With more corporate transparency, careers based on horizontal movement and the tendency of people to use e-mail, cell phones, conference calls, instant messaging and videoconferencing to communicate, relationships are getting lost. Not only does that make it more challenging for vendors to earn business based on quality solutions rather than price point, but it may also negatively affect the ultimate product or service delivered to the buyer. A vendor who knows a buyer’s needs as the result of a strong working relationship is in a much better position to deliver a superior solution.
“The greatest successes of my career can be attributed to relationships, as a vendor but also as a client,” says Fred Liesveld, executive vice president and managing director of Grubb & Ellis Company’s Detroit office.
Smart Business talked to Liesveld about the risks in today’s business climate and how solid interpersonal relationships can benefit not just vendors but also buyers.
Why is it crucial for buyers not just vendors to seek quality relationships?
My experience suggests that quality, price and problem-solving ability are based on depth of knowledge. The better vendors know their customers, the better they can be of service.
It’s easy to do business without taking the opportunities afforded by a good relationship, but having such a relationship puts both parties in preeminent positions to provide mutual services, satisfy each other’s needs and help solve problems.
Having a good working relationship also changes your mentality. A vendor in a good working relationship is contributing to something bigger than itself and that is satisfying.
The other side of that coin is when things get tough. Both professionally and personally, when I was in need of help in the past, it was always a relationship that came to the rescue. We have seen many companies over the years encounter difficult times, and the ones with good supplier relationships could rely on those suppliers for help, while those companies that made decisions purely on price point lacked suppliers with the knowledge and desire to make a difference in the companies’ recovery.
What are some common obstacles to rekindling ‘the lost art’?
Especially over the last 10 years, people have increasingly used impersonal technology to communicate, and relationship-building between sellers and buyers is becoming more of a challenge. In a global economy, the distance between buyer and supplier might be sizable 4,000 miles and technological advances make it extremely easy to communicate exclusively through e-mail or telephone. We see sterile RFPs and online bid competitions all seeking the lowest cost. As a result, a close relationship between buyers and sellers has become incredibly challenged.
Some companies work to promote a better purchasing arena by enforcing purchasing strategies that inhibit relationship-building. The intentions are good: to make purchasing decisions based on pricing rather than ‘relationships’ and eliminate any appearance of impropriety.
However, that mentality does not allow service providers a chance to learn the inner mechanics of a company and figure out how an innovation might provide a shortcut or a cheaper way to get something done. Nonconference room events are where a vendor gains information that is not normally communicated in a request for proposal. By withholding the opportunity to build a relationship, buyers often prevent conscientious suppliers from gaining the knowledge it takes to offer bona fide solutions.
Do situations arise where customers don’t really want a deeper relationship?
Both parties must be cognizant of the fact that relationships are built on trust, and that is a rare commodity in the business world. You just cannot expect someone to give you a commodity like that overnight. It takes time to earn it, and only the person who doles out that trust can decide when it gets doled out.
If a buyer employs a purchasing strategy that causes him or her to avoid deeper relationships, I would call upon the buyer to examine that policy and decide whether or not it is getting the best results.
How does re-establishing ‘the lost art’ relate to the ‘lifetime value’ of customers?
Gone are the days when a person makes a career decision to join a company in his or her 20s and retires from that same company at the age of 62.
Now that we experience so many job changes in a career, getting to know a vendor on a personal level will not only facilitate the supplier providing good service, but it will also provide potential when you move on to another company. You already have someone who understands your wants and needs and who can hit the ground running with you at your new company, providing the best results possible from day one.
FRED LIESVELD is executive vice president and managing director of Grubb & Ellis Company’s Detroit office. Reach him at (248) 357-6590 or firstname.lastname@example.org.
If you are an investor looking for a great piece of property or if you’re a corporate officer looking for land on which to build a new facility, a qualified land professional can be a source of valued expertise and assistance.
According to the Realtors Land Institute, land buyers and investors generally need more than a licensed real estate agent. Specifically, they would need a land professional.
Jim Riggert, a Senior Vice President in Grubb & Ellis Company’s Dallas office, says that specialized experts understand the intricacies of land transactions and can provide the kind of guidance to achieve investment satisfaction.
“In Dallas, many investors bought land in the path of growth along the Dallas North Tollway (DNT),” he says. “That’s a story that everybody in Dallas real estate knows and understands.”
Some of the services a land professional can provide include locating your ideal property, providing expertise and recommendations, exploring investment opportunities and options, and achieving maximum return on investment.
Smart Business talked to Riggert about these services and more.
How would a land professional structure a deal for a business that needs to sell investment properties?
Land developers often ask a land professional to list some of their properties for sale. Many single family land developers have a lot of inventory right now and need to ‘rearrange their balance sheet’ and sell some land. These developers could be a big public company or a local land developer. They’re the people that a successful land professional will have established a personal relationship with. Some of my clients have builders that have cancelled their lot contracts on several subdivisions. Some would now like to sell land and get it off their balance sheets.
On the other hand, land professionals also have relationships with land investors and land funds that are eager to purchase land at a discount. I am currently working with several well-capitalized land funds that I am showing investment opportunities to throughout Texas. They are able to perform very short due diligence and close quickly as the opportunities come available.
How would a land professional assist a company that needs to expand or relocate to the Dallas area?
Dallas is still a vibrant economy. The company looking to expand its business needs someone who knows where the best fit locations are. When that company calls, the land professional would then initiate a conversation with their real estate community and/or members of the local and regional economic development commissions. Some factors in choosing the right land sites are proximity to the company’s employee base, traffic volumes and good access to airports. Other factors are proximity to retail and educational facilities in the area.
Another function of a land professional is identifying a specific site with enough acreage for a new corporate headquarters or manufacturing plant. For example, Kit Corbin in our San Antonio office got a call from the local economic development entity to locate more than 1,200 acres for the new Toyota Tundra plant. It ended up being a 2,000 acre assemblage with tax incentives from the state and local municipalities.
Where is the growth in northern Texas, and why would you recommend investing in it?
An investor needs to target areas that have strong historical growth. And Dallas’ population and job totals are still growing. For instance, when LBJ Freeway was being built, adjacent land near the future DNT cost $1.05 per square foot. In 2006, a property in the same area sold for $38.50 per square foot. It’s no secret that Dallas growth follows the Dallas North Tollway, which is the ‘straw that stirs the drink’ in North Texas. Plans have already been made for a northern extension of the Dallas North Tollway from U.S. Highway 380, where it currently ends. There are plans for a regional mall at this intersection and property has traded for $11 per square foot in 2007.
The two-lane northbound service road to FM 428 is complete. This is Phase 4A for the North Texas Turnpike Authority (NTTA). Phase 4B plans to extend the DNT north along the Collin/Denton County line into and through Grayson County Phase 5. Property at the intersection of FM 428 and the service road have traded at $2.25 per square foot. One of my clients has a 744 acre property just to the west on the Collin/Denton County line and another 1,027 acre property in Denton County that the Outer Loop will eventually bisect.
If an investor wants to identify land sites that will eventually be sold for single family homes, offices or retail, the best opportunities are those that fall in the path of the future DNT.
JIM RIGGERT is Senior Vice President at Grubb & Ellis Company. Reach him at (972) 450-3265 or email@example.com.
How many corporate dollars have flown out the window during the past five or 10 years because of ill-advised real estate decisions? Don’t know? A trusted real estate adviser can correct mistakes and lock that window tight.
“Within an overall corporate budget, the real estate component is a very large cost factor,” says Mark Talley, vice president of Grubb & Ellis Company’s Office Group. “Corporate executives often don’t realize the impact that real estate decisions can make on the bottom line. A lot of the benefits come down to your adviser’s credibility, reliability, accuracy and dedication.”
Smart Business talked to Talley about how to find a trusted real estate adviser and what traits he or she should possess, ultimately saving you time and money.
How might a corporate executive approach finding the right trusted adviser?
The most common way is to ask your peers for referrals. You want to find someone who cares. Since we are talking about the advice business, you have to establish a relationship built on trust.
Why should companies have an ongoing relationship with a trusted real estate professional?
An executive may not be trained in real estate. If the adviser has the ability to pick up the nuances of your business, you’ve found someone who takes away the worries of dealing with real estate issues.
In-house corporate specialists can certainly be capable, and working hand-in-hand with an outside real estate adviser completes the package in terms of experience, specialty market knowledge and core competencies. Trusted real estate advisers may also have access to resources like research, benchmarking trends, specialized advice and national support.
What qualities should a trusted real estate adviser possess?
He or she must have the ability to engage. Professionals and business leaders have a finite amount of time, so a good adviser must demonstrate through past performance and referrals the right to even sit in the executive’s office. Moreover, the adviser has to possess some accountability and a level of trust with you. That includes:
- the ability to listen and then frame the issue;
- the ability to envision the goal; and
- a level of commitment to really attack your problems.
The adviser also must treat the client’s information with the utmost confidentiality. For instance, if I’m doing a land search and the seller finds out the identity of the potential buyer, the price can go up. Maintaining that high level of trust allows you to rightfully assume that certain proprietary information won’t be used against you.
If real estate decisions and changes don’t come around very often, why establish an ongoing relationship?
No one can tell the future. Things change over time. A company that may have 20,000 employees today might shrink to 10,000 employees, or it could boom and outgrow its facilities before the end of the lease term. So real estate is really an ongoing consideration. The adviser is someone who can identify industry trends and project what your needs may be, so that when tomorrow rolls around, you’re not in a reactionary mode.
For example, early in my career, one client was seeking a $100,000 property. In the years since, that client has been able to realize more than $11 million in savings and eliminate a loss by repositioning some of its real estate and filling in a budget gap of more than $30 million. That wouldn’t have been possible without having someone who was easy to share ideas and information with, who can do it without wasting time or words.
What can you expect from a trusted adviser?
You can have the confidence that you will receive accurate, unfiltered and honest information. Many of your needs will be anticipated, and opportunities will be presented to you first. A trusted adviser takes the time to understand your business, knows your strategy moving forward and shares your goals. The trust obtained through a genuine relationship frees you to focus on your core business and be confident that your adviser is doing what is best for your organization.
The amount of contact between you and your adviser may vary. Generally, the adviser should be calling or visiting you at least bimonthly, if for no other reason than letting you know that he or she is dedicated to your success in the long term. You can also expect your adviser to provide status reports for projects at a frequency that is useful to you.
MARK TALLEY is vice president of the Office Group in Grubb Ellis & Company’s Detroit office. Reach him at (313) 350-5820 or firstname.lastname@example.org.
The decision to change your corporate office space involves far more than making a telephone call to a moving company. Companies may select an internal resource to manage this change, and while that individual may be an expert in his or her particular field, chances are he or she has no experience in corporate real estate. While choosing to handle the job internally may seem more cost-effective on the surface than outsourcing to a project management team, the employee tasked with this responsibility costs the company more than it saves, more often than not.
“When you think about it, you’re attempting to save the cost of the project management fee, but you’re losing out on the additional savings a professional project manager can bring to your project,” says Mark Kowal of Grubb & Ellis Company. “Furthermore, project managers anticipate your needs and can head off costly decisions upfront, particularly when they work with your commercial real estate salesperson.”
Smart Business talked to Kowal about some of the cost-saving measures a company can employ to ensure a smooth transition.
How should a company approach the relocation process?
The best relocations are the ones that fully integrate the client, project resources and the project manager and have a solid communication process. Every project requires the coordination of resources. The better the communication and the more integrated the approach, the less opportunities there are for the project to get derailed due to conflicts in timing or logistics, such as two vendors needing to be in the same area at the same time or not installing electrical outlets needed to support the technology, for example.
How does the process play out?
The first consideration is your programming requirements. Determine what works in your existing space and what should change in your new space. Are you deleting or adding departments, products or services?
At that point, you can engage an architect to give you a more detailed version of your required programming, including how departments align, what can be shared and what needs to be separated.
For even the smallest projects, you’ll need space for copiers and office supplies. You’ll need signage to make the move easier for employees. For bigger jobs, you may need to add a cafeteria, food services or even an auditorium. As you determine what will be included in your space, you can call on specialty services to supplement your core team.
You can also involve a construction manager in the design process to comment on constructability. The more information you have upfront, the more you will save time and money.
How closely must contracted services be monitored, and in what manner?
Typically, there is constant communication with the team, including daily e-mails, weekly meetings and site visits. Different players participate in the meetings as necessary throughout the course of the project. For instance, you wouldn’t necessarily want to involve furniture suppliers as you’re putting up steel, but at some point, they will have to visit the site.
A project manager will involve a client representative as the project progresses. It’s important for that selected representative to see what’s going on and relay that to employees who might not be involved in the process.
Depending on the size of the project, the project manager may be located at the site and interact with the contractors on a daily basis.
How can a competent project manager save money?
A good project manager always has cost avoidance in mind. It’s a huge financial benefit to include the project manager in the site or building selection process. He or she can work with the real estate broker to analyze what site factors like layout or access to elevators or docks may cause higher construction costs. Even reviewing what the landlord is providing (and not providing) could save the end-user hundreds of thousands of dollars. As the project progresses, the project manager provides value engineering to avoid getting away from the budget numbers.
Furthermore, determining what materials may require a long lead time to acquire and having them ordered early can minimize expediting costs. Lastly, a good project manager is able to provide an experienced global support system that has the capability to pull in other experts from various areas when necessary.
What determines the success or failure of a typical relocation?
My view of a successful project is when employees can walk into the new facility for the first time, get a cup of coffee and find their way to the conference room for an early meeting. When the meeting is over, they can find their new office or cubicle with a working computer, ready Internet access and working telephones.
MARK KOWAL is senior project manager in Grubb & Ellis Company’s Detroit office. Reach him at (248) 357-6567 or email@example.com.
A new survey indicates a wider demand by property investors and tenants for buildings that have earned either Leadership in Energy and Environmental Design (LEED) certification or the Energy Star certification.
According to a CoStar Group study, LEED buildings command higher rent premiums per square foot over their non-LEED peers and have higher occupancy. Rental rates in Energy Star buildings represent a smaller premium per square foot over comparable non-Energy Star buildings and also have higher occupancy. Energy Star buildings and LEED buildings are each selling more per square foot versus those that are not.
“Most major property management companies are really trying to get a handle on green construction and green development,” says Jim Dyer, Vice President of project and construction management for Grubb & Ellis Company’s Corporate Service Group. “But it’s a moving target; there is not a defined set of green policies that everyone’s trying to follow.”
Smart Business talked to Dyer about what factors play a role in a company’s eco-friendly real estate policies.
How is the environmental movement making an impact on commercial real estate?
In today’s commercial real estate market, you must be prepared to market your product or services as being green. Like it or not, clients are now demanding it, and the government is starting to require it. The rapid growth of green initiatives within the real estate sector has caught many owners and property managers by surprise, most finding there is no ‘one-size-fits-all’ approach to moving green.
To meet a rapidly growing demand for environmentally friendly options, many owner/developers now include such green practices as recycling or the use of lower VOC (volatile organic compounds) building materials. Unfortunately, many of these options provide little, if any, ROI for the owner/developer. Conversely, the owner/ developer’s approach to green initiatives typically seeks out those concepts such as relamping to high-efficiency lights or upgrading HVAC equipment, which, while being ‘green,’ can also generate an acceptable ROI.
While there are many differing opinions as to which green initiative is more beneficial, the industry’s use of LEED certification and Energy Star certification has become an invaluable performance benchmark. These certifications allow developers/owners a means to market their product as being environmentally friendly. It also provides another measuring bar for investors and tenants trying to evaluate competing buildings.
How is local government involved in setting ecological standards that apply to real estate?
Recently, Dallas implemented a new program establishing practical incentives, such as expedited plan-check for those buildings and projects that make a demonstrated commitment toward meeting many of the same standards found in the LEED program.
In 2009, the city will also mandate that all projects reflect a 15 percent reduction in energy consumption as compared to the 2006 Energy Code and a 20 percent reduction in water consumption compared to the 1992 EPA standards. While it will lower the operating costs for the property, it will lessen the growing demand on the city’s utility infrastructure and financial resources.
How do finances, return on investment and spending threshold impact corporate planning for eco-friendly buildings?
All other factors being equal, using green building materials for interior finish construction typically can add 10 to 20 percent to project costs. While most construction budgets or operating decisions typically boil down to an ROI, those companies considering green options tend to be more subjective than simple ROI analysis. They tend to look at the available green options in a manner that does not easily translate into ROI numbers. Decisions factors could include: employing green initiatives as a means for retaining younger employees (generally considered more environmentally conscious), promoting a better image within the community or region, or even just being associated with participating in leading-edge green technology.
How does a real estate adviser or corporate real estate specialist manage green projects and construction?
Within commercial real estate, going green while still in its infancy has already demonstrated its ability to impact building operations and valuation. An afterthought only several years ago, it’s no longer uncommon for projects or properties to be positioned or viewed in terms of green value.
The challenges for project managers or transaction professionals involving acquisition, development and/or construction will be the same as they have always been, but they must now be able to understand and convey to the client the practical implications of green initiatives, policies and codes, and their potential impact on current and future value of investments.
JIM DYER is Vice President of project and construction management for Grubb & Ellis Company’s Corporate Service Group. Reach him at (972) 450-3218 or firstname.lastname@example.org.
As an employer, you may not be aware of how the Family and Medical Leave Act (FMLA) affects bonus pay.
According to a 2006 court case, you may prorate (reduce) a production bonus but not an “absence-of-occurrence” bonus for employees who are absent on leave under the FMLA.
“You may not reduce an absence-of-occur-rence bonus if the employee would have qualified for the bonus had he or she not taken FMLA leave,” says Craig Snethen, a senior associate of Jackson Lewis LLP. “However, you may prorate a production bonus by the amount of lost production hours or other quantifiable measure of productivity caused by the FMLA leave.”
Smart Business spoke with Snethen about how the courts interpret FMLA-related bonus conflicts.
What bonus programs are affected by FMLA?
The Department of Labor interprets the FMLA relative to two varieties of bonus programs: an ‘absence-of-occurrence bonus,’ like a bonus for perfect attendance, and a ‘production bonus,’ like a bonus based on hours worked, number of items manufactured or some other productivity measurement. Generally, a production bonus requires some positive effort on the employee’s part at the workplace, while an absence-of-occur-rence bonus merely rewards an employee for compliance with the rules.
What precedents have the courts set?
In Sommer v. Vanguard Group, the U.S. 3rd Circuit Court of Appeals ruled that an employer did not violate the FMLA when it reduced a former employee’s annual bonus payment based on the employee’s eight-week FMLA leave. The employer’s bonus program defined ‘hours worked’ as the actual hours for which an employee is paid or entitled to be paid for performing duties or for vacation, holidays or sick time. However, the policy explicitly excluded unpaid leaves of absence under disability programs from the definition of ‘hours worked.’ Similarly, the employer had a practice of prorating the bonus based on absences due to workers’ compensation and personal leave. The court observed that the FMLA regulations do not require the equal treatment of employees who take unpaid forms of FMLA leave and those who take paid leave. Doing so would be incompatible with FMLA regulations, it ruled, because it would entitle employees to accrue rights or benefits that would not have been available had their leaves not been designated as FMLA leaves. Therefore, because the employer’s policy explicitly excluded FMLA leave and other forms of unpaid non-FMLA leave from the definition of ‘hours worked,’ the employer’s proration of the productivity bonus based on the employee’s unpaid FMLA leave was proper.
Why should bonus programs be in writing?
If you have an unwritten bonus program, the Sommer decision underscores the importance of putting it in writing in order to maximize the likelihood that it will be interpreted consistent with your intent. Further, a written policy covering various types of unpaid non-FMLA leave will constitute evidence that you do not discriminate against employees who take FMLA leave and/or discourage employees from availing themselves of rights under the FMLA. In drafting written bonus programs, you should clearly establish your goals in simple, easy-to-understand terms. Defining an employee incentive as a production or absence-of-occurrence bonus can determine your right to prorate a bonus based on an employee’s absence. To that end, you should be conscious of this critical distinction when formulating a written bonus program. We also encourage you to review any existing bonus programs to maximize the likelihood that such programs be construed as production bonuses. Because the plaintiff in the Sommer case attempted to bring the claim as a class action, the importance of carefully preparing and reviewing written bonus programs to maximize your right to lawfully prorate employee bonuses under the FMLA cannot be overstated.
What are the primary dangers inherent when an employer doesn’t put a complete and specific bonus program in writing?
One danger is that the bonus program can be interpreted in a manner inconsistent with your intent, therefore, you may be deprived of an opportunity to prorate a bonus based on an employee’s absence under the FMLA. Another danger is that you are deprived of the opportunity to present it as evidence in an FMLA discrimination/interference action.
Should there be a separate written communication to employees about bonus programs?
You should be able to demonstrate that employees have access to, or are otherwise aware of, the program’s terms. The mechanics of the manner in which this is accomplished is up to you. In a perfect world, each employee would sign an acknowledgement that he or she received a copy of the program. However, as a practical matter, this often may not be feasible. At a minimum, written bonus programs should be circulated to employees in the most efficient manner possible. If you provide annual employee handbook updates, these programs may be included in the updated handbook. You may also circulate the written program to employees via electronic means or at least let them know of the written program and direct them to a central site.
CRAIG SNETHEN is a senior associate of Jackson Lewis LLP. Reach him at (412) 232-0196 or email@example.com.
Having a hard time collecting money from one of your customers? Don’t want to subject yourself to a long, complicated and sometimes expensive lawsuit?
Depending on the situation, you may have an interesting, little-known option: Force your customer into involuntary bankruptcy and collect when the assets of your customer are liquidated.
“This is a very aggressive maneuver and an alternative to the garden-variety breach-of-contract collection action,” says Leonard M. Shulman, managing partner, Shulman Hodges & Bastian LLP. “Frankly, it is also less expensive. The legal fees involved in preparing and prosecuting an involuntary bankruptcy petition are a fraction of what a breach-of-contract action and post-judgment collection activity can cost.”
Smart Business talked to Shulman about using involuntary bankruptcy as a collection strategy.
How can an involuntary bankruptcy petition result in getting money that is owed to you?
An involuntary bankruptcy is placing a company or an individual into a potential Chapter 7 [bankruptcy]. The involuntary petition is filed by one creditor if the ‘alleged debtor’ has 12 or fewer total creditors or by three creditors if the debtor has more than 12 creditors.
In order to petition the court in such a manner, the money owed by the alleged debtor must not be disputed (subject to a bona fide dispute by the debtor), unliquidated (amount owed is unknown or subject to a future event) or contingent (much like a guaranteed debt that is not yet owed).
When the petition is filed, the company or individual in question becomes an ‘alleged debtor’ and has 30 days to respond by asserting either (1) that the involuntary petitioners are not true creditors or (2) that the alleged debtor is generally paying debts as they become due.
The alleged debtor does have one other strategic option: namely, agree that it should be in bankruptcy. Instead of a Chapter 7 liquidation, the alleged debtor can consent to an order for relief and elect to attempt a Chapter 11 reorganization. Chapter 11 of the U.S. Bankruptcy Code provides a breathing spell for the debtor, during which negotiations can take place to try to resolve creditor difficulties. The debtor can terminate burdensome contracts and leases, recover assets and rescale its operations in order to return to profitability and pay its debts over time.
Why should a company use the involuntary bankruptcy strategy?
It is an extremely powerful tool that is often overlooked because it is not well known.
Let’s say a company does not pay what is owed to you. Assuming you find out that it has more than 12 creditors, you have a choice. You can file a collection lawsuit in state court and try to collect upon that judgment, or you can locate two other creditors who have not been paid and the three of you could place your common debtor into involuntary bankruptcy. If the debtor does not have a defense, its assets will be liquidated and your debt may be paid, along with the debts of other creditors. Note that the debt will be paid to the extent that there are unencumbered assets with which to pay creditors.
However, this strategy does not come without risks. If your claim is subject to a real dispute by your debtor which ultimately shows the court that the involuntary petition was wrongful you can be assessed significant sanctions. So creditors have to be extremely certain that their claims and the claims of any other petitioners are valid not disputed, unliquidated or contingent.
How difficult might it be to locate other creditors?
The process of finding other creditors is easy in this day of the Internet. You could do an online credit search, a search through the Better Business Bureau or use a variety of other means, including the use of third-party services or investigators to locate other outstanding creditors.
What role do bankruptcy trustees play in the involuntary bankruptcy process?
If the alleged debtor does not have a defense to the involuntary bankruptcy petition and the alleged debtor does not voluntarily opt for a Chapter 11, then a trustee is appointed to liquidate all its assets. If value of the assets in liquidation is less than what is owed to all creditors, the creditors will share pro rata in whatever money the trustee generates when the trustee liquidates the assets. The trustee has other powers to recover assets transferred prior to bankruptcy, a discussion of which is beyond the scope of this interview.
How common is this strategy? Isn’t it fairly unusual?
It is becoming more acceptable as it is becoming more known. Creditors are getting very frustrated with the garden-variety breach-of-contract process, which includes waiting up to a year for a judgment, trying to collect on the judgment, and perhaps getting delayed or stonewalled by the debtor.
Involuntary bankruptcy is a very quick process. The alleged debtor has to respond to the petition filing within 30 days, and within 60 to 90 days, it can be adjudicated a debtor, ultimately to be liquidated by a court-appointed trustee.
LEONARD M. SHULMAN is a managing partner with Shulman Hodges & Bastian LLP. Reach him at firstname.lastname@example.org or (949) 340-3400.
Amachine run amok injures one of your employees. Dozens of newspaper and television reporters immediately descend on your company headquarters, looking for blood. What can you say or do that will minimize the impact of that unfortunate accident, while portraying your company as the compassionate company it is? Do words matter at a time like this? You bet they do and they should begin with a competent communications department.
“Crisis communications are important to most businesses,” says Greg Blase, director of academic programming at Kent State University. “If something happens a plant accident, an employee injured there’s a need for communication, right away.”
Most companies work hard to ensure that their integrity, credibility and reputation are protected. When a crisis strikes, they can issue statements, provide updates through the Internet, hold media briefings or even issue statements through webcasts. All require professional communicators who possess a strategic mindset along with accomplished writing and presentation skills.
Besides being adequately prepared to handle a crisis, strong communicators are more important now than ever in business, especially since current and future technologies demand strong communication skills.
Smart Business talked with Blase about the benefits of good communications.
Why are communications so vital to a company’s success?
With the high-paced technical life we lead, there will always be a strong need for communications. It is both a learned and an acquired skill. A large company needs to communicate with a variety of different contingencies customers, stockholders, donors, employees, local government and sometimes even state government. It communicates to those audiences through news releases, public relations, advertising, employee newsletters or videos, special events and more. Typically, the person who must communicate business ideals, strategies and goals will be more of a business professional. A savvy CEO will realize that his or her expertise is in running the company, building the business and seeking out new markets. But he or she must also realize that woven into that entire strategy is the need for good communications. A smart company will use its communications department to take information and craft each message to the particular market for which it’s intended. For instance, everybody talks about technology today, but even if you possess this wonderful new technology, you’ve still got to let people know about it. Because we see so many people in high positions who don’t know how to communicate well, I would counsel upper managers to rely on their communications department. Find the right people for it, staff it intelligently, and use those people as a management resource so that when anything occurs that requires communication, trained and educated professionals can respond appropriately.
What about communications that don’t involve a crisis?
The CEO of a company doesn’t need to be a master linguist, but he or she needs to convey the right message clearly so it’s not taken the wrong way and so that the audience understands not only the words but the intent. That’s where strong communication comes in. Companies that want to create an identity for themselves have to wave the flag when they develop a new product, get a new client or hire a new person. All of that information has to be assembled and disseminated through the right channels employees, customers, the media by a strong communications department.
Should corporate leaders take a communications course at a local college or university?
It really depends on the strengths and weaknesses of the individual leader. Executives weak at interpersonal communication and/or public speaking could most likely benefit from these types of courses. But the key is knowing your weaknesses. I suspect many leaders and managers don’t know they are weak in these areas or won’t admit it to themselves or anyone else. A lot of bright people are not good communicators.
Why the current emphasis on applied communications at regional college campuses?
Ohio is dealing with brain drain. Because universities are tax-supported, it behooves the state to try to keep its students in Ohio after they graduate. The thinking is that regional campus students are more place-bound, somewhat nontraditional and a little bit older. They attend a regional campus because they want to stay where they are. That, in part, is why many universities are expanding their curriculum to regional campuses. The governor has stated that he wants everybody in Ohio to be able to get a degree within 30 miles of his or her house. That’s a difficult promise. Having a four-year degree such as applied communications at a regional campus allows someone to study communications in more depth, closer to home. An applied communications graduate has basic skills in communication. The program offers courses in organizational communication, high-impact speaking, interpersonal communication, gender communication, writing and design, so it’s an all-encompassing package. It is not as in-depth as the advertising, journalism or public relations degree programs, but sometimes, companies need people with a broader education.
GREG BLASE is director of academic programming at Kent State University. Reach him at (330) 672-8290 or email@example.com.
If you have prepared your corporate tax return truthfully, notice of an IRS audit should not make you nervous. After all, IRS employees are only doing the job we pay them to do. In any event, it pays to be cooperative.
“Be prepared if the IRS shows up for an audit,” says A. Lavar Taylor, Of Counsel to Shulman Hodges & Bastian LLP. “Then, treat the agent or agents with respect.”
Smart Business talked to Taylor about IRS audits and the various types of IRS agents who may show up at your front door.
Where is the IRS currently concentrating its audit efforts?
The IRS wants to maximize its efforts, so agents are investigating more corporate and high-income taxpayers, foundations and 501(c)(3) charitable organizations a base that generates more dollars and has a bigger impact compliancewise.
There was a big change 10 years ago when a new law required the IRS to reorganize and follow new procedures, so audits pretty much stopped for a couple of years. Now, agents are used to the new procedures, which are seemingly kinder and more transparent. So the pendulum has now swung back in the other direction and more audits are being done.
How should I deal with the IRS in an audit?
Generally speaking, the IRS is becoming more difficult to deal with, mostly because a huge percentage of its experienced employees are retiring.
Still, you should always treat IRS agents as human beings. I have been involved in a number of cases where people put the IRS agents in a dark room and turn up the heat, and it does not work well at all. The agents like to be respected, even when they are taking actions that you may think are unnecessary.
Technically speaking, they are not supposed to ask for information that they already have or information that is difficult for you to access or information that is of marginal relevance. However, if you do not cooperate, they could decide to open up another year for audit or open up personal returns of corporate officers.
Agents have lots of power. If they went to court, they could theoretically obtain more access, so if you choose to take a hard line, do so only after carefully considering the consequences.
When should I get an attorney involved in an audit or a dispute with the IRS?
Being proactive will help avoid a lot of problems down the road. The prudent practice is to have somebody vet your tax return. An analysis needs to be undertaken well in advance to see if there are any problems.
If you are consulting a good attorney, you should talk about whether there is even a need for an attorney. Involving an attorney sometimes can be counterproductive. Sometimes, though, there are difficult issues and having an attorney involved is not a big deal.
An attorney experienced in tax disputes can spot issues, advise you on how any court actions may turn out and advise you of steps you can take during the course of the audit to minimize chances of losing disputes.
What IRS agents might pay me a visit?
Revenue agents conduct audits, revenue officers collect money, and special agents develop criminal cases.
A revenue agent is not supposed to show up unannounced. Except in extremely unusual circumstances, you will first get a letter from the IRS. In that situation, you cooperate if you have a high comfort level in your original tax return. I would never recommend a company handling an audit without using an accountant.
A collection officer almost always shows up unannounced. However, typically, first there will be billing notices. You will know there is a problem, so it will not be a complete surprise. Clearly, call an accountant or attorney with experience in handling those types of matters.
What should I do if an IRS special agent wants to talk to me?
No matter what he says or how he presents himself, the job of a special agent is to develop criminal cases. You do not want to talk to him.
The government is ramping up its criminal cases especially white-collar tax cases to hold up as examples. So when a special agent shows up, keep the fact that he is a criminal investigator foremost in your mind. Just smile and say, ‘Have a nice day. My attorney will be in touch with you.’
What if I am unhappy with the results of an audit?
Administrative and judicial appeals can be made through an accountant or an attorney. In my line of work, they are common. But from a business standpoint, most corporate executives like to get the audit resolved at the lowest level possible. If that cannot be done, ultimately, you can go to tax court or district court to challenge the liability.
A. LAVAR TAYLOR is Of Counsel to Shulman Hodges & Bastian LLP. Reach him at (949) 340-3400 or firstname.lastname@example.org.
Among estate planners, the word “intestate” is not taken kindly. Neither should it be taken kindly by high-net-worth individuals who keep putting off planning for the inevitable.
“You should plan for the future of your family now rather than later,” says Donald R. Kurtz, of counsel to Shulman Hodges & Bastian LLP. “Do it thoroughly and review it every one to three years.”
Smart Business talked to Kurtz about the tools available to secure your assets in your family’s best interest.
What are the essential elements of a coherent estate plan?
An estate planner will try to find out your objectives and goals. Some people are interested in making sure that assets go to their intended beneficiaries after their death; some are interested in establishing guardians for minor children; some are concerned about potential estate taxes; some are concerned about protecting assets from creditors.
Wills are a cornerstone. But if you simply have a will and you pass away, the family or heirs usually have to go through a probate court to secure your assets. In most states, a living trust can help you avoid the probate court if it has been properly funded. It can establish the distribution scheme of your assets upon your death; if you are injured or disabled, the trust along with limited powers of attorney can act much like a conservatorship to deal with your affairs.
Additionally, health care directives can designate someone to make decisions for you in the event that you are unable to make those decisions.
These kinds of documents comprise the basic foundation of an estate plan. Sometimes depending on the size of the estate and the needs there may be other direct tools, such as irrevocable trusts, limited liability companies and corporations.
If you do nothing, most states have intestate laws that let the state decide through probate which person or persons should get your assets by the state’s order of priority.
Of what significance is life insurance?
Life insurance is another estate-planning tool. If you have family responsibilities, it can fund the future financial care of family members or other dependents. If you have a large estate, life insurance also can create liquidity to pay estate taxes rather than having to use more tangible assets like real estate that might lose value if they’re liquidated quickly. When insurance exists, other vehicles, such as an irrevocable life insurance trust, can hold that insurance asset and yield additional tax benefits.
What are the most frequently overlooked items when developing an estate plan?
Obviously, people often put off estate planning. It is not the most pleasant subject in the world. They often plan to set up a trust, but it’s put on the back burner. They do not realize that good intentions and verbal wishes passed on to friends and family won’t accomplish what a well-drafted estate plan would. If something unexpected does happen, estate planners have to use what few remaining tools exist usually the intestate rules of the state that may not accomplish what the individual intended.
Even if you write a formal plan, additional factors can get overlooked. For instance, a trust situation requires the transfer of the assets into the trust. Financial accounts should be funded into the name of the trust, and real estate must be transferred into the names of the trustees. For planning purposes, the goal would be to get all of your assets transferred into the trust while you are alive, otherwise probate or other estate administration procedures may still be required.
Trusts are dynamic. Things get overlooked. Situations change. Children get older, trustees may have gotten too old to serve, and/or assets change. You may purchase a different home or have different business interests. So, as you bring more assets into the estate, you have to continually review whether they need to be transferred to the trust. For instance, you may refinance a property a year or two after establishing the trust. During that process, the real estate may have been taken out of the trust and then not put back in.
I prefer to review trusts every year, but even once every three to four years is better than just letting it sit. At a minimum, we recommend trusts should be reviewed every three years.
Can purchasing a will or trust divert enough money to reduce a large estate tax?
We’re not sure how changes in the federal tax laws in the next few years will affect estate taxes. The current law, enacted in 2001, allows for an exemption credit of $2 million in 2008, which will increase to $3.5 million in 2009. Then in 2010, the estate tax gets repealed for one year. In 2011, unless the federal government enacts a new law, the estate tax returns with a lower $1 million exemption credit.
No matter what federal estate tax laws are in affect at the time of a person’s death, tools exist that can reduce the tax bite for larger estates. Advance estate planning can eliminate or lessen estate tax by using trusts that take advantage of the then-current exemption credit and marital deductions.
DONALD R. KURTZ is of counsel to Shulman Hodges & Bastian LLP. Reach him at (949) 340-3400.