on a visionary basis and build the system so that he gets the results that the corporation and the individuals want.” Gerald W. Cowden
After 21 years in the construction business, Fortney & Weygandt, Inc. is expected to reach a record sales volume of more than $100 million during 1999, a plateau President Robert Fortney says was reached through long-term relationships with clients and a focus on customer service.
In the past few years, the North Olmsted company has taken considerable leaps, clearing $83 million in sales during 1998 and expecting to increase business this year by $17 million. During six months of operation during 1997, it earned $48 million in revenue, while in 1996, it topped $53 million in sales.
Fortney said he has always tried to avoid the project-by-project mentality that some construction firms employ. He wants his customers to be pleased with his work and think of him first when more needs to be done.
“In the construction industry, a lot of people will work project by project,” Fortney explains. “We don’t. We work very hard establishing long-term relationships with clients and owners and with architects. We learn the ins and outs of how specific owners like specific things.”
Two full-time marketing professionals are responsible for solidifying relationships between the company and its clients.
“I only know two marketing people working for a general contractor in Ohio, and they both work for me,” he says. “They are not salesmen, they are marketing people that establish long-term relationships with clients. We do a lot of repeat business on a national basis.”
The secret to increasing business every year is constant improvement. His goal is to make each employee more efficient within his or her own field while creating a company environment in which employs can grow and prosper. In the early 1990s, Fortney instituted a 401(k) profit-sharing plan and a program in which employees could give their ideas to management.
The result has been improved organization and a strong growth pattern, with millions of dollars generated for employees to share.
“We have found with every step we take at improving ourselves, we gain more volume and we gain more profitability,” he says. “It all accumulated last year with a couple of great account coming through. Even if those hadn’t come through, it would have been a good year. But it was a phenomenal year because everything hit just right.”
Six weeks after John Di Julius opened the doors of a small hair studio along Mayfield Road, his business mettle was tested. The salon hit a major, if not potentially fatal, snag, and there was real concern whether the fledgling business would survive.
A lack of customers was not the problem. Di Julius difficulty was in getting three of his new hires to show up for work. Many days, his wife, Stacy, would be the only hairdresser at the shop, while three other chairs sat empty. That did not bode well for the young entrepreneur.
I thought, Were going to be the shortest-lived business in the history of Mayfield Heights, says Di Julius.
That was in March 1993. Today, John Roberts Hair Studio and Spa boasts a staff of 74 and 15,000 regular customers and is expected to top $2.5 million in revenue this year. While Di Julius can smile about it now, hes not shy about recounting stories of the obstacles he encountered before his salon became an industry leader.
In fact, it was those early struggles that set the tone for the incredible growth that has forced him to either renovate or relocate every three years.
Last May, the hair studio finally moved from its original location on Mayfield Road to a sprawling 7,000-square-foot location a little more than a mile away at the Eastgate Shopping Center. During its first four weeks there, 700 first-time customers walked through the door more than most of his competitors see in a year and Di Julius is already talking about the need for future expansion.
If the swift rise of the business can be explained, Di Julius believes it is based on two very important factors: First, employees are hired directly from cosmetology schools so they can be molded to fit the companys service standards during a one-year apprenticeship program. Secondly, Di Julius goes to great lengths to ensure every customer feels appreciated.
Theres only so straight you can cut a straight line, Di Julius says of trying to compete with less expensive haircut chains. Were in the experience business. Your perception here is: Is it worth paying $30 for a guys cut or $50 for a womans cut because of all the little things you get from the moment you walk in the door, and even after you go home?
It is 11 a.m. on a warm June morning, and although it will not officially open for another hour, the salon is already buzzing with customers. A greeter stands at a wooden podium emblazoned with a looping JR logo just inside the front doors. Three workers are busy answering phones at a mammoth desk a few feet behind her.
Far down the hall, beyond the lush, open interior of the spacious salon, is a small white room stuffed with several computers. They are the heart and soul of Di Julius operations, storing information about the businesss 15,000 regular clients. Two workers hammer away at keyboards, updating and refining the databases which have become Di Julius lifeline to his customers.
A door to a cramped connecting office stands open. Inside, Di Julius finishes collecting business records from a laser printer next to his desk, then darts out to the café inside the salon. Moments later, he returns with a muffin in one hand and a cup of coffee in the other. He drops into his seat.
What do you want to know? he asks without hesitation.
The bantam entrepreneur is modest when discussing his business, which has been singled out by the industry as one of the best in the nation. His words are breezy and casual. It feels like youre talking to an old friend.
Hearing about the roadblocks he faced in 1993, one wonders how Di Julius transformed his business so quickly. The first step, he explains, was to take a gamble. He quit his job at United Parcel Service and went to school to become a hairdresser.
His philosophy was simple: Even if his employees called off of work, at least two of the shops four chairs would always be available with Stacy and him working there full time.
Di Julius also decided to hire industry rookies to avoid the headaches that plagued the salon during its first several weeks. Although it took time to train the first few waves of recruits, the strategy paid off, and Di Julius staff quickly grew.
As business and number of employees increased, Di Julius realized he needed a way to keep his staff a coherent group and ensure the quality of service would not decline. He consciously developed a corporate culture, which focused on the importance of community service and teamwork. That, he reasoned, would provide a unique and enjoyable experience for each customer who strolled through his door.
Every business has a corporate culture, and from my research, 95 percent of them happen by accident, explains Di Julius, whose modesty gives way to a cool confidence when it comes to explaining how he has built his staff. We designed one that was really nurturing, really caring. Whats really nice about that is when were interviewing a prospective employee, we can see if you measure up to the same things that add to our corporate culture or diminish it.
A simple recognition reward system has helped build morale and cultivate a dedicated and loyal work force, which Di Julius maintains is the cornerstone beneath the tremendous growth.
Now that were really putting more time and energy into people development, were seeing that it is effective, he says. Before you can have raving clients, you have to have raving team members.
Quality service can win favor with customers while they are inside the salon. But in todays fast-food world, the real key to success is impressing customers enough so that they come back again and spend more money.
I was just always paranoid people would forget about us, especially when we were new, muses Di Julius. There just are so many options out there. Our competition is not the salon down the street, downtown or on the West Side. It is everything and anything. When you have discretionary income, whatever makes you feel good is what youre going to do with it.
So Di Julius began sending thank-you notes to each customer and having a member of his staff call patrons within a few days of their visit to see if their experience was a good one. He followed that with birthday cards and started a quarterly newsletter to provide updates about new services. Customers receive a $5 gift certificate and a letter of thanks for each new client they refer to the business.
We are constantly putting our names in front of them, says Di Julius Its not like they say, Where do I get my hair cut? Ive reminded them several times since their last visit that this is where they get their hair cut.
The idea behind the mail campaign is a simple one the average person receives between five and 10 pieces of mail a day, with the vast majority of it being either junk mail or bills. An expression of appreciation sticks out in a customers mind.
When I was a kid, I went to my dentist and I got a thank you card, recalls Di Julius. I thought it was cool somebody recognized me, and I wanted to be recognized again so I sent other people there.
Handling the customer relations side of the business used to be the job of one person. Now, Di Julius has a full-time IS manger and a full-time administrative staff to handle customer mailings, confirmation calls, follow-up calls and employee recruiting. The secret to managing information and keeping up with the wave of new clients is creating a set system and breaking up the tasks among his employees.
Keeping up with this crucial element of customer service has been one of the biggest challenges , but one Di Julius says he will not let slip.
The hardest thing about becoming big is staying small. I don 46;t want anybody to ever say we had a great business when we started, but now that were bigger its not the same. You hear that a lot about companies and I dont want anybody to ever accuse us of that.
A few years ago, Di Julius called a local travel agent trying to get a donation for a promotion he wanted to run. In exchange, he was offering a prominent mention in the salons quarterly newsletter and some on-hold advertising. It was then that Di Julius discovered his customer base was a gold mine.
I was thinking I could get a trip to Las Vegas, and maybe they would give me a couple hundred bucks off of it, says Di Julius. Fortunately, the way I asked the question was what would they be willing to donate. They said, How about a cruise for two on the Royal Caribbean? I said, Great.
That chance phone call has translated into bigger and better things. In the past several years, Di Julius has given away a stay at a condominium in Naples, Fla., a one-year lease on a new car, airplane tickets and the Caribbean cruise. None of it has cost him a cent
He has also been able to work deals for free oil changes and restaurant gift certificates for each of his customers.
Our data base is very valuable, says Di Julius. We have 12,000 to 15,000 upscale, predominately women clients. Everybody wants an opportunity to reach 12,000 to 15,000 upscale women that are spending a lot of money at a hair salon and have discretionary income to spend other places.
Di Julius doesnt just draw a customer name out of a hat for the big prizes. He awards them to the clients who provide him with the highest number of referrals during a certain period of time. His last promotion set off a frenzy with customers who sent hundreds of new faces through the salons doors. During the Royal Caribbean promotion, the first-place winner had 92 referrals. And those new customers have since referred other new clients.
The referral promotions have been an important ingredient in building Di Julius base of 15,000 clients. In fact, the word-of-mouth buzz is so strong, Di Julius avoids traditional advertising mediums such as television and newspaper. The odds are better that a customer will visit more than once if he or she has been sent there by a friend.
The retention factor on a cold call advertisement is a lot less than a sales job by one of your friends or family, says Di Julius. Customers are going to trust their friends and family and ask them real questions. Provided that we meet that expectation, theyre coming back. How to reach: www.johnrobertsspas.com or (440) 446-1316
Jim Vickers (firstname.lastname@example.org) is associate editor of SBN Cleveland.
As a 20-year human resources veteran, Patrick Perry knows the mistakes business owners make when they look to an outside firm to help manage their companies.
What most novices to outsourcing do not realize, he says, is the importance of guiding the process from the very first phone call.
Perry, president of the Employers Resource Council, recently shared with a breakfast meeting crowd of business owners tips on getting first-class service from HR providers. Written proposals are a good way to compare two or more service providers, but Perry warns that simply calling and asking for a proposal can be a dangerous move.
Providers love that, says Perry, who ran across the trend many times during his HR career. They werent controlling the process, I was.
When he asked what he should include in the proposal, some business owners had no idea what to tell him. Here are eight points Perry suggests business owners should ask outsource providers to cover in every proposal:
1. Statement of understanding: This should be a simple statement showing the provider understands the specific needs of your company.
2. Overview of provider firm: A brief history of the firm and how its experience relates to your industry and product.
3. Project objective: A way to make sure service providers know exactly why they are being hired and what is expected of them.
4. Approach: A step-by-step breakdown of how the provider plans to achieve the goal, including a timeline of how long each step should take.
5. Timing and related professional fees: A vital portion of the proposal, because the only reason you outsource is to save either time or money. Be cautious about jumping on the most inexpensive proposal because very often, you get exactly what you pay for.
6. References: A service provider has handpicked its references to give the best possible impression. Look for information on how a provider responds to problems, rather than trying to find one with a perfect track record. No one is that good, says Perry. I just want to know people try hard.
7. Staffing: Request biographies of the team working on your project. They should reflect each individuals experience with similar projects, education, achievements and community and professional involvement. Also get biographies of any subcontractors that will be used.
8. Value-added services: Ask if there are any extras the company could offer to make your project better. What extras can they bring to the carpet? says Perry. What are the ancillary services they have that can make a difference on your project?
Sticking to these guidelines, says Perry, will separate the good companies from the ones just looking to make a quick buck: The 20 percent of the provider industry that makes the rest of us look bad cant handle this. How to reach: Employers Resource Council, www.ercnet.org
Jim Vickers (email@example.com) is an associate editor at SBN.
Prospective hires have always asked Shawn Harter about salary, advancement opportunities and job security during their interviews. But Harter, director of recruiting at Arthur Andersens Cleveland office, recently began hearing a new question raised by college students: What does your company do for the community?
It was an eye-opener, he says, because the global professional services organization recruits 70 percent of its work force directly from college, and recruiters often make contact with students as early as their sophomore year to build relationships and learn what makes them tick.
Although experts have already warned business owners that the younger generation is adamant about balancing work and their personal lives, this commitment to community service was a new and unexpected twist.
As younger workers shop for companies that best fit their personalities and beliefs, Harter expects the question of community service is one many business owners will eventually have to face.
In todays work environment, the balance of life priorities has much more importance, Harter says. I think this is another part of it.
Although the company and its employees were already involved with community service work on a city-by-city basis, executives decided to put together a more organized and higher profile philanthropy program to stay ahead of this emerging trend. As a result, Arthur Andersen employees in 13 cities picked up hammers earlier this summer and went out to contribute to Habitat for Humanitys quest to build affordable new housing.
Interns and job candidates were also invited to pitch in, giving them a chance to network with Arthur Andersen veterans in a more relaxed, albeit more physically taxing, environment.
Arthur Andersens discovery is supported by other evidence, which shows that many of todays college graduates feel a responsibility to give back to the community and are attracted to companies that do the same.
Recent research by Rainmaker Thinking Inc., the leading consulting firm on the attitudes of Americans born between 1963 and 1981, observed community-minded values in thousands of young people during a five-year interview process. The New Haven, Conn., research firm identified a common results-focused mentality that draws people toward companies that are active in the community.
There is also a growing popularity of the Graduation Pledge Alliance, which encourages students to make socially and environmentally responsible career choices. The program was started at Humboldt State University in California 10 years ago, but has gone more mainstream.
The program is now based at Manchester College in Indiana, where 50 to 60 percent of graduates took the pledge last year. The movement has spread to more than 30 campuses nationwide.
Harter says the Arthur Andersen program was a hit with employees and prospects, and enthusiasm among employees was built and sustained through frequent e-mail messages, keeping all workers up-to-date about the project.
This was a great team-building exercise, he says. Candidates got a chance to meet the people who have been here for 15 or 20 years and see that they are no different than themselves. How to reach: Arthur Andersen, www.arthurandersen.com; Greater Cleveland Habitat for Humanity, (216) 429-1299
Jim Vickers is an associate editor at SBN.
Sleep is nothing to mess with; most of us spend a third of our lives horizontally dreaming away the stresses of the day. Ron Trzcinski, owner of the Original Mattress Factory, wants to make sure we do that on one of his mattresses.
For 10 years, Trzcinski has honed his approach to selling “direct from the factory.” The Original Mattress Factory, on State Road, produces mattresses in about a dozen varieties and sells them at nine retail locations in Northeast Ohio. Outside of the Cleveland area, Trzcinski has eight other factories and more than 50 stores.
His approach to selling is simple. Anyone who has heard one of the company’s radio commercials has listened to Trzcinski himself explain it: The Original Mattress Factory sells mattresses comparable to those of the competition, but at a much lower price. The idea came to Trzcinski after he left Sealy Inc., the world’s largest mattress manufacturer.
He worked there for nearly two decades, the last 11 years as company president.
“I thought I could make a bed as good as the national brands, maybe even better,” he says. “If I could just look at the cost structure of where money goes into the bed, meaning the distribution channel, I could eliminate those steps and sell people products that are as good or better for a lot less money.”
How did Trzcinski convince customers his product was as good as the brand names with which they were familiar?
“We decided we would do it in three ways,” he says. “We would show the people how we make them, so they could see it, they could feel it, they could look at it and they would know it is good.”
The second step was comparing his product to the mattresses created by the big names in the industry. Trzcinski bought competitor products with the sole intent of slicing them open a sort of mattress autopsy and allowing his customers to compare for themselves.
“We were really having our product sitting next to a national brand product,” says Trzcinski. “The theory here was to take the mystery out of what is it that is so great about these national brands that I should pay more.”
The final step to sealing a customer’s trust was capitalizing on the experience Trzcinski and many members of his staff had in the industry. It was important to let customers know there was a history there and Trzcinski simply didn’t just one day decide to start making and selling mattresses.
“It was the third leg of the stool,” he says. “Yes, we make them and show them to you. Yes, we’ll cut open (competitor mattresses) and yes, we understand this business. We’re in it and we’ve been in it.”
It is both the quality and simplicity that Trzcinski brought to the Original Mattress Factory which he believes has fueled its success. People don’t want to get bogged down in the gauge of wire used in a bed or the type of springs, he explains. They just want comfort.
“People are looking for real simple things,” he says. “How do I get a good night’s sleep for a good price and what’s good for my back.”
If you’ve ever created a custom greeting card or listened to a compact disc in the store before buying it, you have Peter Vrettas to thank.
After struggling for years to distinguish his company, EDR Corp., from others in the audio/video industry, 10 years ago he decided to re-evaluate the way media is used in the business world. In the process, he triggered a revolution.
But before he snared clients such as Wal-Mart and American Greetings, Vrettas changed traditional beliefs about the use of audio and video in business presentations. “The question is, ‘Can media enhance the experience?’” asks Vrettas. “Can it improve on training, can it improve the selling cycle? We’ve always felt that it could.
“The problem was media in business has been relegated to the A/V department. (They) come along and show some training tapes.”
In 1989, Vrettas decided to add equipment hardware and interactive computer software business to his existing Shaker Heights-based audio/video production company. He moved his company to nearby Beachwood and created four distinct divisions: EDR Media for creative development; Beachwood Studios for audio and video production; EDR Systems for hardware sales; and EDR Technologies for software development particularly interactive retail displays. The divisions gave EDR four distinct profit centers and provided clout that no other digital media company could match.
That’s when Vrettas realized the potential of digital technology, and how easily it could be stored, manipulated and transferred. The popularity of the Internet has only proved his assumption.
“Part of why I think the Internet is so successful is the power,” says Vrettas. “The user can go wherever he or she wants to go. Well, why not take these techniques inside the store?”
That’s exactly what he did with Wal-Mart.
“Whether it was (offering) 30,000 audio clips in the CD department, 10,000 video clips in the tape department or the ability to deliver advertising messages over TV sets, we were going to empower the consumer to make better decisions, and therefore have a greater chance of success in the purchase,” explains Vrettas. “I think that’s the basis of how we structured the company, and just attacked it from different perspectives.”
By re-evaluating EDR’s focus, the company grew from $2 million in revenue in 1984 to $17 million last year. Vrettas expects that figure to double within the next five years.
Although EDR develops national meetings for companies such as Burger King and Office Depot through the EDR Media division, its most innovative accomplishment is the way it has changed the retail shopping experience.
The transformation has just begun, says Vrettas, who explains the company is planning for new digital technology like broadcast-standard video. That, he says, is coming to the Internet not in years, but months.
“Our company is going to be a major force in the new order of information being created by the Internet,” says Vrettas. “We envision that EDR is going to be a very large part of the next wave of information.”
How to reach: EDR Corp., (216) 292-7300
Jim Vickers (firstname.lastname@example.org) is associate editor at SBN.
When the notice from the city of Amherst hit David Moores desk, he wasnt worried. His accountant assured him it was a simple misinterpretation of Ohios tax law. Based on that, Moore expected to walk across the street and put the confusion to rest with an explanation, a smile and a handshake.
Unfortunately, it didnt turn out that way.
Even when city Law Director Alan Anderson filed a criminal charge against Crystal Mortgage Company Inc. last November, citing the companys failure to pay income tax, Moore, the companys CEO, still did not believe a court date would be necessary and waived his right to a speedy trial. It is a move, in retrospect, he chalks up as his biggest mistake.
We believed this would never go to trial, he says. We thought we just had to educate them a little bit, its just a misunderstanding.
Eighteen months after that first letter arrived, Moore is still embroiled in what has turned out to be a bizarre legal battle spurred on by Anderson and city Treasurer Kathleen Litkovitz. The citys dogged persistence in prosecuting one of its most well known and civic-minded local business owners has divided the sleepy city of Amherst.
Other local merchants are afraid to publicly take sides, while city council members, who periodically stop by to drink coffee with Moore, have no alternative but to follow the advice of the citys lawyer. Meanwhile, Mayor John Higgins, who appointed Moore to the citys planning and zoning board, has avoided public comment on the issue altogether.
Anderson and Litkovitz dropped the criminal charges at the end of August, but that hasnt done much to lessen Moores anger or resolve the dispute.
What makes the feud so strange is that the city changed the focus of its investigation twice within 18 months, beginning in April 1998. At first, Litkovitz charged that Crystal Mortgage owed income tax on offices located outside of Amherst. A few months later, she questioned Moores personal income tax payments. Then Litkovitz launched an investigation of Crystal Mortgages employee withholding allowance for its Amherst office.
It is not uncommon for municipalities to collect taxes from businesses that generate income from offices outside the city. For example, the City of Lorain has a process outlined in its codified ordinances. In Lorain, we give you credit for what you pay to another place, explains Lorain city Treasurer Lori Maiorana. But, if it is a lower tax than Lorains, you have to pay the difference.
The problem with Amhersts attempt to tax Crystal Mortgage Co.s offices outside the city is the fact there is no local ordinance on the books allowing it to do so, according to Moores attorney John Rybarczyk. Rather than admit that error, he contends the city started looking for something, anything, to pin on Moore.
I think if you boiled all this down to one simple line, it would be the city made a simple mistake, he says. When they were called on that mistake, they decided rather than admit to the mistake, they would exacerbate the problem.
For months, Moore hoped that the situation could be quickly resolved. That was until Litkovitz decided last February to conduct audits of both Crystal Mortgage and Moore. Even after months of investigation, neither Litkovitz nor Anderson is ready to explain exactly what Moore might have done wrong.
But while the treasurers office poured over those tax records, there is one question it seems no one stopped to consider: What happens if he fights back?
On the walls of Crystal Mortgages Amherst headquarters hang dozens of presidential signatures, from Bill Clinton back to John Quincy Adams the sixth U.S. President and the son of John Adams, an American revolutionary who had a bit of a tax problem himself.
Just down the hall, in a corner office that overlooks City Hall, David Moore is working on a revolution of his own.
It is 10 a.m. on a warm August day, and Moores office floor is stacked high with paperwork generated by his long battle with the city. Moore came to Amherst in 1996 with a wildly successful mortgage lending company which finished at the top of the Weatherhead 100 list of fastest growing companies in Northeast Ohio in 1997 and 1998 and $2 million, which he used to help revive the citys ailing downtown. In addition to Crystal Mortgage, Moore opened two restaurants and a small antique shop.
But that storybook relationship with the city has soured during the past year. It is painfully evident by the newly vacated first floor of his Crystal Mortgages headquarters, and a row of 2x3-foot posters that hang side-by-side in its large plate glass window. The posters depict a man sitting in a stockade with his hands outstretched. At the top is a simple message in bold, five-inch tall letters: Free Dave Moore.
An awareness campaign is how Moore likes to describe his attempts to educate the community about the legal hassles he has faced. The posters downstairs are part of it. So are the bumper stickers he had printed that read Vote A.B.A. 99: Anybody but Anderson and a string of commercials on local cable disputing public statements made by the city law director. The spots started running 150 times a week in mid-August and will continue through the November election, when voters will decide whether to return Anderson to office.
Other business owners may have just paid the fairly small tax bill $7,500, for alleged outstanding employee withholding taxes, according to information Anderson filed with the court all the while muttering under their breath the old maxim about not being able to fight City Hall. Moore isnt wired that way. Then again, he isnt your garden-variety entrepreneur. He occasionally slips the word dude into casual conversation, is known for tooling around town in a Humvee and has a penchant for collecting Hollywood memorabilia.
Moore says he originally just planned to fight the tax bill, not take on the people behind his legal woes.
But when I saw that letter saying they wanted to audit (me) and they still wouldnt admit to their mistake, I started getting mad, he says. And then they turned it up even more.
So last spring, Rybarczyk filed a civil lawsuit in Lorain County Common Pleas Court on behalf of Crystal Mortgage and Moore. The suit asks the city to admit to its mistake, provide written assurance no other business will be treated the same way and to pay an unspecified amount of damages for sullying the companys and Moores good name.
Meanwhile, Moore isnt sitting still and waiting for the courts to decide the dispute. Hes moving Crystal Mortgage out of Amherst, an action that ensures the city will lose thousands of dollars each year in taxes. Although Moore sold Crystal Mortgage last January to Pennsylvania-based Conti Mortgage, he remains the companys CEO and had little problem convincing his new business associates a move was necessary.
In July, he transplanted his 22-person sales staff to Elyria, and plans for the rest of the company to follow by the end of the year.
I started looking for a place after I filed the civil charge, he says. Because I was more concerned about what could happen to my sales force had they maintained a work environment here. I was afraid that they could audit every employee, so I thought, Why should I pay payroll tax and city tax and all these other taxes to a community that obviously doesnt want Crystal Mortgage downtown?
Fighting City Hall, though, doesnt come cheap. Moore has already spent $100,000 on legal counsel and expects that figure to be far higher by the time the matter is finally settled. He hopes to recoup all of that money throu gh his civil suit.
Some may think his battle is doing Crystal Mortgage more harm than good, given the comparatively meager amount of money the city wants him to pay. Moore disagrees. Principle, he says with a sly smile, is very expensive.
Moore was one of eight business owners hit with a criminal charge of failure to pay income tax late last year, and the only one that has not sent a check to City Hall to clear up the matter. However, getting the citys two principal players, Anderson and Litkovitz, to explain the case is difficult.
Calls to Liktovitzs office were not returned, while one of her employees said she is not commenting on the Crystal Mortgage situation.
Anderson, on the other hand, was a little less reluctant.
We asked them for backup information in order to verify what they put on the (tax) return, he explains. They ignored our request and never responded to the city treasurers office. Then I wrote a letter asking for that information as the law director. They ignored our request, so that necessitated getting their attention. So we did.
The failure to pay income tax charge was dropped because Crystal Mortgage has now cooperated with the citys request and provided the information to back up the companys tax return, says Anderson. But that charge could soon be replaced with a different one if, after city auditors finish their assessment of Moores information, the company ends up owing money and still refuses to pay.
And thats the real question still hanging in the air after 18 months: Does Crystal Mortgage actually owe the city any money? Neither Anderson nor Litkovitz is ready to answer that just yet.
Its really out of my hands, Anderson says. It would be in the hands of the city treasurers office, and their accountants are pouring over the returns. They are still doing the audit, now that theyve got the information.
As far as Moores one-man campaign to oust him from office, Anderson doesnt have much to say: Well, I guess thats his right. I have no feelings one way or the other.
Even though the initial criminal charges have been dropped, Moore vows he will continue to do battle against the city officials that have dragged both him and the company through the mud. Litkovitz is up for re-election in November 2000. When that election rolls around, Moore says he will once again hit the campaign trail.
They cant bury us, he says. This thing cannot be buried. Ive brought this to such a public awareness that people on the street are saying, Why is the city running these people out of town?
Jim Vickers (email@example.com) is an associate editor at SBN.
When Stanley Ulchaker decided seven years ago to step down from his position as chairman and CEO of Edward Howard Co. at the end of 1999, he fully realized the danger involved in the transition.
Although the oldest independent PR firm in the United States had twice before survived management changes, this was different. The industry was in the midst of heavy consolidation, marked by PR powerhouses acquiring scores of mid-sized firms similar to the one Ulchaker had called home since 1963.
Traditionally, what happens with PR firms is they have a strong entrepreneur that is very good, attracts very good people to him and does very well, explains Ulchaker. The good people then decide to go out on their own and leave. When its the end of the career for the entrepreneur, he either folds the tent or sells it to another company.
That was the scenario Ulchaker wanted to steer Edward Howard away from at all costs. If the companys philosophy and heritage were to continue, he realized he would have to prepare the firm not only to carry on, but to thrive after his departure. Over the next seven years, he painstakingly set the groundwork for the transition that looms just two months away.
Give employees an emotional stake
Rapid turnover is both a menace to and the reality of the PR industry. Ulchaker knew that and looked for ways to ensure Edward Howard would not fall victim to the trend.
In 1967, the firms upper management was offered an ownership stake in the company. Ulchaker himself extended that opportunity to other company officers in 1987.
Finally, in 1993, the employee stock ownership plan was offered to any employee with three or more years of service in the firm. A year later, the stock-sharing plan modeled after traditional profit-sharing plans was integrated as part of the companys year-end compensation package for every employee who had worked more than 1,000 hours during the previous 12 months.
In the six years the program has been in place, it has generated much interest, with many employees setting aside a portion of each paycheck to invest in the company.
One effect is a stronger sense of loyalty. The average account executive at Edward Howard has been there 11 years. Other employees tenure averages about seven years.
Its a more rewarding experience, says Kathleen A. Obert, who will become president and CEO on March 1. It helps us reduce turnover, which is incredibly important. For us hiring people, there is a lot of competition out there and a lot of good competition for our people, and we want them to stay. We do have a much lower turnover than other PR firms of any size, anywhere.
Openly share information
After employees were offered an ownership stake, Ulchaker disseminated information about the companys performance. If employees were truly going to buy into the stock-sharing plan, he knew there could be no secrets within the companys walls.
For Edward Howard, that means not just annual reports, but quarterly, monthly and even weekly updates on the companys performance. The only information not shared is individual compensation and bonuses. Everything else is fair game.
It demands the willingness to share information, says Ulchaker. If you are going to be a shareholder and invest your money, you might like to know whats going on . . . That information sharing is a very critical component of making something like this work.
Identify your successors early
Once the details of the stock-sharing plan were finalized, Ulchaker identified the leaders who would guide Edward Howard after his retirement. He learned early in his career the importance of choosing ones successor, and knew it was one of the biggest decisions a CEO faces.
One of my first clients was the chief executive of a $300 million company, he recalls. He said his number one job was to find his replacement.
Three years ago, Obert and soon-to-be executive vice presidents Wayne R. Hill, Nora C. Jacobs and Daniel G. Stanowick, who also start their new positions March 1, were selected as Edward Howards new management team. They were seated on a long-range planning committee that met regularly with Ulchaker and the companys consulting firms to prepare for the transition.
We have tried to give them as much background information as we can so that they have every advantage and wont wake up one day and say, My God! Im running a firm, Ulchaker explains. You cant do that by throwing a light switch.
Dont be an ostrich
One solid piece of advice Ulchaker gives other business executives facing the same issue is to start planning the transition as early as possible.
The seven years Ulchaker spent readying Edward Howard for the change were filled with constant tweaking. Not everything is going to work on the first try, he cautions, and the only real mistake is burying your head in the sand and avoiding the problem altogether.
The best thing I can say is dont be an ostrich, says Ulchaker. Youve got to deal with the issue, and the sooner you deal with it, the more effective youre going to be. Maybe this system that has been wonderful for us wont work for the next guy, and thats OK. He finds his own method. But youve got to deal with it.
How to reach: Edward Howard Co. (216) 781-2400
Jim Vickers (firstname.lastname@example.org) is an associate editor at SBN.