Jerry Roche

Sunday, 24 February 2008 19:00

Your rights in Chapter 11s

Just because one of your company’s customers files for Chapter 11 bankruptcy, you do not have to wave the white flag and totally surrender the debt.

“Creditors have rights,” says Richard A. Marshack, of counsel for Shulman Hodges & Bastian LLP and a bankruptcy trustee for the United States Bankruptcy Court, Central District of California, Santa Ana Division. “The squeaky wheel gets the grease.”

For the record, under the Bankruptcy Code, a Chapter 7 is complete liquidation of a business. A Chapter 11 is usually a reorganization.

“If you get a Chapter 11 notice, do not assume that you’re not going to get paid,” Marshack says. “With a modest expenditure of time, you can participate on the creditor’s committee and make sure that your company gets as much money back as possible.”

Smart Business spoke to Marshack about how a company can protect its interests in the event that one of its customers files for Chapter 11 business reorganization.

When an account debtor files for Chapter 11, what are your preliminary options?

Many times, the debtor will initially propose a business reorganization plan that borders on lunacy, and the creditors will approve the plan before exploring their legal options. Debtors may also defer to others because they have limited resources for court cases. Both approaches are unwise.

The debtor will lead you to believe it does not have money, but you must understand it would not be filing for reorganization if there were not something to protect.

So the first step is to evaluate how much you are owed. If it is a minimal amount, it is probably not worth your time getting involved. If you are owed a material amount to your business, then you can monitor what the debtor is doing and oppose it individually or you can become a member of the creditor’s committee.

What is a creditor’s committee?

A creditor’s committee is appointed to act as the voice of unsecured creditors in the bankruptcy case. It is generally made up of the debtor’s top five to seven creditors who have the power to help shape the business reorganization plan. In some cases, the committee can be expanded to more members by the bankruptcy court. Membership involves a minimal time commitment and very little, if any, financial commitment on the part of the creditor.

The committee is entitled to hire a law firm and, if necessary, an accounting firm at the debtor’s expense. It has the right to know almost everything about the debtor.

How can a creditor’s committee influence the outcome of a Chapter 11?

A committee has an enormous amount of power:

1) It can, through negotiations, force the debtor to put in new management to take over the reorganization. Presumably, new management would be a little more benevolent to the creditor base than old management.

2) It can request that the court appoint a bankruptcy trustee to take over the business.

3) It can request that the case be converted to Chapter 7 and have all assets liquidated.

4) If the committee’s accountants believe the assets are worth more than a proposed sale transaction will pay, then its lawyers can formally object in court to the sale of those assets. For instance, after filing, the debtor may want to sell to a certain buyer, but that transaction will only pay a fraction of what is owed to creditors. 5) Under certain scenarios, the committee has the power to propose its own plan that can result in the complete elimination of existing shares of stock and reissuance of new shares to the creditors.

Each of these remedies gives the committee leverage to improve the treatment of unsecured creditors.

How are the disputes resolved without litigating in bankruptcy court?

It is often a case of quid pro quo. If the debtor gives the creditor’s committee what it wants, the committee will agree and encourage creditors to vote for the debtor’s reorganization plan. If the debtor does not negotiate in good faith, then the committee can object to the plan, and the court may then choose to reject it. The judge ultimately decides whether the plan is fair or not. He or she can order the debtor to write a new business reorganization plan — which, financially, is good motivation for writing an agreeable plan the first time.

If a debtor files for Chapter 7 iquidation rather than Chapter 11, what legal options are available to creditors?

The key is for creditors to do some investigation by taking a deposition or talking to other vendors to try to find assets that may provide value to creditors. It is a common practice in a Chapter 7 for a debtor to try to hide assets from the bankruptcy court. If a debt is incurred as a result of fraudulent behavior on the part of an individual filing a Chapter 7, then the creditor can object. If the bankruptcy goes through, the debt will be excluded from the bankruptcy discharge. If such is the case, assets can be recovered, the debtor may have to pay creditors in full and the debtor may have to go to jail.

RICHARD A. MARSHACK is of counsel for Shulman Hodges & Bastian LLP and a bankruptcy trustee for the United States Bankruptcy Court, Central District of California, Santa Ana Division. Reach him at (949) 340-3400 or

Sunday, 24 February 2008 19:00

Lifelong learning

Obtaining a master of business administration (MBA) can be a long, arduous process. “The MBA is not an easy postgraduate degree to earn — but it’s worth every penny and every drop of sweat,” says Dr. Rick Schroath, dean of the Graduate School of Management at Kent State University.

“The pace of change in business — and society in general — is such that you cannot ignore continuing education, whether you’re an electrician, a chemical engineer or a business manager,” he says.

An MBA is a management degree that has applications across a broad set of expanding fields. Historically, it’s been deemed a corporate phenomenon, but it’s starting to make an impact in smaller professional businesses like architecture, law and medicine, which also need specialized knowledge to manage the business side of the organization.

“The challenge in earning an MBA is that someone used to doing quantitative analytical work will have to face the creative human interaction of marketing, HR management and leadership courses. Creative or people-oriented candidates will have to contend with the statistics, managerial economics, finance and analytical work.”

Smart Business spoke with Schroath about the advantages of an MBA and the time and commitment required.

Is having the MBA degree in hand a career door opener?

The prototypical part-time MBA student is on the verge of moving from a supervisory position to a management position. An MBA provides the management skills that are valued by upper management.

What are some of the courses needed to attain an MBA?

You begin with courses that, in part, provide self-assessment, like a leadership course. You then typically move into an analytical set of nuts-and-bolts courses, like managerial economics, statistics, finance and accounting.

In the intermediate phase, you move into international business, advanced finance and accounting, general management and human resources management. Culminating courses include strategy courses that are much more oriented toward large organizational overviews.

What kind of commitment is required of part-time MBA students?

As little as 10 to 15 years ago, the classic path to an MBA was to work for four or five years, exit the labor force, go to school for two years and look for another job. That’s just not realistic anymore. More people are choosing part-time MBA programs because they do not want to leave current employment but still need the job enhancements.

The joy of part-time study is that it’s very flexible. You can emulate a full-time MBA by going four nights a week and taking four courses. Typically, students elect to take one or two courses per term, which can take up to six years — the maximum time you have to complete the degree. Three or four years is typical of our students, depending on whether they go summers, skip a term, etc. At Kent State, there is a 3:1 ratio of part-time to full-time enrolled MBA students.

What kind of financial commitment is required by prospective students?

Financial commitment varies depending on the program. Elite private schools are very expensive. State schools are typically much less. Online degrees are an option now, too. But prospective students also should be concerned with quality. The Association to Advance Collegiate Schools of Business International (AACSB International) is the accrediting body that awards the highest level of accreditation to business schools.

Are online courses opening up new horizons for people seeking an MBA degree?

They certainly are. What I look for is ‘blended learning,’ partly in person, partly online. Certainly, there are many components that students can learn perfectly well online, especially if they’re computer-literate.

There are some courses, however, that really need that ‘high-touch’ component, like a human resources management course in interviewing skills or a quantitative analytical course where students need the coaching. Another function that cannot be delivered online is student-to-adviser and student-to-student social networking.

Is there a time when a person no longer has the capacity to earn an MBA?

Albert Schweitzer went to medical school later in life. Not everybody can do that, but if you’ve got the drive and motivation, you can do it anytime. Recently, we’ve been seeing a peculiar new phenomenon: baby boomers who retire, then go back to school for an MBA and start a second career — many times, starting their own businesses. So the term ‘lifelong learning’ has, indeed, become reality.

RICK SCHROATH is dean of the Graduate School of Management at Kent State University. Reach him at (330) 672-2282 or

Tuesday, 29 January 2008 19:00

No matter of chance

Choosing the wrong real estate agent/firm can result in mistakes that can cost your business tens of thousands of dollars, says R.M. Jack Jones III, Vice President and Director of Management Services for the Dallas office of Grubb & Ellis Company.

“Common errors that real estate consultants can make include not clarifying what you’re looking for, not understanding your position and what you’re trying to achieve, and coming back to you with bad information, especially at the outset of the relationship,” Jones says.

Smart Business talked to Jones about the process of nailing down a real estate consultant who will maximize your investment.

What are some of the services to look for?

Are you interested in expanding or contracting in existing space? Taking over a smaller or larger building or perhaps attracting investors to your building? Which real estate firms can actually help you do that, and which ones have the research departments and market information to put you in the best possible position?

Your cause can be better served if the firm you’ve chosen is broad-based throughout several real estate disciplines so that various personnel can intelligently discuss all sides of the real estate equation without necessarily being in conflict with one another.

The larger firms are pretty broad-spectrum, but some boutique firms specialize in one segment of real estate in a particular market. If the agent you choose is providing good service, he or she should not only reach out to colleagues, but possibly a boutique firm.

Once you’ve chosen the company, how do you select the right individual agent or consultant?

Look for somebody who can listen to you and educate you. Better firms can pair you with the right person to suit your particular business needs. The best position you can take is to interview or get to know more than one agent.

Before making your selection, you must look beyond the interpersonal factors. Look for a collaborator. The consultant must be able to reach out to specialized colleagues if a need exists to invest or explore other disciplines, and then be able to keep the communication lines open and the process running smoothly.

Don’t be reluctant to spend the appropriate time to make your choice. That decision is an investment, and it will save time and possibly tens of thousands of dollars down the road.

Ultimately, you should get to know your consultant, get along well, and trust him or her. It also helps to share the same business philosophies and understand common goals.

What does the agent or consultant need to know?

Your real estate decisions have a huge economic impact on your company, no matter what kind of move you’re contemplating. It’s the consultant’s job to solidify the relationship.

The most critical question that he or she needs you to answer is: What are you trying to achieve in making your real estate decisions? Are you simply renewing? Are you looking to expand or contract your business? What type of building are you looking for? What type of facility? Is a lease the best scenario, or should you consider owning a building?

The consultant is not looking for corporate secrets or proprietary business information. He or she should know how to get the needed information without looking into your mainline business decisions.

What about market-specific information and trends?

Having the correct market information is critical. In some respects, you may be receiving and reading conflicting information about the market right now. For instance, many reports say that the Dallas-Fort Worth Metroplex is booming and growing. But the real market trends may depend on factors like leasing absorption in a micromarket and whether the monetary values of buildings are trending up or down.

You have to understand that, yes, some of your hunches are probably true — but the real market might be the opposite of what you’re seeing or hearing in the news or any feeling you might have. Having somebody help you understand the market is invaluable.

Should a company owner or CEO seek a new agent or real estate company every time he or she needs to change locations?

Everyone aspires to long-term relationships. If the real estate firm has been looking out for your best interests, you will be enticed to use the agent over and over. If your company’s situation changes, you may want to start the interviewing process again — but if your consultant is doing the job, he or she wouldn’t lose out. <<

R.M. JACK JONES III, CPM, is Vice President and Director of Management Services for the Dallas office of Grubb & Ellis Company. Reach him at (972) 450-3274 or

Tuesday, 29 January 2008 19:00

A taxing job

On the eve of filing your 2007 federal income tax Form 1040, high-income earners should already be planning for tax year 2008. “Aligning with a qualified tax preparer is key, because so many of the rules pertaining to deductions and tax rates are changed or taken away from year to year,” says Andrea H. Sheets, CPA, a principal at Skoda Minotti. “For instance, the recently enacted Alternative Minimum Tax (AMT) patch will impact taxpayers with high unreimbursed business expenses and those who pay high state and local taxes.”

Smart Business spoke with Sheets about how changes in federal tax laws can impact you this year and down the road.

What legislation will affect tax payers this year?

The AMT was originally devised to make sure that a group of high-income taxpayers who benefitted too much from certain tax deductions pay their fair share of federal income tax. A growing number of middle income taxpayers have discovered over the past few years that they are also subject to AMT. Through a recently enacted ‘patch,’ Congress has exempted millions of additional taxpayers from being classified as ‘high-income taxpayers.’ However, this patch is only a one-year fix that will need to be addressed again for tax year 2008. A new mortgage relief/debt forgiveness act creates a retroactive new exception for certain discharges of home mortgage debt that was/is incurred between 2007 and 2009. It allows homeowners to exclude from gross income ‘up to $2 million of qualified principal-residence indebtedness used to acquire, construct or improve their personal residence.’

Additionally, the IRS liberalized the home sale gain exclusion for surviving spouses. Under the existing provision, a couple filing a joint return is allowed a tax-free gain upon selling their principal residence of up to $500,000. Individuals are allowed up to $250,000. An unmarried surviving spouse is not permitted to file a joint return after the year in which his or her spouse dies. Therefore, the larger gain exclusion was not available when an unmarried surviving spouse sold a principal residence in the years after the spouse's year of death.

The new Mortgage Relief Act allows an unmarried surviving spouse to take advantage of the $500,000 exclusion if the home sale occurs within two years after the spouse’s death and all other requirements for the gain exclusion were met (immediately before that spouse’s death). The mortgage insurance premium deduction was also extended for three years. If you take out a mortgage loan and have to pay mortgage insurance on your qualified residence, this is a deduction subject to an AGI phase-out.

Lastly, don't forget the changes to the ‘Kiddie Tax’ rules. Kiddie tax affects a child’s income earned, typically from investments. This income gets taxed at the parents’ higher marginal tax rate. For tax year 2007, Kiddie Tax affects those who are under age 18, but for tax year 2008, it affects children who are age 18 and fulltime students ages 19 to 23 as of December 31, 2008.

Of what traps should taxpayers be aware?

First and foremost, not giving yourself time to understand the rules and instructions can be costly. AMT is creating a stir. All tax software packages and IRS computers are currently being updated and reprogrammed.

Keep in mind that all taxpayers are technically required to calculate their regular tax, as well as AMT. This means that people who prepare their returns by hand and/or people utilizing a canned software package need to be sure they understand what is required and prepare all calculations accordingly. Another trap is not understanding the potential tax credits and deductions and how they’re treated for AMT, and what income phase-out ranges are applicable.

What can high earners do?

Plan. If you wait too long to calculate your income taxes, mistakes can be made and potential deductions and credits can be overlooked. The planning process requires projecting and calculating, and every situation is very unique for each individual taxpayer. Effective tax planning is always done for two years concurrently. A deduction on this year’s return could be a pitfall, depending on what is claimed and deducted on next year’s return. Make decisions because they make good financial sense, and understand the tax ramifications and benefits of the decisions. Never make a financial decision only to save tax dollars. If you spend a dollar to save 25 cents of federal tax, the 75 cents should be a good investment in the eyes of the investor. Don't forget about the state tax impact of a potential financial decision, if applicable.

What happens if you don’t file on time?

If you haven’t planned adequately and an unexpected balance due is not affordable due to cash flow issues, always be sure to file the tax return regardless of your ability to pay the tax. Failure to file penalties can be quite steep. Both the IRS and the state of Ohio will work out payment plans that can reduce penalties and interest charges. Still, an extension of time to file is not an extension of time to pay the tax balance due. If the reason for not filing is solely due to financial limitations, file the returns and request an installment arrangement. Both the IRS and state of Ohio are looking for good-faith efforts on behalf of the taxpayer upon considering installment payment arrangements, as well as potential abatements of any penalties and/or interest. However, if you don’t file the proper forms on time, penalties and interest accrue and compound, and they can get pretty ugly. <<

ANDREA H. SHEETS, CPA, is a principal at Skoda Minotti. Reach her at

Friday, 26 October 2007 20:00

Changes in bankruptcy law

Bankruptcy laws get modified every year or two. But in October 2005, a major overhaul by Congress resulted in a significant paradigm shift.

“Two years later, a lot of people do not realize the extent of the bankruptcy law changes, their impact and how they play out in real cases,” says Mark Bradshaw, a partner in the Insolvency and Reorganization Practice Group at Shulman Hodges & Bastian LLP. “If you’re dealing with a company that appears to be in financial distress, you definitely want to contact your attorney right away.”

Smart Business asked Bradshaw about how to minimize the impact of lawsuits originating from companies that have filed or are in the process of filing for Chapter 7 or Chapter 11 bankruptcy protection.

What changes in the bankruptcy law were implemented in October 2005?

Although the law that enacted the changes, in part, is named the Consumer Protection Act, the law favors the rights of creditors. Here are some changes. 1) Venue. Previously, certain lawsuits within the bankruptcy realm were filed and tried wherever the debtor filed. Defendants not only had to spend money to defend themselves, but they often had to do it in a foreign jurisdiction chosen by the debtor. With some exceptions, the trial is now located where the defendant, or the creditor, is located, not where the debtor files its bankruptcy. That helps defendants in terms of cost and convenience. 2) Reclamation. Reclamation is the procedure by which a creditor that has supplied goods may seek the return of those goods from a company that files bankruptcy. There was already a procedure for reclamation claims, but the timeline was essentially only 10 days. Under the new law, the supplier still must make a written demand, but it now has 45 days from the date goods were received or 20 days after the bankruptcy is filed if the 45 days have not expired. This is a powerful and under-utilized tool for improving a creditor’s position when faced with a bankruptcy. 3) Creditors as landlords. Under the old code, a debtor/tenant had 60 days to decide to either assume or reject a lease, but that 60 days was routinely extended numerous times. Now, the limit is 120 days, with only one further extension for cause, unless the landlord consents to additional extensions. The changes to the law give the landlord more certainty and control in the process of lease assumption and rejection.

What is preference law, and how does it impact debtors and creditors?

Preference law is an area of bankruptcy that has often irritated business owners. The philosophy behind the law is that bankruptcy seeks to treat creditors the same so that a creditor that receives a payment is not preferred to other creditors that do not receive payments.

A creditor that is paid by an insolvent debtor outside of 90 days before the bankruptcy filing is immune. But within that 90 days, the creditor risks being sued.

How can you tell if a customer/debtor is ‘distressed’?

It is important to watch payment patterns and the creditworthiness of your customers. You may not always know if your customer is insolvent on a balance-sheet basis, though you may have clues that your customer is equitably insolvent (i.e., not paying bills as they come due).

Customers in trouble may start paying beyond the stated term of the invoice or beyond the ordinary course of dealing with you. The customer may start paying only a portion of the amount due or start claiming an offset or recoupment right. There are often warning signs.

How do you protect yourself from preference actions?

The most important steps are to be prepared and to be informed about your rights. Creditors usually react rather than anticipate. A creditor should occasionally be surprised by its customer’s bankruptcy filing, but they should never be surprised if they get sued for a preference. Debtors are certainly getting the advice of attorneys, which includes prebankruptcy planning.

The changes to the law have made it easier for the defendant/creditor to prove an ‘ordinary course of business’ defense to a preference lawsuit. The test used to be conjunctive; the defendant had to prove A, B and C. Now the defendant just has to prove that the payment at issue was made in the ordinary course of business of the debtor and defendant or that the payment was made according to ordinary business terms.

In every Chapter 7 and some Chapter 11s, a trustee is appointed and is in charge of all decision-making with respect to the debtor. Trustees are extremely familiar with the bankruptcy process and preference lawsuits, and routinely hire attorneys.

An unsophisticated or unrepresented creditor is at a distinct disadvantage and may enter into an unfavorable or unwar-ranted settlement. You do not have to be that company. Do not wait until the bankruptcy is filed or a preference lawsuit is filed against you.

MARK BRADSHAW is a partner in the Insolvency and Reorganization Practice Group at Shulman Hodges & Bastian LLP. Reach him at (949) 340-3400 or

Tuesday, 25 September 2007 20:00

Extra understanding

In May of this year, the U.S. Equal Employment Opportunity Commission (EEOC) issued new guidance titled “Unlawful Disparate Treatment of Workers with Caregiving Responsibilities.”

According to the EEOC, the potential for greater discrimination against working parents and others with caregiving responsibilities has increased. Its new document helps both employers and employees determine whether certain conduct constitutes unlawful disparate treatment under federal law.

“CEOs and business owners must be aware of the fact this new guidance from the federal government probably will increase employment litigation if they are not informed about what to do and what not to do,” says Lynn Outwater, managing partner of the Pittsburgh office of Jackson Lewis.

Smart Business spoke to Outwater about how the EEOC plans to enforce the guidance and how employers should comply.

How is ‘caregiver’ defined?

The definition of ‘caregiver’ is discussed at great length in the guidance, and it’s not limited to a particular sex and it’s not limited to parents. The guidance recognizes that the employee might be taking care of an elder parent or a ‘significant other’ with a disability, for example. So caregiving is broadly defined.

What are some common mistakes that an employer might make?

The most common is what the guidance terms a ‘sex-based disparate treatment.’

For instance, an employer might ask a female applicant — but not a male applicant — ‘Are you married?’ or, ‘Do you have young children?’ or, ‘Tell me about your child care or your caregiving responsibilities.’ When interviewing for a job opening, certain questions are evidence of sex discrimination. Naturally, the employer is trying to find out everything possible about applicants to make sure there aren’t any issues or problems. But some questions are legally taboo.

Here are two other examples:

  1. An executive doesn’t realize an employee is pregnant. He tells her that he’s concerned about employing pregnant women. Later on, she may successfully sue for damages, partly because of his statements, which never should have been made in the first place.

  2. After giving birth and returning to work, an able employee is perceived as less capable or less skilled, and such is reflected in subsequent performance assessments.

The guidance also addresses executives who stereotypically assume that a male caregiver will somehow be inadequate or unable to do his job because they don’t believe that a male should be a caregiver in the first place.

What about well-intentioned discrimination?

Sometimes supervisors and other decision-makers are benevolent and are thinking of the employees’ best interests. But that can be trouble, too.

For instance, you assume that someone with caregiving responsibilities is not going to want to relocate to another city, even for a promotion, so you never even discuss the promotion. An assumption like that, even though well-intentioned, can violate federal law.

How can employers avoid these situations?

Given the EEOC’s new focus, I would recommend that you re-examine your policies and practices and be certain to use nondiscriminatory criteria when hiring, promoting or terminating.

Avoid stereotypical thinking to be certain that reasons for management decisions are not the reasons prohibited by federal guidance. Base performance evaluations on documented, objective criteria and observations. Train executives and supervisors regarding lawful and unlawful questions about employees’ family and child care.

If you have an employee who is missing work because of caregiver responsibilities, you do not have to ignore the absence, as long as you treat anyone who’s absent the same. You can get into legal difficulties by assuming that an employee will not be as present, focused or work-oriented because he or she has caregiving responsibilities.

What kind of training should be done?

Employers should train their supervisors regarding gender discrimination with a particular emphasis on stereotyping and harassment, so that supervisors understand that they should not consider child care or other family care responsibilities in employment decisions. Employers also should train their supervisors regarding retaliation and how, for example, unfavorable scheduling changes affecting care-givers could give rise to retaliation claims.

Employment handbooks, harassment policies and anti-retaliation policies should be updated. The whole gamut — anything that’s published to employees — should be examined to make sure these federal guidelines are addressed.

You should make sure that policies and practices are in conformity with how the EEOC views treatment of workers’ care-giving responsibilities. That would include not only reviewing handbooks but training executives and supervisors regarding appropriate and inappropriate behavior.

LYNN OUTWATER is managing partner of the Pittsburgh Regional office of Jackson Lewis, which includes Pittsburgh and Cleveland. Reach her at or (412) 232-0232.

Tuesday, 25 September 2007 20:00

University research parks

According to Dr. Patricia A. Book, the central role of higher education in the regional economy is preparing college graduates to become business leaders and a technology-oriented labor force. However, economic growth overall is driven by productivity growth and innovation.

“Universities bring educated people and a culture focused on ideas and creativity to the regional economy,” says Book, vice president for regional development at Kent State University.

“Public research universities, like Kent State, also play a leadership role in the transfer of technology and business skills between the university and industry, which ultimately creates jobs and wealth.”

Smart Business spoke to Book about the benefits of research parks to a local/regional business community.

What is a research park? What are its objectives?

A university research park is a property-based venture. Typically, it involves a property that has been master-planned primarily for research and development facilities (both public and private), technology and science-based companies, and support services. Tenants have contractual, formal or operational relationships with one or more university research institutions.

Through industry partnerships, these parks promote the university’s research and development, assist in the growth of new ventures and promote economic development. In general, they play a strong role in promoting technology-led economic development in the region.

University-based research parks are intentionally designed to foster an innovative, interdisciplinary environment for learning, discovery and engagement that leads to intellectual excitement, scientific achievement and economic growth and opportunities. The parks offer a complementary mixture of opportunities that include new ventures, industry and government cooperation, student internships and employment opportunities.

A research park may be not-for-profit or for-profit, owned wholly or partially by a university or a university-related entity. The park also may be owned by a non-university entity but have a contractual or other formal relationship with a university, including joint or cooperative ventures between a privately developed research park and a university.

Nearly half of all research parks nationally are university-affiliated, nonprofit entities. About 60 percent of them — most of which were built 15 to 25 years ago — include a technology incubator or accelerator. Varying in size from about 4.5 acres to 7,000 acres, they are now a permanent part of higher education's landscape.

Biotechnology/pharmaceutical companies are the most dominant participants in research parks, followed by software/information technology, computers/electronics and aerospace/defense. These align well with the industry in Northeast Ohio.

A regional approach to economic development aligns nicely with university-based research park development and technology acceleration. Intermediaries that support these developments include Jump-Start for venture capital, TeamNEO for business recruitment, NorTech for high-tech companies and Bioenterprise for bioscience start-ups. Kent State's FLEX-Matters Accelerator, developed in partnership with NorTech and Kent Displays Inc., is a perfect example of this kind of regional collaborative approach.

What do these research parks offer corporate partners? How can corporate partners take advantage of their benefits?

Research parks offer corporate partners space to incubate or accelerate their companies. Other benefits include:

  • opportunities to collaborate with university-based scientists to invent new products or processes;

  • support services to prepare business plans, including marketing, human resources and financial components;

  • prototype development; and

  • access to talented pools of graduate and undergraduate students.

If a company wanted to get involved, what are the first steps it might take?

I would advise the company to call the university’s economic development out-reach office and set up an appointment to tour the research park facilities to determine if they would accommodate initial and immediate space needs. If there is a match, then the company can discuss leasing arrangements.

Assuming further interest, I would advise the company to work with the university’s economic development office to set up appointments with university-based scientists to find potential collaborations between its entrepreneurial or business enterprise interests and faculty research.

Our office can connect the company with business development services and facilities, such as a clean room for research and product development, prototyping facilities, analytical services, or corporate development and small-business development services. Because universities also seek student internship opportunities, we typically make those matches, as well.

What kind of monetary investment is required for a company to participate?

The investment generally would be in leasing needed space, because part of the concept is that support services are already in place.

Some research parks are major property ventures and companies can actually build on the land, or they just might rent a couple thousand square feet. Space demands — and thus lease/build costs — vary widely.

DR. PATRICIA A. BOOK is vice president for regional development at Kent State University. Reach her at (330) 672-8540 or

Sunday, 26 August 2007 20:00

Employer strategies

Companies are accepting more of the risks associated with employee benefits packages, and they are offering more options to their employees. Choosing the right plan while remaining within budget parameters usually requires the help of an experienced benefits adviser.

“Because consumer-driven health care initiatives and funding alternatives are available, a company needs to determine what adviser can best steer it through the options,” says Dave Chiappino, sales executive for JRG Advisors, the management company for ChamberChoice.

Smart Business spoke with Chiappino about different approaches that a company can take to maximize employee benefits and minimize expenses.

What benefits strategies are available to companies today?

No single strategy fits all companies. But when a company wants to reduce the cost of employee benefits, it all starts with picking an adviser that you are comfortable with; one that has resources, access to markets and experience.

Many larger companies, those with at least 150 employees, are beginning to explore the possibility of taking on more of the risk associated with different kinds of employee insurance. Usually, the risk involves some version of self-funding. By using that strategy, the companies are putting themselves in a position to accept some of the rewards, which can include lower premium costs. This approach, in effect, removes insurance company profits, overhead and risk charges, and may reduce premiums by as much as 10 percent.

What tactics work better for larger and smaller companies, and is there a big difference?

The big difference is that the larger companies can put themselves in the position of not allowing insurance companies to dictate their policy. That’s where it gets back to hiring a good adviser to review data and implement strategies, such as wellness and other focused initiatives, and to appropriately set deductibles and co-insurance levels based on hard data.

Smaller groups, specifically those with fewer than 50 employees, do not typically have this option because their data is aggregated with other smaller employers.

The focus for smaller groups is choosing the right plan design, carrier and adviser with access to innovative resources to keep as many benefits expenses in check as possible.

How often should a company compare providers and plans?

Large companies should shop every two to three years, even though it is a significant project involving multiple and complicated requests for proposals (RFPs).

For smaller companies, it is not too difficult to simply get rates, so they may shop every year. Smaller companies often consider changing plan designs offered by their current provider or introducing an employee premium contribution model.

Upon what criteria should a company choose a benefits adviser?

Experience is one of the main criteria, and available staff is another. You want a benefits adviser who is your partner; one who will give you the time and the resources you need.

Our industry has trained buyers to shop product, and that is an admissible strategy that can sometimes satisfy the point of sale. But employers should consider factors that are important after the sale, like availability of local staff and technology.

Are price breaks available to health insurance advisers?

Insurance advisers representing the various health insurance companies do not receive ‘pre-arranged’ discounts. However, an experienced adviser armed with solid claims information will be in the position to negotiate lower premiums on behalf of his or her clients.

Are there opportunities for a company to save money with benefits other than health care?

There are always opportunities to save money, particularly with ancillary benefits — like disability, life insurance, dental and vision. For instance, companies are beginning to self-fund dental insurance because there are caps inherent in the program. The 10 or 15 percentage points you can save on a dental plan just by changing the funding is pretty significant.

There is no definitive strategy that everyone can use. It depends on the group, the benefits offerings, how they interact with one another, and the employer tolerance to accept risk and change.

With most strategies, the company and the adviser must follow through by giving employees the right communication tools.

What are the right employee communication tools?

Educating employees on plan options, employee cost share and how to best access vendor and adviser information should be included with an employee communication package. The tools used to support this type of communication varies by adviser. We are fortunate at JRG in that we offer a state-of-the-art online communications tool that is easy for employers and employees to use. By engaging employees in this manner, we are bringing them ‘into the process,’ which is critical if we are to have a long-term impact on benefits costs.

DAVE CHIAPPINO is a sales executive for JRG Advisors, the management company for Chamber-Choice. Reach him at or (412) 456-7015.

Sunday, 26 August 2007 20:00

Training and the bottom line

In-house training is a necessity at all good companies. But hiring professional educators to supplement that internal training is often what separates the better companies from the best companies.

“With the proper training, employees are more focused,” says Amy Lane, executive director of Regional Corporate and Community Services for Kent State University. “They spend more time working on the right activities and exhibit higher skills. Projects are efficient and effective. And there’s better morale.”

Smart Business talked with Lane and Kelli Baxter, director of the Office of Corporate and Community Services at Kent State University Stark Campus, about external training issues.

What types of employee/talent development do employers seek?

Lane: Employers feel that technical training can be offered internally, so they are seeking the softer skills from external training providers — human relations skills — to help employees relate interpersonally, solve problems efficiently and manage projects better. Chief executive officers and other executives ask for topics such as problem-solving, leadership and supervisory skills, project management, Lean and Six Sigma continual improvement methods, and more sophisticated sales topics.

Baxter: Additionally, negotiations training — which is not usually part of the internal training and is not necessarily considered supervisory/management-level training — is important for all salespeople, managers and supervisors.

Lane: Top-level managers say that they need to improve their managers’ coaching accountability and interpersonal communications. Their companies are growing, and they are spending a disproportionate amount of time on interpersonal issues between employees.

How does an organization assure that its external training meets its objectives?

Baxter: By using a holistic approach and making sure that the external training company serves as a partner to the organization. The training partner should ask good questions in a consultative way and tailor the sessions based on the answers — whether it be training, consulting or one-on-one coaching. The trainer might ask about corporate values, strategic plans, internal communications or management of resources in order to help you think through what else could be impacting the challenge you’re facing. The plan should help you meet those objectives.

Lane: In addition, training should be tied in with the corporate performance-management system. A follow-up performance evaluation session between the manager and each individual employee should be mandatory. The manager needs to discuss how employees are going to apply what they learned on the job, if they understand what they learned, whether the training had impact and how the manager can help support that training in the future.

Is this technically ‘training’ or ‘education’?

Lane: It is a hybrid. An effort should be made to provide both knowledge and skill-based training. The participants should be able to acquire knowledge about the topic so they can think critically and, thus, have more options in their decision-making. But there should also be a lot of skill-based training that includes group activities, practical exercises, brainstorming and role-playing. Adult learners don’t want to be lectured at or sit for eight hours; they need to be engaged. The training needs to be participatory, action-oriented and practical — not just theory-based.

In addition to training, what other services can external trainers provide?

Lane: For executives, strategic planning, helping with goal-setting, investing in employees and figuring out how to tie it all in with a corporate strategic objective is very important. The process might include organization development work, including strategic planning facilitation, setting goals and objectives, continual improvement and executive consulting. This helps set standards, goals and objectives. It shows how to best invest in employees so they understand expectations.

Are these types of programs standard — at least in their approach?

Baxter: Training facilitators should know about adult learning theory and practices, including the utilization of models, theories and world-renowned experts. But what drives content should not be standard. It should be tailored to your company’s individual needs.

Lane: Facilitators must have the ability to deliver a program that serves the client’s needs, and an outline should be developed from that. Look for long-term relationships and training institutions that really believe in the region’s economic vitality.

What other factors go into selecting a training partner?

Lane: Testimonials are important. The best way for you to understand the effectiveness of external training is to hear from your peers about the significant bottom-line impact that they have derived from external training.

Baxter: Some educators/trainers, like Kent State, have public programs that one or two people from a company can attend. Tools like learning outcomes action plans can get participants thinking about what they can incorporate when they get back to work and what resources they need from their managers. Look for these kinds of tools that will help to transition learning from the training room to the workplace.

AMY LANE is executive director of Regional Corporate and Community Services for Kent State University. Reach her at (330) 672-5828 or

KELLI BAXTER is director of the Office of Corporate and Community Services at Kent State University Stark Campus in North Canton. Reach her at (330) 244-3505 or Pertinent Kent State University Web sites: TrainingPartner and

Monday, 25 June 2007 20:00

Size doesn&#x2019;t matter

When reviewing your corporate insurance policies, one of the worst possible mistakes is budgeting for employment practice insurance and general liability insurance — and then overlooking directors and officers (D&O) insurance.

“Corporate managers need to understand that no matter the size of their company, they are not immune to litigation against directors and officers,” says Ron Hodges, partner and director of the Litigation Department at Shulman Hodges & Bastian LLP. “They have read a great deal about the Enrons and Tycos of the world, but smaller public [and private] companies in their own communities are just as vulnerable.”

Directors and officers insurance protects personal assets and/or company assets. It also provides access to valuable resources to help companies manage litigation.

Smart Business spoke with Hodges about how companies large and small can minimize their exposure to D&O lawsuits.

How can a company be damaged by a lawsuit against its directors or officers?

With or without insurance, a D&O claim against a company can be devastating on a number of fronts.

Financially, it can cripple a company. We have seen companies literally forced to close their doors or seek bankruptcy protection just by virtue of the professional fees associated with litigating a claim — notwithstanding the fact that they might be in the right.

From a time standpoint, D&O claims can cripple a company because executives must occupy their time dealing with litigation matters when they could be more productive by spending time on the nature of their business.

Finally, any company facing D&O litigation is potentially susceptible to negative publicity. Mere rumors and allegations will have a negative effect on a business and on the reputation of the principals — regardless of whether the allegations turn out, at trial, to be true.

A director’s and officer’s lawsuit is a taxing and a very significant event for a company, regardless of whether or not it has merit.

What kind of claims are the most common?

Many claims occur in the employment arena where directors and officers have not handled an employee dispute properly or they themselves were personally involved in the termination. Typical suits include wrongful termination, discrimination, harassment or misrepresentation of employee benefits.

But the most common claim is for a breach of fiduciary duty, most often in the instance of a transaction that personally benefits a director or officer to the detriment of the company or its other shareholders.

A third type of claim results from a company owing money to a vendor or customer, which tries to hold directors and officers personally responsible for all of the corporate debt and obligations.

Who most often brings legal action against directors and officers?

In our society, we tend to deflect responsibility for our own actions. If a customer knows there is risk involved in a certain business move, he or she still wants to blame others for losses — and the directors and officers are there to blame.

Another scenario stems from a need to survive. Companies in dire financial straits may attempt to pursue the recovery of money by filing a lawsuit just to leverage a settlement during a negotiation.

Companies often face the daunting task of assessing the business realities a case presents. It is often less expensive to settle a meritless claim than pursue the defense through trial. That is unfortunate, but a reality nonetheless.

How much are premiums for directors and officers insurance?

Coverage should be commensurate with the growth of the particular business. And if a company is doing poorly, it may need less insurance.

There are two different types of insuring provisions. One protects corporate assets, the other protects the assets of the individual. Some companies only maintain the insurance that protects the assets of the company, because it has lesser premiums.

Other cost factors are how much insurance you are purchasing and how much the insurance company is willing to write for your particular company.

What else can guard against D&O lawsuits?

Astute corporate leaders should certainly consult with their professionals — including their insurance brokers — at least once a year. Encourage your outside professionals to interact with each other. When you have done that, you need to properly document that interaction. You need to show that you have exercised prudent judgment in your corporate decisions and that you have sought the advice of objective outside professionals regarding whether a given action is appropriate from a business and legal point of view.

Documentation acts as a safety net for officers and directors when they are scrutinized in litigation that sometimes has the unfortunate benefit of 20-20 hindsight.

RON HODGES is a named partner and the director of the Litigation Department at Shulman Hodges & Bastian LLP. Reach him at (949) 340-3400 or