Dustin S. Klein

Sunday, 30 January 2005 19:00

A new flavor

Not long after Richard Graeter and his cousins, brothers Bob and Chip, purchased the family business from their parents in late 2003, effectively ensuring fourth-generation ownership of Graeter's Inc., the trio sat down with a business consultant to determine how to guide the ice cream company's future.

The meetings focused on three things -- streamlining Graeter's image, beefing up its online sales and establishing an expansion plan for the 135-year-old company's long-term future.

"Brand management, brand identity, logos and all that nonproduct-oriented type of thing was stuff that my father and uncles (didn't worry about)," Richard Graeter says. "They were just making the ice cream and getting it out in the stores. My aunt was worried about getting the doors opened on time.

"They were so close to the day-to-day operations of the business that they never had the time to pull back and look at the strategic part. That's what the three of us are doing."

Graeter, who pursued an accounting and finance degree at Miami University before earning a law degree from the University of Cincinnati, recognized early on that a successful past didn't guarantee a successful future. In fact, less than 3 percent of family-owned businesses ever reach the fourth generation.

Graeter's, itself, almost didn't make it. The company's ownership transfer to Richard, Bob and Chip required more than three years of planning and a family business consultant to end the squabbling among the third generation of Graeters.

But that's all in the past. Today, more than a year after Richard, Chip and Bob reached an agreement among themselves and with their parents, business is booming.

Richard, who serves as president and CEO of Graeter's Franchising Corp. and Graeter's Inc., oversees a two-fronted operation -- a 12-store ice cream retail business that employs more than 300 people and generates nearly $14 million each year; and a 25-store franchising operation.

Under his leadership, Graeter's has updated its image, strengthened its foundation and expanded its reach. To accomplish this, he recognized essential components that simply had not been previously necessary. He, Chip and Bob have rebranded the venerable Cincinnati icon and set it on a solid path for its next phase of growth.

Streamlining the brand

There are few companies in Cincinnati with more name recognition that Graeter's.

"I could probably put it in a brown paper bag and wouldn't have a problem (selling it)," says Graeter.

However, knowing the Graeter's name and being able to identify its logo are two different things.

"Our brand appeared probably five different ways in our stores," Graeter says. "The Columbus stores had their look and feel, we had ours. The Kentucky ones were a little different, even the stores in the same city were a little different. Our Kenwood store looked different than our Western Hills store."

And that, he says, created identity problems that had the potential to hamper expansion.

"We thought that if we were going to franchise, we needed to have those essential foundation blocks - the brand ID and the store look and feel. In a very big way, the projects my partners and I have worked on are building blocks."

The idea of developing building blocks for a 135-year-old company may sound strange, but for any consistent growth strategy to succeed, the brand is an essential component. Companies go to great lengths to protect their brands - consistent brands provide consumers with trust and reassurance that if they purchase a product, it will be the same quality no matter where they buy it. The same goes for consumables, such as ice cream.

So last May, with the help of Cincinnati-based branding firm Libby Perszyk Kathman Inc., Graeter adopted various components from existing logos and compiled them into one streamlined version, rolling out a new corporate logo and an updated package design.

"We now have a very high-end, classy, professional-looking logo," Graeter says. "Our pints carry that logo and our candy and bakery product line will soon be carrying it. We also have gift cards that have that identity."

This achieved Graeter's most important building block -- a consistent, upscale look that could compete nationally.

"(The) brands now look and feel the same caliber as the quality as, say, Godiva chocolates," he says. "There is a big difference between one that has been well-thought-out and executed and one that has been done on the side, as a secondary product or project, over a hundred years. That's what we had. We haven't had a real brand other than the quality of the product.

"People recognize Graeter's, but I wanted them to recognize the brand and identify it together with the ice cream."

Reaching the masses

Even with a new brand identity in tow, for Graeter, as with his parents and grandparents before him, the business remains about one thing -- the ice cream.

"It is what it is because it's special," Graeter says. "It's made two or three gallons at a time."

The process, called the French Pot method, is the backbone of the company's long-term success. But because of its manufacturing limitations, Graeter's French Pot method for making ice cream is its greatest weakness as well as its greatest strength.

"You can't make our ice cream on a modern machine," Graeter says. "We basically had to design our own machine that gave the same quality of the French Pot ice cream as machines made before 1908. It still only makes two gallons at a time."

And in a world where mass production rules and competitors can churn out hundreds, if not thousands, of gallons of ice cream quickly, having to manufacture your own machines one at a time for franchisees or company-owned stores presents another set of growth challenges.

"We're not going to build a giant plant somewhere to ship our ice cream across the country. That defeats the purpose of Graeter's ice cream," Graeter says. "The product doesn't travel well. It's not meant to sit on a shelf in a warehouse, to be shipped in trucks and then sit in a back room waiting to be stocked. National brand ice cream actually has a shelf life of a year. I can't imagine and don't want to eat ice cream that's more than a few weeks old. Ours isn't.

"At any one of our stores, at any Kroger's store, you can get ice cream that's days and maybe a couple weeks old, at most."

This helps explain why, despite numerous requests, Graeter and his parents have not expanded nationwide as quickly as other specialty ice cream shops.

"People ask why we're not coast-to-coast," says Graeter. "That's because we're making about as much ice cream as we can make here. Our goal is to be the very best ice cream. The other ice cream companies are all about franchising. Their No. 1 goal is to sell another franchise."

So while Graeter gets calls almost daily from entrepreneurs who want to introduce the Graeter's brand to markets beyond Cincinnati, Columbus, Dayton, Northern Kentucky, Lexington and Louisville, he and his cousins have settled on a more controlled process for adding franchises.

In the meantime, Graeter is reaching the masses in a more high-tech and targeted way -- through his company's Web site at www.graeters.com.

Relaunched in late 2003, just before the purchase agreement that transferred ownership of the company to Richard, Bob and Chip, Graeter's online store provided an immediate ability to compete nationwide, albeit in a somewhat limited manner.

Consumers can purchase the company's ice cream in specially made six- or 12-pint reusable shipping coolers and have it shipped via next-day air across the continental United States. The company's other products -- candy and gift certificates -- are also offered through its online operations.

"We use old-world technology to make the ice cream," says Graeter, "and new-world technology to deliver it."

Expanding the company

One of the biggest mistakes generational owners commit is trying to run the family business the same way their parents or grandparents did. Graeter and his cousins refused to fall into that trap.

"Our consultants were very adamant about that," Graeter says. "They said, 'Look, you guys, if you are out there driving and loading trucks and making ice cream, you can't possibly plan where you want the business to go five or 10 years down the road because you're worried about the next five or 10 minutes.' That's the real critical difference between our fathers' generation and ours."

Instead, they've set up a management structure that allows them to focus on their strengths. And, for the first time, they've hired nonfamily members to fill out the senior management team.

"In the past, you had employee members and you had Graeters, and that was that," Graeter says. "There was no in-between."

Graeter sought to fill that "in-between" with strong team members who could serve as a link between the family members and the company's other employees.

"The most important thing was (to find) someone who was as dedicated to the quality of the product (as we were)," he says. "Someone who cared about it, who looked at that ice cream or candy or bakery item as it's going out the door, knowing that they were wrapped up in it. Our name is on that, and we want the best to be out there carrying our names."

Graeter says he found two of those people already inside the company -- one managing the bakery and another in ice cream operations.

Adding them to the team -- and having them oversee those key aspects of the business -- allowed Richard to focus on his role as company leader, managing the accounting, legal, finance and marketing functions of the business. Bob oversees all plant operations and Chip is the trio's natural salesman, designing and managing the company's retail sales.

The moves led Graeter to work on developing incentives beyond ownership for the new senior managers. "That's another project we're working on," he says. "Obviously, with a small corporation, there isn't stock, so you look to use other ways to benefit them -- salary and bonus. You're basically trying to give them the incentive to stay for a long time. If they stay for 10 years and contribute to the company's success, at the end of that time period, there'll be a nice pool of wealth created for them."

But despite all the changes, all three Graeters are interested in one thing -- ensuring the product's quality.

"We could try to do 100 different things, extend our brand to different product areas," Graeter says. "But Graeter's is ice cream. And when you get back to the product, it requires hard work and staying true to who you are."

HOW TO REACH: Graeter's Inc., (513) 721-3323 or www.graeters.com

Amanda Wurzinger contributed to this article.

Monday, 20 December 2004 11:47

Stop the bleeding

Dear Mr. President: The news coming out of Northeast Ohio's manufacturing community continues to disappoint. But you already know this. You visited the state more than 30 times during your re-election campaign.

Recently, Orville-based J.M. Smucker Co. was the latest to announce layoffs -- about 180 positions at a California plant it's closing. Smucker also intends to restructure its operations and sell off its industrial bakery ingredients and dairy ingredients businesses. So add it to the list of companies in the region, such as The Timken Co. and The Hoover Co., which have contributed to the loss of jobs.

It doesn't have to be this way, Mr. President. You can help. As you begin your second term, don't forget about Northeast Ohio. What we need during the next four years isn't another round of tax cuts that expands the budget deficit, but well thought-out business-related incentives to help manufacturers adapt to the global economy and pump money into the sagging economy.

Moral values were a key factor this past year, so don't forget what the New Testament said about teaching a man to fish rather than feeding him fish. With a little push, manufacturers can be on the road to self-sufficiency.

It's being done at companies like ISG, where a savvy investor bought the assets of a left-for-dead steelmaker and installed a keen CEO, who scrapped the old model of U.S. steelmaking and remade the industry to make it globally competitive.

Mr. President, you can't pass laws, but you influence Congress' legislative agenda. So please consider sending to the Hill the following proposals:

* Tax credits to manufacturers that undertake Six Sigma or lean manufacturing initiatives. These credits can be given based on effectiveness of the programs.

* Hard dollars allocated to work force development and other training programs to update the skills of traditional manufacturing employees

* Money to retrain the hundreds of thousands of displaced manufacturing workers who have lost their jobs over the past five years

Mr. President, Ohio did its part to provide you with the opportunity to lead this country for four more years. Now it's time for you to do your part and provide Ohio an opportunity to remake its manufacturing economy. After all we've been through together, it's the least you can do.

Wednesday, 01 December 2004 06:42

Sharing knowledge, building trust

Robert Joyce runs The Westfield Group by sticking to the company's very simple tagline -- sharing knowledge, building trust.

Those four words underscore the Westfield Center-based insurance company's commitment and style of giving back.

"We feel particularly vested in initiatives that positively impact youth, education or those in need," says Joyce, the company's chairman and CEO. "Insurance is about providing security and protection for the future. Through sponsorships, charitable contributions and volunteerism, Westfield further demonstrates its commitment to making a difference."

Joyce says one of the company's main goals is to support and provide opportunities for young people to learn the skills they need -- whether it is confidence, gamesmanship, etiquette or integrity -- to succeed in life.

Westfield sponsors Academic Challenge, a television show that features the best and brightest students from 78 Northeast Ohio schools and airs for 26 weeks each year. At the end of the competition, the 10 top-scoring schools share grants totaling $34,000.

The company's Westfield Group Foundation hosts several golf-related events as its company-owned Westfield Group Country Club. Four years ago, Westfield partnered with The PGA of America to become the host and title sponsor of the Westfield Junior PGA Championship.

Since then, the tournament has grown into the nations' leading event in junior golf. Each year, more than 300 of Westfield's employees, retirees and community members volunteer their time to help with the event.

In 2001, Westfield founded its Junior Golf Academy. Members of area high school golf teams are invited to the country club for a free half-day of group and individual lessons conducted by the region's top PGA professionals. Nearly 600 young golfers have benefited from the program.

Next year, Westfield will partner with The University of Akron to introduce the Westfield Cup, a national collegiate soccer invitational. Proceeds raised from the event will benefit youth soccer programs across the region.

Westfield's community service efforts reach beyond sports and youth, touching organizations such as the Neighborhood Housing Services of Cleveland, Cleveland Housing Network, Fairfax Renaissance Development Corp. and the Medina County Performing Arts Foundation.

Last year, Westfield employees pledged nearly $63,000 to the Medina County United Way annual campaign, while Westfield donated a corporate match of $50,000. And recently, Joyce was named the Honorary Campaign Chairman for the United Way's 2004-2005 fund-raising campaign.

How to reach: Westfield Group, (800) 243-0210 or www.westfieldgrp.com.

Monday, 22 November 2004 10:00

Commitment to service

John Di Julius has a thing for customer service.

The president of John Robert's Hair Studio and Spa thinks about it 24/7. He travels the nation speaking to other business owners about how they can instill a culture of customer service in their own companies.

His company has been nationally recognized for its customer service; Di Julius has even written a book about it.

More important, he's found a way to transform his staff's top-notch customer service into a well-ingrained commitment to community service that has earned his firm the 2004 S.H.A.R.E. Award as the organization that best exemplifies employee-driven philanthropy.

The S.H.A.R.E. Award is named for Pillar Award co-founder Medical Mutual of Ohio's employee-based volunteer committee. S.H.A.R.E. stands for Serve, Help, Aid, Reach and Educate, and the employees at John Robert's demonstrate their ability to do that every day.

A class of 1999 Pillar Award for Community Service winner, John Robert's mission statement says it best -- "To enhance the quality of lives around us." Says Di Julius, "It's only eight words, but I know that all 130 of our employees know it and appear to live it daily. It's about a commitment we made to share our success and, hopefully, we have inspired others to do the same."

Among the employee-directed activities, every year, each of the salon's managers pick a charity for which he or she would like to organize an event. Staff members then choose which team they would like to be on.

John Robert's most prominent charity is Rainbow Babies and Children's Hospital. Once a month, several of the salon's employees go to the hospital to play with the kids, provide hand and arm massages, paint their nails and, says Di Julius, just spend quality time with them.

Di Julius says when people accept jobs with the company, they understand that community service is nonnegotiable. It's expected, and a key part of the decision-making process for hiring.

To recognize employees who go above and beyond, each month John Robert's features "above and beyond" stories in its employee newsletter. The executives also tell stories about those employees during morning "huddles" before the work day begins.

How to reach: John Robert's Hair Studio and Spa, (216) 839-1430

Wednesday, 20 October 2004 18:04

The case for innovation

One look at the artwork that adorns the walls of Duane Morris LLP, and the message is clear - this is not your typical law firm. The original works are painted and drawn by self-taught artists and inspire a creative atmosphere, says Sheldon Bonovitz, who holds the very unlawyer-like title of CEO.

Art holds a special place at Duane Morris. The firm's marketing materials compare the law to art, saying it is "seen differently by different people, constantly changing, and in many instances open to interpretation." But the real explanation is that the artwork, which is quite literally everywhere, is simply a reflection of Bonovitz and the firm itself.

"It's kind of edgy," Bonovitz says. "What you really want to do is create a physical environment and intellectual environment where there is a lot of energy."

Duane Morris is a 100-year-old organization with more than 550 attorneys and 20 offices nationwide. It prides itself on, of all things, innovation and entrepreneurship, in an industry in which case law, precedent, high-profile clients and billable hours are the typical driving factors.

"We promote our entrepreneurialism, and it carries through our lawyers," says Bonovitz. "Lawyers join our firm because we do this."

But Duane Morris isn't innovative because it looks at the law in a different way than its competitors. Rather, Bonovitz and his staff look at the entire practice of lawyering through the eyes of their clients. They apply lessons learned to the launch of new businesses in industries that are in need of creative thinkers.

"We're probably the leading firm in the country in fostering ancillary businesses," Bonovitz says. "The strategy is to leverage our infrastructure and resources to generate another source of revenue from our knowledge base. That sort of entrepreneurialism filters down into the lawyer force."

Among the businesses Duane Morris has launched through a wholly-owned subsidiary are a malpractice insurance company, American Health Care Provider Services, and a money management firm, Westcott Financial Advisory Services. Both arose from needs that were not being served by others.

Smart Business hit the law books with Bonovitz to discuss how Duane Morris fosters entrepreneurship and innovation throughout its ranks.

 

As CEO, how do you nurture innovation?

 

We talk about what our philosophy is and how important it is to understand what being an owner is; what making money and losing money is, because that's what our clients do. We tell our lawyers to put themselves in the clients' position and act like them. We have a contingent fee program, and they (the lawyers) know we're risk-takers.

We look at things in terms of time value of money, and risk-adjust our proposals. We also have a very aggressive sales and marketing force. That reflects our innovation.

Our partners meet three times a year face-to-face, and we have programs that feed on this. They meet in practice groups and interdisciplinary practice groups, so they're meeting to discuss marketing and business generation. That's all entrepreneurial; they're not talking about the latest case.

When recruiting, we stress the innovative environment. We're very long-term-thinking and invest 10 percent of our income in our growth. That's money that would otherwise be income (to the attorneys). We expense about $7.5 million a year in our growth, and we invest about $2.5 million to $3 million in firm capital.

We're investors and we're builders, and when we're recruiting, that will resonate with a certain group of lawyers, so we get people who want to build an institution.

 

Does this innovative philosophy contribute to a collegial culture?

 

Yes. The other aspect of it is that when we bring lateral partner candidates in, we intensely spend time with them, so that not only do you see the objective tests - like the fact that we cross-sell into our clients with no territorial thinking -- but we also talk about our 'no jerks' rule. We want to get people in who are nice. We're not interested in jerks, no matter how much business they may bring in.

 

How do your firm's attorneys learn from their attorney/client relationships and translate that knowledge into new business opportunities and revenue streams?

 

Our businesses are run by professionals who are not lawyers and are stand-alone businesses. They're really walled off from the firm. One group practices law, the other engages in various business aspects.

Our health care lawyers recognized a need in Pennsylvania on the part of physicians who needed medical malpractice insurance. Companies were going out of business, so doctors were being left without insurance alternatives. And those that were left were outrageously priced and increasing.

So our health care group defined the need. Our insurance group devised the structure to satisfy that need, which was the formation of an insurance exchange -- an insurance company regulated by the Pennsylvania Department of Insurance, like any other insurance company, but the capital is provided by the physician insureds, who contribute 50 percent of their first year's premium to capital.

That provides the capital base to fund the insurance company. The insurance company is a virtual insurance company with no employees. Duane Morris, through two tiers of subsidiaries, owns the company that provides the services to the insurance company -- the claims administration, underwriting of risk, placing reinsurance, financial operations, staffing in terms of records. The service business is paid a percentage of the gross premium of the insurance company.

This is our second full year, and the insurance company will probably write about $20 million of insurance premiums and the management fee is a little over $4 million. We've replicated this in Florida and just filed in New Jersey. We have a very qualified, very senior staff who have equity in these businesses. Virtually all the profit will be gleaned with a very small investment on the part of the firm.

We also have a joint venture with a health care consultant that we're just forming that will enable the new company created to enter into very large and substantial contracts with hospital and health care systems throughout the country that will help them with innovative ideas to save money. The other partner is a 20-person health care consultant. We have 32 or 33 health care lawyers, who have the network and relationships.

 

How do the nonlegal service businesses operate in conjunction with Duane Morris?

 

Duane Morris is a law partnership, a Delaware LLP. It owns an LLC called Westcott Holdings LLC, 100 percent. Westcott Holdings LLC owns the various businesses that are stand-alone businesses that we've helped create. One is called American Health Care Provider Services, which is an LLC, which is our parent service provider, which owns New Jersey, Pennsylvania and Florida health care service providers. The executives in each of those service organizations own a percentage of them.

Westcott also owns Westcott Financial Advisory Services, about 55 or 60 percent. The executives own about 40 percent. It's a money management firm with between $800 million and $1 billion under management.

If you took our family of businesses, about 90 to 95 percent of the clients are nonlaw firm clients, so we don't really sell into our (law firm) client base.

 

What unique challenges do you face because of this philosophy?

 

A decade ago, we had about 200 lawyers and were a regional law firm that, on average, probably grew 2 percent to 5 percent a year. We had revenue of $60 million to $70 million. This year, we'll have about 575 lawyers, and our revenue will be in excess of $260 million. We're a national firm in 11 or 12 major markets.

The challenge 10 years ago was to do what you're doing and continue to do it well. If we did that, we'd be profitable. Today, the challenge is to manage our growth so that we can be a full-service provider of legal services throughout the country, getting quality lawyers in these various offices.

We've probably grown faster than any other law firm in the country that's grown other than by merger. We haven't had any mergers. It's all been by adding twos, threes and fives. One of the challenges is to manage current expectation of the partners, as well as build for the future.

 

The firm boasts more than 20 offices. How do you effectively communicate with your staff, and how do you present a clear, unified vision of the organization's goals and objectives?

 

With the Internet and e-mail, you really can almost do things seamlessly as far as providing a client with services from any office. We break into practice groups, so virtually every one of these offices has a member or more in a practice group. That practice group meets anywhere from weekly to monthly.

Our partners meet monthly. The partners meet three times a year at weekend retreats that are working meetings. It's been very successful.

 

Many law firms specialize in only a small handful of practice areas, but Duane Morris is very diverse. How does that position you in the marketplace.

 

Our strategy is to be a full-service firm and service the complex and specialized needs of a broad client base. The diversity gives you a certain cushion in a business that's very cyclical. Generally, in a law practice, if you have a conventional law practice, your corporate and real estate practices are very cyclical because when the economy is weak, those two practices are generally weak.

And in a weak economy, your litigation and bankruptcy practices thrive. There are some practices that are more neutral, in terms of being affected by the economy. One of the advantages of diversity is that you're buffeted against the cyclicality that exists in the economy.

We also adjust our expectation levels for the practice groups based on the cycles almost on a quarterly basis. Right now, bankruptcy is slowing down and the corporate practice is picking up.

 

What criteria do you use when determining where to open new offices?

 

We say, 'What are the major markets, and what are the markets that will help the international practice? What is the greatest opportunity for synergy among markets?' We measure the flow of business between offices, and overall, more than 20 percent of our revenue is interoffice.

Out of $260 million, more than $50 million of revenue is obtained because we have a particular office. We don't care if an office is an importer or exporter, we just want to see the interrelationship and synergies of that office as it relates to other offices.

 

How do you measure their success?

 

We expect our offices to be cash flow positive once they get past their start-ups. That means you take our cash revenue, minus our projected cash partner compensation and all expenses, including overhead, and we expect the revenue to exceed compensation plus overhead.

We disregard the first four months and expect them to be cash flow positive after that. How to reach: Duane Morris, (215) 979-1000 or www.duanemorris.com

Monday, 27 September 2004 10:21

Ups and downs

UPS to the Greater Cleveland Partnership. Its new "Cleveland on the Edge" strategic plan calls for ways to relieve the city's growing tax burden, something that's put the community at a competitive disadvantage. Other goals of the plan call for increased support of innovation and entrepreneurship, expanding job creation efforts, stronger business attraction and retention efforts and better educational reforms. This is a strong way to position the new entity as a driver of change.

(Downs) to the city of Lorain. The looming loss of 230 manufacturing jobs from the Marconi Communications complex as a result of Marconi's sale to Emerson Electric is a major blow to the city's already beleaguered manufacturing base.

(Ups) to CareerBoard LLC. Its acquisition of Columbus-based JobBoards.com not only increases CareerBoard's annual revenue by 35 percent but also expands the company's reach and continues its nationwide expansion. In an industry filled with consolidation, it's encouraging to see a Northeast Ohio firm on the acquiring side.

Monday, 27 September 2004 10:13

Dial F for fraud

In the Alfred Hitchcock classic "Dial M for Murder," a former tennis pro contracts an old schoolmate to kill his wife. He pays the crook in cash with money methodically socked away by withdrawing just a touch more than normal over the course of a year.

The plot fails, and the husband gets caught. Among the clues that help tip off the crime is the husband's bank ledger, which reveals the slight -- but not red flag-worthy -- increase in money withdrawn over time. If the investigators had not been looking for any unusual financial activity, they would never have noticed the small increased amounts.

While your employees probably aren't plotting murder, they could be robbing your business through carefully plotted fraud, a little at a time, says Andrew T. Clark, senior manager at Meaden & Moore.

Left unchecked, he says, fraud can easily cost your business thousands of dollars a month.

"The No. 1 cause of fraud is the trust factor," says Clark, a forensic accountant and certified fraud examiner. "In privately-held companies, you're dealing with a small accounting department, or even just one person, handling most of the accounting functions. They may have incompatible duties, such as custody of assets, authorizing certain transactions and also record-keeping functions.

"Ownership thinks that person would never steal, and thus physical controls are overlooked. Those three duties are extremely incompatible and equal fraud risk."

Problems occur when a fraudster has access not only to money that can be stolen but also the ability to cover his or her tracks by altering books and records and burying the money as a legitimate company expense.

"When I'm called in to investigate fraud matters, where there's smoke, there's usually fire," he says. "I always look at, among other things, expense reimbursements. Typically, there will be misstatements, overstatements and wholly fictitious expenses in addition to other fraud committed by the same employee."

Clark says there are many schemes employees use to defraud their businesses. They include:

* Fraudulent dispersements. This may be simply taking money and accounting for it elsewhere in the books, hiding the crime.

* Billing schemes. One of the most popular schemes, says Clark, is creating fictitious vendors. Fraudsters write checks to themselves or fake vendors, then convert that check for their personal benefit.

* Payroll schemes. Fraudsters have been known to create a ghost employee or, in the case of overly ambitious criminals, multiple ghost employees, and establish separate bank accounts that the fraudster controls and has the paychecks deposited into.

However, Clark warns, employees who commit fraud, in any of its forms, aren't your typical criminals.

"Most fraudsters are first-time offenders," he says. "But they become accustomed to the supplemental income they've established for themselves and rationalized the act of fraud, meaning they might believe they're entitled to the money."

And, if the fraudster has the ability to alter the books, he or she may be able to continue the fraud for a long time before anyone notices.

So how do you know when your company is the victim of fraud, short of suddenly finding out you've run out of cash? Clark offers these warning signs.

"If you identify an employee who has a brand new car in the parking lot, is taking extravagant vacations or is living a suddenly elevated lifestyle without any solid reason, those are obvious signs," he says. "And when it comes to identifying the fraud on the books or records, review expense accounts, accounts receivable and your accounts payable."

The most important thing you can do, he says, is to keep your eyes open and recognize that fraud can happen to any business. Even yours. How to reach: Meaden & Moore, (216) 241-3272 or www.meadenmoore.com

Protecting against fraud

Don't look now, but your company is being robbed. And it's not by crooks clad in hooded masks, forcing themselves upon your coffers with guns. It's by your own employees, who are quietly -- and effectively -- stealing from your business.

Fraud, says Andrew T. Clark, a senior manager and forensic accountant at Meaden & Moore, can cost your company thousands of dollars each month. So what can you do to prevent, or at least deter, employees from turning into fraudsters? Clark offers a few simple preventive tips.

* Tighten internal financial controls. Review the books regularly, looking for anything out of the ordinary, such as irregular expenses paid to new vendors or patterns of exceptionally high employee expense reports.

* Segregate duties. In many middle-market companies, accounting duties are handled by a few individuals, sometimes only by one. By segregating the duties of asset custody, transaction authorization and record keeping, you will decrease the opportunities for fraudulent activity and the ability of fraudsters to cover their tracks.

* Increase companywide perception of fraud. Make your managers and staff aware that you're trying to prevent fraud. Clark says this doesn't mean you'll need to install security cameras around your offices, but consider setting up an anonymous fraud hotline, voice mailbox or e-mail address where employees can pass along tips when they suspect fraud.

"Most fraud is identified by someone providing an tip to suspicious employee activity," Clark says.

Tuesday, 31 August 2004 06:20

Ups and downs

Ups to Voss Aerospace, a division of Voss Industries. Voss recently inked a six-year deal with Lockheed Martin to supply sheet metal and machined couplings and flanges for F-16 and F/A-22 fighter jets, along with the C-130J transport aircraft. The deal is a coup for Voss, which has worked with Lockheed Martin in smaller capacities for 17 years but never realized a contract of this magnitude.

Downs to the city of Cleveland. Director of Strategic Planning and former Chief Development Officer Tim Mueller's exit underscores the troubles Mayor Jane Campbell's administration continues to have when dealing with the local business community.

Ups to Anthem Blue Cross and Blue Shield of Ohio. Six Ohio schools are among the 18 in the Midwest that will receive a total of $5,000 in grants from the health care insurer to promote heart healthy habits among students. To determine the schools, Anthem worked with the Ohio Association of School Nurses to solicit grant application from school nurses.

Wednesday, 21 July 2004 10:58

Ups and downs

(Ups) to Cambridge Home Health Care. The Akron-based company, which started providing home health care services in 1994 with two offices, recently opened its 20th Ohio office in Sandusky. CEO and founder Nancy Diller-Shively has found a savvy way to fill the nursing shortage void other organizations continue to face.

(Ups) to Hawk Corp. The friction products manufacturer, which earlier this year told Smart Business it planned to expand its brand through retail stores, last month inked a deal with Pep Boys auto parts and repair chain to launch a national rollout of the complete line of Hawk Performance street brake pads.

(Ups) to Diebold. The North Canton manufacturer, which was criticized for selling electronic voting machines while Chairman & CEO Walden O'Dell raised money for Republican political candidates, has banned its senior executives from making future donations. In June, the company's board of directors passed an amendment to its business ethics policy stating that top Diebold officials "may not make contributions to, directly or indirectly, any political candidate, party, election issue or cause, or participate in any political activities, except for voting."

Tuesday, 22 June 2004 13:16

Matchmaker

Competition in the auto industry is fierce, and getting the Big Three automakers to sit down at the same table and play nice isn't easy.

So it's that much more impressive that Chuck Rotuno, president and CEO of OEConnection, was able to bring together General Motors, Ford Motor Co. and DaimlerChrysler to form a joint venture that provides auto dealerships and their wholesale parts customers with business-to-business Internet-based logistics and parts procurement products and services.

Rotuno's vision arrived in 1999, when he took a job at ProQuest, an information technology company that owns and operates a substantial automotive division that commands $100 million in annual revenue, more than 500 employees and a customer base of more than 30,000 franchise car dealerships. Rotuno envisioned multiple Internet-based solutions that could improve efficiencies within the highly labor-intensive original equipment replacement parts industry.

He served as the primary catalyst, leading the team in negotiations with the Big Three automakers to launch a joint venture with ProQuest in 2000.

Today, as president and CEO of OEConnection, Rotuno's vision has become reality. The Richfield-based firm's signature product, D2Dlink, has revolutionized the workflow and infrastructure of dealership parts departments by connecting trading partners for the timely location and purchase of OE replacement parts.

And, its CollisionLink product has transformed how collision repair shops validate and purchase replacement parts by providing faster and more accurate information about purchases.

Rotuno says the next issue OEConnection plans to tackle is data mining and reporting. Later this year, the company will launch a product aimed at plugging dealerships' profit leaks that come from not having solid information about sales and inventory at their fingertips. How to reach: OEConnection, (888) 776-5762 or www.OEConnection.com