Toni Corsanico has worked as a travel manager at Westinghouse Lighting Corp. for 15 years. By organizing the travel needs of the company’s 2,500 employees, she can better police company spending by employees. Using vendors, publishing an annual travel policy and detailing price caps on all facets of travel, she tracks where the business’s travel dollars go.
Q. Is a travel policy important for companies of all sizes?
Yes. Companies want to save money regardless of their size, and a travel policy is key in that formula. Having a travel policy means your company has a plan that will allow them to predict the company’s future needs based on the reports and adjust that to economic changes within or outside of the company. The annually updated policy is a playbook that forecasts travel for upcoming trips, which should be validated on a case-by-case basis depending on how beneficial it is to the company.
Q. What types of problems can arise within a company that can affect the travel budget?
If a company is experiencing difficult economic times aside from the economy and events that affect every business, they may need to lay off employees depending on the magnitude of the issue. Steps taken before more drastic measures can include altering budgets, such as travel. We have cut back on intra-company travel significantly and put the bulk of our travel dollars toward traveling to meet the needs of our customers. We still needed to meet with employees in other states, but that travel wasn’t in the budget so we utilized videoconferencing, which is very effective for several reasons. With videoconferencing, you can save money on air travel and food, meet with more people at once, stay in the comfort of your own office, and bypass the lines and delays. You’re not trying to impress co-workers or prove dedication to service like you are with clients. Videoconferencing and teleconferencing works 99 percent of the time.
Q. What are companies’ biggest concerns with travel?
The first concern when there is a problem and before there’s a problem is the cost. Budgets fall apart, and everything becomes unhinged. There are lots of things that can go wrong with travel. Overstepping your budget unnecessarily isn’t one of them.
In previous issues of Smart Business, members of MIS Group, one of the nation’s premier software and technology service providers, discussed the importance of developing an intentional approach to the integration of business and technology.
“It’s important to understand the problems faced by companies without sound IT strategy,” says Chuck Reeves, vice president of Technical Services with MIS Group.
Smart Business asked Reeves how a company can make sure it has an effective IT strategy and what happens when it doesn’t.
What happens when companies do not give IT strategy the attention it deserves?
A company’s approach to disaster recovery is a great example, especially among small businesses, of what can happen when IT strategy is not properly emphasized. Data might double in size every year. Many businesses deal with this by increasing storage capacity and purchasing bigger and faster tape backup systems. Because there is not any one person in the organization who can properly categorize and prioritize all the data, the decision-making is left to the IT person, who usually treats all data the same. Customer data is treated like payroll data, which is treated like end user mp3 files or internal memos. There is no attempt to classify data by what is mission critical. There is little attention given to determining how much data is acceptable to lose in the event of a disaster, or what an acceptable amount of downtime might be if something unforeseen happens. Seldom do small businesses have policies for archiving or purging. These critical functions are often overlooked, that is, until disaster strikes.
These tasks sound pretty important. Why are they so often overlooked?
People rarely believe disaster will truly strike them so they only make a halfhearted effort to prepare. Preparing to cope with the unforeseen is complicated, time consuming and no fun. Without a qualified IT adviser, planning is left up to the business leader who is probably focused on other things, like revenue and cash flow. The leader wants to believe everything is OK, so when the person in charge of the tactical execution of IT says, ‘Everything is fine,’ the leader goes along with it. The executive in charge probably doesn’t know how to challenge this statement and isn’t inclined to spend the time to discover if it should be challenged, so everyone in the company just assumes the best.
Isn’t assuming a dangerous thing to do?
It is. If the business leader is not interested or not sure how to evaluate the effectiveness of the IT department or its policies, then it is all just too easily ignored. In defense of the business leader, it is hard to know whom to believe. There is not just one way to handle IT effectively, and there are a lot of ways to handle it incorrectly. Most business leaders have no standard by which to evaluate IT, and this is especially true for those heading up the small business. There are some internationally accepted standards for IT controls and processes (such as CoBIT and ITIL), but these principles are almost never mentioned in the small business setting.
What do you consider to be the scope of influence for IT?
I think that many business leaders don’t think about their technology investment as a whole; rather, they see it as several unrelated pieces. A lot of money is spent on computers, network equipment, printers, server software, personal software, Web sites, telephone systems, cell phone service, fax machines, copy machines, Internet service, phone service, supplies, repair, maintenance, etc. Decisions about individual items are often made without respect to other technology investments.
It’s not uncommon to find up to 20 vendors and multiple internal purchasers all helping a small business spend its technology dollars. There are those who evaluate what stuff to buy, while others buy, receive or oversee the implementation of the purchased product. On top of that, there are those who troubleshoot, escalate or secure the maintenance or service for these items.
When these steps are properly condensed and organized, the organization saves a considerable amount and can stave off significant loss of productivity.
A lot of problems have been identified. So what is the answer?
IT strategy is important not just any strategy, but one that manifests itself in the roles of automation, empowerment, control and transformation. Most important is the IT adviser. That is the one person who can bring it all together in a way that makes sense for even the smaller company. My encouragement is for all leaders to spend time identifying a qualified individual or organization to manage what is such a critical part of their business success.
CHUCK REEVES is vice president of Technical Services with MIS Group. Reach him at firstname.lastname@example.org or (866) 467-4181.
Vice president of Technical Services
We’ve all had days where we would rather not open the newspaper, turn on the TV or pick up the phone for the fear of learning about more bad news.
Unfortunately, there have been a lot more of those days for all of us lately.
The stock market is going through extreme ups and downs, capital has dried up, and key customers are cutting back. You start to wonder where the sales are going to come from to enable you to make this quarter’s budget. If things don’t turn around soon, you’ll have to consider drastic cutbacks yourself.
In times like these, what’s a CEO to do? The answer: Get back to basics. Focus on the things you do best and do them as efficiently as you can. Use your strengths to exploit your competitors’ weaknesses and outhustle them.
It’s often the simple things that made you a success in the first place, and it will be the simple things that keep you afloat during the economic storm.
With that in mind, we’ve assembled the best pieces of advice garnered from Dallas’ top leaders from throughout the year. We think you’ll find some great ideas to help you improve your business within these pages, and we encourage you to keep this issue as an ongoing reference to help you find your way through the trying times that lie ahead.
Buy or merge with caution
CEO, Nursefinders Inc.
Business changes rapidly and constantly challenges us as leaders, but mergers and acquisitions can be particularly challenging. One of the keys to these deals is to approach them grounded in reality.
“Just don’t try to be overly optimistic,” says Mark C. Layton, senior partner, chairman and CEO of PFSweb Inc., who was featured in the January issue. “Be conservative in terms of the time and cost to get it done. Too many companies do a deal and say, ‘We know we’ll have to close these three plants,’ but they’ve underestimated the time, the difficulty and the cost to get that completed, and they come back eight months later and have to deliver disappointing news to stakeholders because of the cost and time involved. Take a good look and be honest about the risk assessment.”
When you’re looking at the real picture, one of the key factors you need to evaluate in that assessment process is the numbers — growth rates, revenue, gross margins and expenses.
“The trends for these are key indicators when you compare them to the industry,” says Bob Livonius, CEO of Nursefinders Inc., who appeared on the September cover. “If the industry’s growing at 10 percent and this company’s growing at 15, that’s a very good sign. Obviously, the reverse would not [be a good sign.] If margins are lower than the average in the industry or if expenses are higher, those are all key factors to look at.”
Also look at the company’s customer base.
“(Business) needs to be spread across a large customer base where there are multiple years of sales to those clients,” Livonius says. “This indicates that their client retention is high.”
It’s also important to look out for critical warning signs when doing your evaluation.
“One of the warning signs would be more than 20 percent of your business concentrated into one client or more than 50 percent in the top five to 10,” Livonius says.
president and CEO, ALON USA Energy Inc.
Jeff Morris, president and CEO of ALON USA Energy Inc., says a CEO’s job is to allocate resources.
“You have a certain amount of resources,” he says in the March issue. “You have a certain amount of people. You have a certain amount of money. You have a certain amount of time. What you have to choose and prioritize is how to use those resources. You always have more to do than you have resources to do them.”
Great CEOs know how to delegate resources, especially people, and empower their staff to make decisions. They trust their staff but keep an open door to offer assistance if need be. He says there are two keys to getting a high level of performance from a team. The first is hiring great people. The second is trusting them.
“You have to say, ‘Go do the payroll system,’ and you can’t be asking every hour on the hour, ‘How are you doing?’” Morris says. “It’s not a management-by-objectives system. It’s not something where you set objectives, and you have weekly staff meetings to see how people are doing, and you update and have interventions to make sure you stay on course. We didn’t have time for weekly staff meetings. We are a group of doers. We hire doers; we don’t hire watchers. I don’t have anybody around here whose job is to make sure that something happens or that XYZ person is doing their job or following up.
“We have doers. If you are the HR person, you do the HR. If you are the IT person, you do the IT. If you are the top mechanic, you fix the pumps, and we aren’t going to have someone stand over your shoulder and make sure you do it appropriately. That’s really helped our cost structure, but it’s also created a culture of doers. You can trust them if they perform, and they do.”
Communicate at all levels
CEO, Baylor Health Care System
At Baylor Health Care System, President and CEO Joel Allison emphasizes listening just as much as talking with his employees, and executives are encouraged to listen to concerns of employees. Also, employees are surveyed every other year, with some 79 percent taking part in the 2006 survey, the most recent data available. Baylor also has focus groups with employees and also an ethics hotline, in which employees can anonymously report violations of company policy. The calls are routed to a third-party vendor who handles the calls to assure the review is objective. Every call is reviewed by Baylor’s chief compliance officer, who reports directly to Allison.
“That helps us to find out if there are any issues or concerns about any problems or early warning signals to pay attention to,” Allison says. “It’s all back to quality. It’s all back to service. It’s about commitment to patient care and value of integrity and openness that we want to be the best organization we can be and to be trusted as an organization that is delivering the highest quality of service.”
The two-way nature of the conversation engages employees in contributing to quality. Allison’s own e-mail address is made available to all employees, and he tries to answer every e-mail he receives, even if it is just to let the employee know he’s forwarded their question on to another manager. Surprisingly, employees aren’t abusive of having it, and often have valid points or concerns that they bring to his attention.
Employees have to feel valued and one of the ways to do that is to be responsive.
“They are critical to you being successful,” Allison says. “They are the ones who are out there, 24 hours a day, seven days a week, taking care of patients. I think it’s a CEO’s and management’s responsibility to stay in touch with your employees. You have to engage them. You have to know what they are thinking and what they can do to help you, how they can make it better for the patient. I’m a big believer in building strong employee relationships and being out with the people. We encourage all of our senior executives and the presidents of our facilities to do that.”
On a mission
CEO, Transplace Inc.
Have you ever looked at your company’s mission statement and laughed upon reading it because it seemed so off from what your company actually does? If so, then you just failed Tom Sanderson’s laugh test, and you need a new mission statement. As chairman, president and CEO of Transplace Inc., he went through that, and it led to creating a new mission.
One of the keys to remember when creating a new mission statement is length.
“Try to keep it short enough that it will resonate with people, and they’ll remember it and the key aspects of it,” Sanderson says. “If you write too much, you risk having people pick up on the wrong pieces of it as being the most important elements.”
When creating it, you also need to run it by other people to see what they think of it.
“Some people are afraid to put that statement out there and get the feedback because it might bruise their ego a little bit,” Sanderson says. “The focus has to be on how do we get a good statement out there.
I can’t let my thin skin get in the way of a better product.”
No matter what you decide to do, keep the long term in mind when crafting your mission.
“You have to think about what’s right for your own situation, for your own company, for your own employee base and leadership team,” Sanderson says. “A well-crafted statement should stand the test of time.”
Stick to your core
president and COO, LSG Sky Chefs — North America
president, Bombardier Flexjet, Skyjet and Aircraft Services
With so many different things that you have to keep juggling in the air as a leader, it’s important to not become so focused on those items that you forget why you’re juggling in the first place.
“It’s about picking up one marble at a time,” says Michael McQuay, president of Bombardier Flexjet, Skyjet and Aircraft Services, our July cover subject. “It’s about a focus and keeping the basics of your business in mind.”
One of the most essential basics to keep in mind is knowing who you are as a company. Instead of chasing every opportunity that comes your way, Sondra Lehman, our November cover subject, says it’s important to use your core as a way of evaluating opportunities to pursue.
“You have to take the blinders off,” says Lehman, president and COO of LSG Sky Chefs — North America. “Look at what you’re doing and how it could be used in a very different way. If you look at what your core competency is and see how it could apply to a very different market or industry, a lot of them are obvious.”
By sticking to the basic core model of what you do and remembering other business basics, you’ll be more successful over the long term.
“Over the years, most businesses that have had real difficulty have tried to grasp the brass ring without doing the hard work that’s necessary to get there,” McQuay says. “People look at wanting to hit a home run in business, and it’s not about a home run — it’s about doing the basics. It’s the hit and run, laying down the bunt, not making errors in the field. If you focus on the basics and the little things, you have a tendency to have a better opportunity to be successful with the big things.”
If your IT guru has told you that something called search engine optimization is the way to go, but you’re still foggy about what it is or why you should care, consider this: When done right, SEO could double your return on investment and help you acquire scores of new customers.
Search engine optimization in its most basic form is simply about making your Web site appear higher up in search results from sites like Google and Yahoo.
Search engines are the starting point of almost all online activity, second only to e-mail, yet more than half of readers surveyed by Smart Business say search engine optimization isn’t part of their current marketing strategy. Search engine optimization has a rightful place in every company’s budget, yet few companies ‘get it,’ and they don’t allocate serious funds into the development of a program.
It all starts when a potential customer enters a search term into Google. Two types of search results are displayed: natural and pay-per-click.
Natural search, which are the results shown on the left side of any search page, are based on merit and validity to the keywords used. The results in the narrow column on the right are pay-per-click results.
When you optimize your site for natural search, it can take three months to see progress in your rankings. The better the optimization, the higher up your site will appear in relevant searches, increasing your chances for a sale.
Pay-per-click gets immediate results by displaying your ad when someone searches for a particular keyword that you choose, but you are charged every time someone clicks on your site. This is an advertisement and a temporary fix.
Why optimization is important
The name Google is so widely used that it’s the newest verb in the English language. Everyone knows of the search engine because it has a commanding market share (various online sources cite 60 to 70 percent on average), so the connection is easy to make: If your Web site ranks high on Google, that’s the best way to reach an audience that’s looking for your goods or services. SEO gets your name in front of consumers at a time they are looking to buy what you sell.
SEO creates compelling information on your site, makes it easy to find and spreads your name around the Internet as much as possible. In the process, your site will be placed ahead of your competition when keywords are searched related to your business.
“The biggest advantage of SEO is offering more eyeballs interested in your product at a reduced cost compared to other advertising,” says David Russell, president, Red Spot Design. “With SEO, the prospective customer actually asks the search engine for information about you you just have to provide it.”
Competition plays a role in the difficulty in ranking high, but a series of criteria installed by Google and implemented by SEO firms help make the ranking determination.
“SEO should be the first consideration for any online marketing,” says Jennifer Walsh, SEO account manager, Bayshore Solutions. “You must have an understanding of SEO to make decisions. Many times, a minimal budget is given, and necessary changes can’t be implemented. This leads to frustration by the customer and firm because the job isn’t being performed as well as it could be.”
The longer you wait to take action, the more difficult it will be to get your site ranked higher.
“SEO has grown extremely fast,” says Steven Capone, search marketing director, imc2. “Advertisers will spend more than $10 billion on search in 2008 and a predicted $20 billion by 2012. About 70 percent of online consumers click on organic listings. The opportunity cannot be ignored.”
What to look out for
Although understanding the intricate details of what makes search engine optimization work would require two Advil and a clear schedule, knowing the basics and what questions to ask will minimize the use of your mental reserves. There’s no accreditation program for SEO firms, but getting a brief education of the process will allow you to know your opportunities instead of becoming one.
First, there are different forms of SEO, none of which comes with a guarantee. There are two main types of search: local and global and you’ll also hear the term “universal search,” which encompasses both, plus video. A business like a restaurant would probably be interested in a local search only, so would focus on keywords and phrases that include the city name.
One of the easiest ways to measure what keywords might help you rank high is Google Analytics (www.google.com/analytics). It’s a free service provided by Google that allows you to test the current value of your Web site and gives you detailed reports on what keywords are being used to find your site.
But keywords are not the only measure of success.
“Before launching a campaign, make sure the company provides valuable insights such as geographic location and advertiser competition across different behavior sets and keyword categories,” Capone says. “It’s the search engine optimization firm’s responsibility to have knowledge of consumer language and to know that consumers see search as search.”
Web site design also plays an intricate role in the process. Your site may have an impressive appearance, but spiders software robots that “crawl” the Web indexing data must be able to understand information on the page, or it will not be efficiently indexed, dropping your Web site’s ranking.
Mobile search is the newest type of optimization and sometimes it’s referred to as “third screen.” In the U.S., mobile marketing is largely used for local search, but foreign markets rely on mobile Web access heavily for all facets of search.
Getting the most return from your site requires a balance of compelling information, easy access and optimization that gets it to the top of the search engine rankings. Most professional firms will be able to handle all of these needs, but again, ask questions before signing anything.
Ask the SEO firm if it performs link building, which places a link to your site from other reputable sites. Also ask what techniques it uses to create incoming links to ensure they follow search engine guidelines.
Also, ask the company how it tests, measures and reports results. Think about what you want to know, such as how many people visited a page and if they made a purchase,
and make sure the firm can provide that data. The SEO firm must provide updates that mean something to you. Also ask to see samples of its work and see where those clients rank.
Once you find a company you are comfortable with, think long term.
“If you are thinking of hiring an outside company, you should definitely engage in it for a year,” says David Roth, director of search marketing, Yahoo. “SEO is a long, iterative process with delayed results; you’ll want to keep the agency around so they can maximize the benefit to your company and hold them accountable for their actions.”
Like anything else, SEO gets you what you pay for and that means hours of work and a decent chunk of your marketing budget. Since a feasible figure depends on your budget, factor at least a quarter of your marketing budget for SEO.
“The good news is, once SEO is put into place, the cost of attracting a new user is practically zero,” Roth says.
IMAGE PROVIDED BY CINCINNATISOLUTIONS.COM
Being proactive in your funds management can lead to greater profitability.
Computer technology has created significant conveniences for businesses these days. Whether it’s mining consumer data, balancing the books, or aggregating and interpreting financial data, companies have realized great efficiency gains that have enabled them to put more energy toward growing their bottom lines.
A sweep service is one product born out of advanced computer technology. It basically automates and simplifies cash management, says Trish Herskovitz, vice president of treasury management for Capital One Bank in Dallas, because a business no longer has to monitor daily balances and then manually initiate either a line-of-credit payment or investment.
Smart Business spoke with Herskovitz about the advantages of a sweep service and how it helps a business become more efficient and productive.
What is a sweep service, and why should businesses take advantage of it?
You don’t want your cash sitting idly in a business checking account, earning little or no interest. Businesses today can take advantage of an automatic sweep service that automatically invests their idle balances overnight. All debits and credits posting to a business’s account are automatically considered when determining daily excess collected funds available. Excess collected funds are invested overnight and automatically credited to an account the next business day. Interest is compounded daily.
Is the same service available for loans?
Yes. With a loan sweep service, businesses can automatically apply excess cash toward paying off loans. An automatic draw from a business’s line of credit occurs as needed to cover daily clearings. Excess collected balances in the account are used to pay down a line of credit. If the line of credit is fully paid, excess collected funds can be automatically invested. For example, a client could have $100,000 in excess funds and a $40,000 line-of-credit balance. The line-of-credit balance would be paid down first, and the remaining $60,000 would automatically be invested.
To utilize the line-of-credit sweep option, the line of credit typically has to be a stand-alone, revolving line of credit with no processing restrictions. Also, any amount of excess collected funds can be used to pay down a line-of-credit balance. However, an average daily minimum of $50,000 in excess collected funds is usually required for the investment option. This average minimum helps ensure that the investment earnings offset the cost of the monthly service fee.
Two overnight investment options include repurchase agreements, which are secured, collateralized investments with a lower return, and eurodollars, which are unsecured but backed by the full faith and credit of the bank, earning a better rate with lower monthly maintenance fees.
Can a sweep service combine funds from multiple accounts?
Yes. Excess funds from several different accounts can be combined to gain the benefit of higher interest rates without com-mingling funds. Balances in each related sweep investment account are totaled in order to determine the rate of interest to be applied to each individual investment. The excess funds from each account, however, will sweep into separate investments, with the principal and the interest returned to the respective accounts the next day. This way, clients are able to invest excess funds at the most advantageous rate without commingling funds from different accounts, which makes for easier account reconciliation.
How does this type of service help a company?
Daily cash management goes on autopilot, freeing businesses up to do other treasury tasks. Also, it helps a company maximize its earnings by applying idle funds to an overnight investment or reduce interest expense on its line of credit. A business is also able to manage cash more efficiently by automating the transfer of its excess balance.
How can a business keep track of all these transactions?
Daily sweep transaction reports are available through online banking services for businesses, which offer balance reporting and transaction initiation.
These services can also offer a ‘positive pay’ type reconciliation service designed to fight check fraud. This is in addition to balance reporting, information reporting, transaction processing, automated clearing house origination, information download, product information, maintenance and online help. Monthly statements can provide a summary of daily activity for easy account reconciliation.
Clients can also arrange to have a minimum balance remain in their checking accounts after any sweep of funds in order to offset any maintenance fees.
TRISH HERSKOVITZ is vice president of treasury management for Capital One Bank in Dallas. Reach her at (972) 855-3945 or email@example.com.
Wholesale prices shot up 1.2 percent last month. The Dow-Jones stock market index fell 96 points yesterday. The average temperature of the Earth rose by 0.74 degrees Celsius over the last 100 years. During the last five years, the overall vacancy rate for commercial buildings in downtown Dallas has hovered between 27 percent and 31 percent.
In this so-called “Information Age,” we are bombarded by statistics, charts, graphs and outright trivia almost every moment of every day. But in order to take full business advantage of this mountain of information, we have to know how to interpret it especially in the real estate market.
“Information has certainly become a competitive advantage,” says Ariel D. Guerrero, Assistant Vice President of Transaction Services and Client Services Manager for Texas based in Grubb & Ellis Company’s Dallas office. “In today’s volatile economy, commercial real estate investors and asset managers must be able to accurately assess trends, analyze their portfolios and evaluate options to ensure they make effective decisions that maximize investment returns on an ongoing basis.”
Smart Business spoke to Guerrero about how information plays a vital role in making crucial real estate decisions.
What research is available, and how can it be used as a competitive advantage?
Up-to-the-minute property, economic and GIS mapping/demographic data can be accessed from various subscription services, including Costar, Loopnet, Xceligent, Catylist, REIS, Moody’s Economy.com, Claritas and other research tools.
By integrating all these data sources and utilizing proprietary reporting tools that provide advanced analytics, informed decisions can be made based on up-to-date information and their impact on future returns. To remain competitive, leading firms have been implementing information management and analysis tools that provide aggregated data as well as automated distribution of information to clients.
What can be gleaned from raw research data?
Custom and published market reports are produced highlighting and analyzing the commercial real estate markets on a quarterly basis. Within these reports, vital information related to the health of the markets is presented, including but not limited to rental appreciation/depreciation, net absorption, current construction, vacancy rates and any other information that a client would need to assist real estate decision-making.
What is digital marketing, and how does it affect the quest for lucrative real estate opportunities?
In the rush to close more deals expeditiously, technology has certainly played an important role in streamlining the commercial real estate sales process. Digital marketing has helped brokers realize efficiencies in cost as well as time. For example, most marketing materials for investment properties are most often condensed to property-centric Web sites and/or virtual online areas known as ‘war rooms’ where due diligence information can be uploaded in a secure manner, which allows users 24-7 access to the information they need to keep the transaction moving. Brokers can use these services in their marketing so they can truly stand out from their competitors in this highly competitive industry.
How has the economy driven the demand for proprietary information?
There seems to be an inverse relationship that exists between economic performance and the demand for information. When things are going well, people are less inclined to ask questions and dig deep.
The booming commercial real estate market of years past caused a relative level of complacency with regard to access to critical market data. However, with the credit crunch and slowing national economy, there is a sense of urgency that drives a growing demand for reliable market information.
What kinds of exclusive information are available to qualified and experienced agents but not to the general public?
Competent advisers utilize proprietary research capabilities and analysis, extensive property databases and proven negotiation skills to create transaction opportunities that support their clients’ business objectives.
In what ways can an adviser assist interested parties with their decision-making?
An adviser can assist clients in their decision-making by applying real estate strategies to business imperatives: changes in ownership, market shifts, changes in business focus or regulations, expansion/consolidation initiatives, and procurement or outsourcing initiatives.
ARIEL D. GUERRERO is Assistant Vice President of Transaction Services and Client Services Manager for Texas in Grubb & Ellis Company’s Dallas office. Reach him at (713) 599-5112 or firstname.lastname@example.org.
When Greg Faherty looked at his company last April, he saw too much manufacturing capacity and too many people serving a rapidly stagnating new housing market.
But before taking the drastic action of consolidating two of the window and patio door manufacturer’s plants, Faherty, president and CEO of Atrium Cos. Inc., sought the input of his leadership team, customers and vendors.
“We had to take a look at what we could do in terms of shutting down some of that capacity and reducing our cost,” he says. “We have a couple of facilities in Southern California. We decided that we could serve our Arizona and Nevada markets from California fine.”
The move — which consolidated the company’s Tolleson, Ariz., and Anaheim, Calif., manufacturing facilities into a single California location — shouldn’t have surprised anyone. Though the company experienced revenue growth during the first few years of the nationwide housing slump — moving from $720 million in 2004 to $840 million in 2006 — 75 percent of its sales originate in the new home construction market. But even with such conspicuous market indicators, Faherty couldn’t pull the trigger without first consulting with his people to get their input.
“You get input from your people, you get input from your customers, you get input from your suppliers,” he says.
What’s more, he can’t imagine any leader that wouldn’t.
“I can’t imagine a leader that on his own says, ‘This is what we’re going to do now,’ and his team disagrees, and he wants them to go out and implement it perfectly,” he says. “He’s going to have trouble.”
To avoid trouble during times of duress, maintaining a two-way flow of communication with your key constituents can make all the difference. Your employees, customers and vendors supply you with the information you need to make the best decisions, and being able to explain the rationale behind your decisions can facilitate understating while quelling anxiety or anger.
“You have to respond with the people who have provided input, and if you decide to go in a different direction, you need to explain why you’re doing what you’re doing,” Faherty says.
That’s exactly what Atrium’s president did in the events leading up to the company’s consolidation. By seeking input from his key constituents and then articulating the decision that resulted, Faherty successfully navigated through a tumultuous situation while keeping the 5,000-employee company charted toward a brighter horizon.
Seek input from key executives
Making a decision without the appropriate information is like shooting at a target without lining up the gun’s sight.
“You need to make sure that you’ve got all of the information to help you make the decision so that you’re not doing some kind of a hip-shot situation where you’re pulling the trigger without all of the information that you need,” Faherty says.
As the housing slump worsened and Atrium’s unused capacity was beginning to stifle incoming revenue, Faherty didn’t shoot wildly. Instead, he gathered up as much information from as many different sources as possible to home in on his target — the right decision.
Much of that information came from national reports and databases that report on past trends and predictions within the housing market. While that certainly was helpful, Faherty says no information dredge is complete without tapping into your constituents. But soliciting feedback from your leadership team can’t be a one-time request.
“That has to be a part of your style, a part of your culture, a part of the company’s culture,” Faherty says. “You can’t turn it on and turn it off like a switch.”
To establish that collaborative dialogue, Faherty says to hold regularly scheduled meetings with your key executives every month.
“You seek to bring them in,” he says. “You ask their opinion. You don’t give them a yes or no question. You give them a question that requires their responding with more than a yes or no type of answer.”
Asking open-ended questions is a great way to elicit feedback from your more introverted executives. It’s also a great way to pull multiple opinions on the table to get the conversation going. As each idea is being presented, just make sure to give them proper consideration.
“Don’t bite people’s heads off if they come up with a stupid idea,” Faherty says. “That’s the last time they’ll come up with any kind of an idea.”
When members from your leadership team contribute to the conversation, Faherty says they’ll begin to develop a sense of ownership about the ultimate decision. They may not like your chosen course of action, but at least you’ll foster a certain amount of buy-in.
“Nobody liked doing it, but if we had to do something, that was the right decision to make,” Faherty says of the consolidation. “If you get buy-in with all of the people involved, then the execution of it becomes a whole lot easier. Everybody wants to execute the strategy because they’ve played a part in that decision.”
Solicit customers and vendors
When Faherty first became Atrium’s president and CEO in January 2006, the housing market had just started to crater, and the company was beginning to feel the effects. One market that was hit particularly hard was Florida.
“We were having some difficulty servicing our customers in Florida,” he says. “We had a facility that really needed to be overhauled and get its service and quality right. I visited several builders in the Florida market, and every one of them told me the same thing: ‘You guys suck. You’ve got to really improve.’ That was good feedback. I wish it would have been different, but it was the honest feedback, and it told us where we stood and what we needed to fix.”
Your customers will often be your most honest barometer of performance in a given market.
“You’d be surprised by what they’re willing to tell you,” Faherty says. “They don’t sugarcoat it.”
But unlike your leadership team who will come to you with their feedback, you most often go out and seek customers yourself.
“You get out in the marketplace, and you meet with your customers,” he says. “You learn so much more because you really get what the true world is. Sometimes, things get filtered from up the organization from salesmen to sales managers to general managers. By the time it gets to me, it’s been so filtered that I’m not sure I’m getting the true story. So getting out and talking to the customers one on one really gives you an insight into how you’re doing and what you need to do better.”
That can be hard for a busy executive. You can’t expect to interact with the consumer on a daily basis. Instead, Faherty suggests organizing efficient visits with your sales force when time permits. If your team is making a West Coast swing over the course of two weeks, for example, that would be a much better use of your time than flying 500 miles to tag along on intermittent sales calls over the course of three months.
However you organize it, the important thing is to get out and interact with your customers face to face.
“You travel with your salespeople,” Faherty says. “You go visit, whether they’re a national account or whether they’re a local distributor or a builder. You just walk in and shake hands, sit down, and say, ‘How are we doing? What can we do better?’”
You should also direct those same questions at your vendors. At Atrium Cos., Faherty invites key suppliers to come in once a year to audit each facility.
“You’re buying their equipment to manufacture their products, and they know exactly how that equipment should be used to maximize the productivity and efficiency of the equipment, and how the men on the line ought to be using the equipment and what they ought to be doing,” he says. “From what is optimal to what we wind up doing, there’s often quite a big spread.”
Eliciting feedback from your suppliers also provides a great window into the practices of your competitors.
“They can go look in our plant and look at our operation and compare it to our competitors operation,” Faherty says. “They’ve got an opinion about what you can do better, so you elicit that, and you listen to them.”
Articulate the tough decisions
Whenever you make a hard decision, Faherty says you or your key executives need to explain the rationale behind it to enhance understanding and get buy-in. While this practice certainly comes in handy in the boardroom, it’s even more important when articulating a major decision that affects many of your employees.
Take the consolidation. When he and his team decided to close the Tolleson facility and consolidate it with one in Anaheim, Faherty knew the move had to be conveyed with care.
“You have to understand that consolidations are difficult, and they’re hard on the people,” he says. “There are going to be some people who lose their jobs.”
When articulating the rationale behind a hard decision, Faherty says the first thing you must consider is the messenger.
“An executive needs to be there,” he says. In this case, Faherty sent the company’s western regional president who oversaw the affected manufacturing facilities to deliver the news. Delivery from a key executive or manager always gives the rationale a stronger sense of credibility.
Once you’ve identified the messenger, Faherty says your next consideration is time. The worst thing you can do is sit on a decision and not inform your people.
“You need to let people know,” he says. “You can’t wait until the last minute and pull the trigger.”
After you’ve designated the messenger and time frame, the only thing left to do is to explain the decision and share the rationale.
“Let them know what you’re doing, why you’re doing it, more importantly, how’s it going to affect them,” Faherty says.
Part of that process involves allowing your employees to make their own voices heard. Faherty says you can’t simply announce a major decision and then cut and run.
“You give them an opportunity to ask questions,” he says. “You give them an opportunity to vent because a lot of them are going to be unhappy.”
That’s precisely what Faherty’s regional president did at the company’s Tolleson location. After explaining the rationale behind the consolidation, he allowed the facility’s employees to air their grievances and ask questions. Though the decisions itself didn’t make many people happy, devoting extra time to that process proved therapeutic when it was all said and done.
“At the end of the day, they still aren’t happy, but if you explain the rationale correctly, and you’ve taken the time to do it in person, and you’ve taken the time to let them ask you questions or vent, they’re never pleased, but at least they understand,” Faherty says. “They say, ‘Thanks for taking the time to come to talk to us in person to let us know what you’re doing, why you’re doing it. We don’t like it, but we understand it.’”
HOW TO REACH: Atrium Cos. Inc., (214) 630-5757 or www.atrium.com
Employers who seek to regulate or monitor their workers’ electronic communications could be stepping into a legal quagmire. Lest they get their shoes muddy (and mess up their legal standings, too), employers should be up to date on court rulings on employee communications. The latest ruling comes from the 9th Circuit Court of Appeals in California.
Smart Business asked Michael A. McCabe, a shareholder at the Dallas law firm of Munck Carter, P.C. with expertise in e-discovery and labor and employment law, to help sort out the situation.
Let’s cut to the chase; can I legally monitor workers’ e-mail accounts?
Yes, in most states. But, you have to go about it in the right way. The key is to defeat the employee’s expectation of privacy in his or her workplace communications.
Employers can do this by distributing a policy that clearly and unambiguously states that any communication made over the company’s e-mail system is not private and will be monitored by the employer. Having established no expectation of privacy to workplace communications, the employer is on solid ground to legally monitor the communications.
Does that mean I can monitor personal communications on company computers?
This is a relatively new and dynamic area of the law that is constantly being fine-tuned. However, most courts have consistently ruled that so long as an employer’s policy dispels any expectation of privacy, it is fair game for the employer to review communications made over the employer’s e-mail system.
Some courts have gone so far as to hold that communications between employees and their lawyers cannot be privileged if the employer retains the right to review communications sent or received over the company’s e-mail system. In the words of one court, a properly drafted policy is equivalent to notifying employees that ‘the employer [is] looking over your shoulder each time you send an e-mail.’
How about monitoring other technology like cell phones, voice mail, BlackBerrys?
Written communications, in whatever form, that are transmitted over the employer’s computer system can be monitored if the employer’s policy eliminates any expectation of privacy. This same rule should apply to voice-mail communications that are transmitted over an employer’s e-mail system.
Monitoring cell phone conversations is a different story altogether. The law of most states and the federal government is that telephone conversations can be monitored if proper notice is given and consent received. In some states, only one person to the conversation needs to consent to being monitored, while in other states, all parties to the conversation must consent. That’s why you’re informed that your telephone conversation is being recorded when you call a customer service hot line.
To monitor employee’s cell phone calls, you would have to receive consent from both the employee and whomever he or she calls because you don’t know if he or she is calling one of the more restrictive states.
For all practical purposes, it would be very difficult to implement such a policy with cell phones.
But didn’t the 9th Court’s June decision draw some lines?
Not as much as you might think. The 9th Circuit ruled that Arch Wireless, a text message provider, violated the federal Stored Communications Act (SCA) by disclosing a police officer’s sexually explicit text messages to his employer, the City of Ontario Police Department, even though the city was the subscriber on the service contract. In the court’s view, Arch Wireless violated the SCA because it disclosed stored text messages to a third party without the consent of either party to the communications.
This does not, however, stop employers from monitoring e-mails that are sent entirely over their own e-mail and computer systems. The easiest way for employers to avoid the 9th Circuit’s ruling is to limit business communications to those devices that can be monitored by the employer, such as BlackBerrys and traditional e-mail.
Can I take disciplinary action against an employee for a post to an industry blog?
Probably, but it can differ from one state to the next and between public and private employers. There are several cases in which employees were fired or disciplined for material they posted on an industry or personal blog that was critical of their employer. Other employees have been disciplined for making statements online that appear to be the employer’s official position on a topic.
To avoid these problems, all employers should have a policy that prohibits employees from blogging about their employer without making their employment status known and without stating that the espoused views are personal to the employee and not the views of the employer. Furthermore, the policy should remind employees that they can be disciplined if they paint the company in a bad light.
MICHAEL A. McCABE is a shareholder at Munck Carter, P.C. and a member of the firm's labor and employment and litigation sections. He can be reached at (972) 628-3609 or email@example.com.
It is critical that the owners of privately held businesses understand that their business will transition, certainly at their death, and that the overwhelming majority of opportunity lies in planning for a transition while the owner is alive and the business is continuing to prosper. Many business owners have contingency plans in place that address an untimely death or disability. However, the more likely scenario is that the owner lives a normal life span and at some point will want to redefine his or her relationship with the business. This is where a “during lifetime” orientation to business transition planning can really pay off for owners, their family, their employees and the business.
Successful business transition involves a complex matrix of interrelated personal, family, business, legal and financial issues. Also, business transition can take many forms including: changing the ownership and management of the business, retaining the business for family members, shareholder dispute resolution planning, an internal sale of the business to a key employee group or a sale of the business to a third party.
The complexity of these issues prevents many owners from taking any action at all, says Lloyd E. Drumm, Senior Vice President and Group Director of Capital One Client Advisory Services in Dallas. Others take only limited action and fail to deal comprehensively with their situation.
Smart Business spoke with Drumm about how business owners can best address business transition issues an often difficult process that may happen only once in a business owner’s life.
When should a business owner begin planning for a transition of his or her business?
Most business owners should start planning early so that the desired transition path happens more quickly, costs less money and falls in line with a comprehensive objective set. Also, early planning usually accomplishes more.
The key resource business owners have to implement a business transition strategy congruent with their family, financial and personal objectives is time. Successful business transition strategy can take several years to successfully address the myriad challenges that integrated business transition presents. More planning time is needed when there are many objectives or when the gap between resources and desires is narrow, and less time when there are a few objectives to accomplish and many resources to deploy. Time is an essential resource for significant tax reduction.
Most business owners have primary goals that become the focus of transition planning. If started earlier, the transition could also address secondary goals, such as evaluating the ‘readiness’ of the next generation to successfully run a business, resolving conflicts among active and inactive shareholders, building a management team that will support new ownership or mentoring the family on wealth stewardship.
What penalties will a business be subject to if it doesn’t plan properly?
There are no specific ‘you planned poorly so you pay extra’ kinds of things. However, an owner can be subject to significant expenses at the worst possible time with little relief from those expenses. An example in terms of estate taxes: The government wants its 45 percent tax paid within nine months of a person’s death, so there is typically a huge scramble for liquidity by those who haven’t been preparing for that (or haven’t been finding some way to reduce the tax) this while the company may have just lost one of its most productive members, possibly hurting the company and casting uncertainty among employees about the company’s future.
Is strategy formation different if the business owner plans to transition to family members versus to employees?
If the business owner plans to sell to a long-term partner or to an unknown third party, a different and possibly less complicated strategy matrix may result than if power is being transferred to someone new, such as the owner’s adult children or key employees. Strategy will escalate if the owner’s financial or personal happiness hangs on a successful power transfer.
The critical question here is: Can the business support a significant, nonperforming stream of payments and continue to compete successfully in the marketplace? The answer requires management evaluation and precise financial modeling.
What issue do you consistently encounter that can be a major roadblock to successful business transition strategy?
Many transition strategies fail to balance the current and future needs of the business with those of the owners. Considering family business transition, it doesn’t make a lot of sense for the owner to enact strategy that ends up critically burdening the company into the future. Superior transition design can balance these two critical objectives and prove successful in delivering the needs of both the departing ownership and the ongoing business.
LLOYD E. DRUMM is Senior Vice President and Group Director of Capital One Client Advisory Services in Dallas. Reach him at (972) 855-3699 or firstname.lastname@example.org.
If you want to work for John C. Miller, then you’d best be prepared to embrace the “Bueno way.”
As president and CEO of Taco Bueno Restaurants LP, Miller knows how he wants things to be run and the experience his customers should have, so he refuses to settle for less than the highest standards, which he is constantly looking to improve upon.
“We celebrate the little victories, but then we set new goals that have some stretch in them every year,” he says. “No one should ever rest or be content in their latest achievement because the competition isn’t going to rest.”
To stay ahead of the competition at the $183 million restaurant chain, which has more than 180 locations, he continuously measures progress and gets feedback from his customers so he knows what he’s doing right and what he needs to change.
Smart Business spoke with Miller about how he knows what to do next.Establish good metrics. If you don’t have ways to measure, you don’t know how to assess what to do next in the business. You’d have to be lucky, or you’d be on your way to a short life.
What adds value to the organization? There’s all sorts of things you measure, but the measures have to be anchored in why any of those matter. Quite simply, what you value is what the customer values.
Nothing is sacred except that the guest returns. They have a lot of competitive choices. Those measures are against what customers say matter, then what our shareholders say matter, and then what our employees say matter. If you think of those as a wheel that rolls nicely down the street when they’re balanced, it works pretty well, but if they’re out of balance, the company doesn’t work well.Talk to customers. Sam Walton said it best if you don’t know what to do next, if there’s not real clarity around where you’re doing well and where your performance is slight, then go ask your customer.
Know your customers. You can get it with surveys, from employee opinion, but there’s nothing as valuable as face time with real customers that you can synthesize.
Listen to those consumers on what they’d like to see. You have to constantly ask. Sometimes, the consumer doesn’t know how to tell you you have to twist their arms. If you ask a straight-up question like, ‘What can I add to the menu?’ sometimes they can’t answer. If you probe a little deeper, you find out.
I interview a lot of guests and employees. If there’s an enthusiastic response and endorsement, I’ll probe more, trying to get to the bottom of why they were delighted.
If they weren’t delighted, ‘What would have made you happy? What kept you from being excited about the business?’ You get to the heart of what the consumer is looking for.Listen better, then assess. If you’re listening and then feel like, ‘Well, that’s not how we do it. I wish more people liked it the way we did it,’ then you’re not really listening. If you’re really listening, you’re listening for what you can take action on to improve your business.
Consumers are not static. They’re constantly changing based on what’s available to them, but it takes a commitment to be engaged with your consumers.
Assess where you’re at against what customers say matter, and give yourself an honest assessment with your team every year.
What are your strengths against what consumers say? Protect those. What are your weaknesses? Improve those. What are your opportunities things you aren’t doing that customers would like to see you do? Add those.Hire the right people. You don’t get to try people out for a year. How you staff is a critical part of putting together a successful organization that has continuity and can work together as a team.
We’re not in a hurry to fill every spot. We’d rather do it right.
In our reference checking, we ask some pointed questions about accountability, teamwork, customer focus, other people focus, employee focus. There are ways we ask that, interestingly enough, even people who mean to endorse their candidate, they sometimes pause over those questions, and that can be telling at times.
What most people do is assign that to a junior HR person who goes through a list would you rehire them, can you recommend them, would you say this person has integrity? The problem with those questions is, it’s too easy to say, ‘Yes, no, yes, they’re fine, they’re great,’ and you don’t get into it.
So the questions are more open-ended and designed to have conversation not yes-no answers.Strengthen your hiring process. If you’re not careful with the selection process, it’s difficult to maintain the environment you want. We have a verification process that requires some redundancy, so the store manager would not add a staff manager without an assistant manager or district manager’s involvement.
When you add a second layer of verification, it adds another layer of strength and credibility to the process. That causes people to slow down. If the system is really strong, it makes it easier for a manager to make a strong decision.
By having a set of high standards that people have to go by, the system becomes self-policing and self-fulfilling.
HOW TO REACH: Taco Bueno Restaurants LP, (972) 919-4800 or www.tacobueno.com