Matt McClellan

Saturday, 25 April 2009 20:00

Alternatives to bankruptcy

Recent changes to the bankruptcy code have made filing for Chapter 11 a less reliable and more costly option than it was in the past. As a result, some ailing companies are looking for alternatives.

“While bankruptcy alternatives have always been around, they are becoming more popular because bankruptcy is less attractive today compared to how it was a few short years ago,” says Jonathan Friedland, head of the Restructuring and Insolvency Practice at Levenfeld Pearlstein, LLC.

When a company is faltering, the owner needs to first determine whether he or she wants to stay in business or close up shop, and then explore the options to achieve that end. For example, a composition may allow a company to stay in business. Under this agreement with creditors, reached out of court, the debtor satisfies its indebtedness through partial payments or payment over time.

But if the goal is to get out of business, a foreclosure might be the best option.

Smart Business spoke with Friedland about how to keep your company out of bankruptcy by pursuing alternative solutions.

Is bankruptcy the best option for ailing businesses?

When a business is in distress, bankruptcy is the most well-known option. It is not, however, the only option, nor is it always the best option. The best option depends on what the source of the trouble is and what the owners of the business and their creditors want to achieve.

For instance, if the business is viable but the balance sheet simply has too much debt on it, it may be possible to do a composition agreement rather than a bankruptcy.

On the other hand, if the company is ready to throw in the proverbial towel and it wants to throw the keys back to the secured lender, a friendly foreclosure and/or turnover agreement might make the most sense.

Lastly, an Assignment for the Benefit of Creditors (ABC) may also be a very good option if the goal is to liquidate the company. In an ABC, the company transfers its assets to an assignee. The assignee sells the assets of the company and then distributes the proceeds of the sale to creditors according to a priority scheme established by state law.

What are the advantages of pursuing a composition agreement?

The ultimate goal of a Chapter 11 bankruptcy is to confirm a plan for repaying creditors. The advantage of using a composition agreement is that it can achieve a similar result while avoiding the time, expense and notoriety of a Chapter 11 bankruptcy.

A typical scenario might involve a company making a written proposal to its creditors, requesting that they each accept only a portion of what is owed to them in lieu of the entire amount and/or asking that they accept payment over time.

A composition agreement typically includes a disclosure of the company’s financial condition, so that creditors can evaluate how they might fare if the company were forced into bankruptcy, as compared to what they would receive if they accept the company’s proposal under the composition agreement.

If you are dealing with management that is mistrusted by the creditor body, a composition agreement is less likely to succeed.

But in the vast majority of commercial cases, that’s not the case. You simply have well-meaning and reasonably good management that failed, but failed for a legitimate reason.

What should be included in a composition agreement?

It’s standard to include a provision stating that the proposal will remain open for a specified period of time, but it won’t be open-ended. Also, the agreement won’t become effective unless it is accepted by creditors holding a specified percentage of claims, usually 90 or 95 percent.

If this debtor’s proposal is accepted by this minimum percent of dollars owed, the company can move forward. But let’s say 10 percent of the creditors are holdouts. To those creditors, the company will still owe 100 percent of what it owed before. That’s OK, because there has been a mathematical business calculation that can deal with a small percentage of holdouts.

That’s why it’s only effective if a specified percentage of creditors accepts. That way, the company can decide ahead of time what it can live with. If the minimum percentage of creditors does not accept the composition, the company may file a bankruptcy.

In a bankruptcy, the company can bind the holdouts if it gets enough creditors to accept the plan. That is one of the powers that bankruptcy offers in return for the time, expense and notoriety.

Can a composition agreement work for a company of any size?

The more creditors you have, the harder it becomes to do. It’s really a numbers game. Typically, it’s good for a company that has upward of a couple hundred creditors. But if it’s the kind of company that has thousands of creditors, the cost of bankruptcy quickly begins to make more sense. At some point, bankruptcy actually becomes more cost-effective.

jonathan friedland leads the Restructuring and Insolvency Practice at Levenfeld Pearlstein, LLC. He also is the principal author of “Strategic Alternatives for Distressed Businesses,” (West, 2008), which provides a detailed examination of alternatives to bankruptcy. Reach him at (312) 476-7528 or jfriedland@lplegal.com.

Saturday, 25 April 2009 20:00

Setting the course

Even in a difficult economy, Jonathan D. Rosen says you can still steer with a steady hand if you’re always honest with your customers and employees.

“Sometimes that involves tough choices,” says Rosen, co-founder, chairman and CEO of Entaire Global Cos. Inc. “But if you have an honest dialogue … even if you’re delivering bad news, they’ll respect your perspective.”

Involving employees in every aspect of Entaire’s business, from vision planning to financial review sessions, has been a vital key to the company’s success. Since co-founding Entaire in 1997, Rosen has grown the company’s revenue to $16 million in 2008. The company, which works with business owners, medical practitioners and legal professionals to find solutions for their financial and retirement planning problems, has 33 full-time employees and 3,500 independent contractors.

Smart Business spoke with Rosen about how to create a plan that will allow your company to reach its goals and why you need to buy more lunches as your company grows.

Work backward toward your goal. The first step is dreaming about where you want the thing to be. If you look out five or 10 years into the future, what do you want that landscape to look like for your business? You draw on your internal resources and your external resources and your advisers, and you say, ‘If I were painting a picture, what would I want that picture to be?’

Then, you back up and you build pathing between where you are today and the end goal.

Along the way, you check and make sure you haven’t deviated from your course.

It’s a lot like navigation — you know where you are and you know where you want to go. It is a lot easier to make simple course corrections along the way than to get three-quarters of the way there and then realize you need to make a huge course correction.

You try to get more information sooner. Then you can create more landmarks, find more landmarks and get a real feel for where you are. So if it turns out that a course correction is essential, you can go ahead and make it now rather than later.

Get the data. The first way to make sure you’re maintaining your course is by looking toward actual data. Once you find that data, then you try to validate what the data tells you through anecdotal evidence. Then, you see what others tell you. It’s amazing the wisdom you can get when you walk around the office.

If you want to know what’s really going on, you walk out into the workspace. You would be amazed at what you hear and see and what it can teach you about your business. You’ll be looking around and you will discover, ‘Gee, we’ve got a huge opportunity,’ or ‘Uh oh, we have a major problem.’ You can discover those things merely by listening to what others have to say.

It’s tough to maintain that kind of an open-door policy as a business grows. So you have to create forums for dialogue.

As we’ve grown, it has become harder and harder to do that. One thing we’re doing this year is I’m buying a lot more lunches. Somebody on the staff came up with the idea that we would have team lunches with the CEO. It is simply three or four people, and we all go out to lunch. I’ve found that with a couple lunches a week, you can get there. It gives people a chance to actually ask their questions.

Let your employees participate. Another thing we do that I’ve found effective is to have financial review meetings. We have a sign-up sheet once a quarter for these.

People who want to come look at the financials of the business can sit down in the conference room with us and we’ll go through the statements and answer questions. We talk about what we did right and wrong and why we are where we are. It’s participation — you need to let them in.

Employees believe that management and leadership operations occur in this giant amorphous black box. One of the things I encourage them to do is say, ‘How’d you make that decision? What were you thinking when you did that?’

Then I give them an honest answer. You say, ‘Well, I struggled with this; I considered that.’ And if it was the right decision, you say, ‘And it looks like it benefited us.’ If it was the wrong one, you say, ‘I got that one wrong.’

Encourage your employees to speak up. At first they are reluctant to share. Then you find through their questioning you get an enormous amount of wisdom. What happens is, people will start to connect the dots and say, ‘Oh, that’s why we do that that way.’ Yes, it is.

And as you’re going through that dialogue with them, you’ll get snippets of information like, ‘Oh, now that I understand that is the objective; in customer calls, we get a lot of calls that look like this. How would you answer that question of the customer?’ Then you’d say, ‘Interesting. Didn’t know we were getting those calls. Here’s an answer I might give.’

Two or three weeks later, you’re walking down the hall and someone says, ‘I tried that explanation you gave us the other day. The customer really got it, and as a result, they referred a client.’

How to reach: Entaire Global Cos. Inc., (800) 871-4442 or www.entaireglobal.com

Thursday, 26 March 2009 20:00

Get a better deal

Real estate cycles swing the negotiatingpower back and forth between thetenants and landlords. The current economic unrest has swung the balance infavor of the tenant, which can be a boon forthe opportunistic business owner.

“All the classic symptoms of a tenant’smarketplace are beginning to unfold,” saysDaniel Rudd, a Senior Vice President in theDallas office of Grubb & Ellis Company.“Typically, in a landlord’s market, you havelower vacancies and rising rents. There isless supply of real estate on the market, theeconomy is good and there is higherdemand, which drives up rental rates.”

“As you move into a tenant’s market, yougenerally have a slowing economy withincreasing vacancies and companies thatare going bankrupt, pulling back or puttingsublease space on the market, so you haveless demand and falling rents.”

Smart Business spoke to Rudd about howbusiness owners can take advantage of themarket to improve their leasing options.

How can business owners know if they couldbenefit from renegotiating their current leaseor finding a new landlord?

Most tenants should be able to loweroccupancy costs in this business environment. This turn in the marketplace createsan opportunity for tenants, and not onlytenants who have a lease expiring in thenext 12 to 18 months, which is the typicaltime frame when a tenant would approacha renewal or relocation. However, theopportunity is still worth pursuing even if atenant has 24 to 36 months remaining ontheir lease, especially larger tenants.

If that tenant is financially stable andcreditworthy, has a long-term view towardthat particular location as being core tothe business and are willing to extendtheir lease, they have an opportunity torenegotiate and immediately lower theiroccupancy costs through the remainingtwo or three years of their lease.

The flip side of that stability coin is thegrowing number of tenants who are havingtroubles and need rental concessions topotentially save themselves from bankruptcy or going dark in a location. This can bea tougher sell to the landlord, but not impossible, depending on the situation.

In every case the landlord will wantsomething of value to give you currentconcessions. Usually this is an extension ofthe lease term. However, if you’re already onshaky financial ground, perhaps you arealready paying late or are behind on rent, itdoesn’t help the landlord to offer three moreyears of extended term for lower ratestoday if they have little confidence thatyou’re going to survive regardless. In thatsituation, be prepared to share enoughinformation regarding your finances andbusiness plan so that the landlord can getcomfortable with restructuring your lease.Also in addition to more term, giving thelandlord back some other rights youcurrently have in your lease may grease theskids to get the concessions and help youneed.

What sort of landlord concessions shouldtenants look to make part of their leases?

There are a variety of concessions anddeal points that tenants need to be awareof, but as much as anything, they need toknow who their landlord is and how thatcan affect the ultimate lease negotiated.

Can my landlord perform? Tenants aren’tthe only ones having financial issues somake sure that the concessions negotiatedare protected.

To that end, tenants should try to geta Subordination and Non-DisturbanceAgreement from the lender on any building.The SNDA ensures that the lender agrees tohonor the lease and its covenants beyondany foreclosure.

If you don’t have an SNDA, many timeswhen the lender takes back the property,they are not obligated to honor the lease.Usually, the lease document will state thatit is subordinated to the mortgage and thelender’s rights.

So if the lender takes back the buildingand in its opinion there is a bad agreementin place that creates a problem for thebuilding, they may terminate the lease.This is atypical, but it can happen.

You also want to seek protection on anycash component the landlord is obligatedto provide in the lease agreement. Anysubstantial amount of cash concessionsthat the landlord is responsible forfunding, such as allowances for tenantimprovements, moving, technology, furniture, architectural, project management,etc., you want to get those amountsescrowed on the front-end with a fiduciarycontingent on the lease.

Where can business owners turn for helpwith this process?

Certainly we can help, and don’tunderestimate the value of professionalreal estate representation. Going thisalone will not yield the same resultsand you will certainly leave money onthe table. A professional that has anunderstanding of landlords and how bestto leverage the market is key to yoursuccess.

DANIEL RUDD is a Senior Vice President in Grubb & Ellis Company’s Dallas office. Reach him at (972) 450-3204 orDaniel.Rudd@grubb-ellis.com.

Thursday, 26 March 2009 20:00

Ongoing education

Today’s entrepreneurs face different challenges than those 20 years ago. Laura Kuhl, a former business owner and entrepreneur who currently works as a senior manager with Dixon-Hughes PLLC, knows those challenges firsthand. As a faculty member at University of Phoenix’s Cleveland Campus, Kuhl helps tomorrow’s entrepreneurs prepare for those challenges.

“I’m a lifelong learner,” says Kuhl. “That is one of the hallmarks of being an entrepreneur. They never, ever feel quite finished.”

Whether you are an entrepreneur or an “intrepreneur” — Kuhl’s term for someone who possesses the skills and attitude of an entrepreneur but works inside someone else’s business — you need to be prepared if you want to survive in the business world.

Smart Business spoke with Kuhl about how the traditional ideas of business are changing and how you can make sure you can adapt to the changes.

What does it take to succeed as an entrepreneur today?

There are things you need to be able to do if you’re an intrepreneur or an entrepreneur. It’s all the same things you have to do to be able to create your own job security. You have to recognize who your customers are. You have to be able to solve problems; you have to be able and willing to accept accountability. The buck stops here. That’s something that entrepreneurs have always had. They are the bottom line for accountability.

Entrepreneurs or intrepreneurs who succeed in the work force take that attitude every day. They are willing to work to generate new business or new business ideas. They innovate and adapt their services — meaning if I’m an employee, I need to be able to adapt to what my customer wants, what my boss wants or what the people I’m serving want. There are some people who can’t do that, but you can learn it. All of these things are things you can learn. So find an academic institution that knows how to equip people with those things that are entrepreneurial in nature.

If you can’t solve problems, if you can’t use technology and/or if you can’t adapt to your customers, you’re going to have a difficult time as an entrepreneur. Those are just skill sets that are unique.

How do you prepare aspiring entrepreneurs for the challenges of running a business?

I stress a nine-step model of problem solving, where you dissect things automatically and routinely. You understand what the steps are to benchmark alternatives and how to assess those alternatives against what your companies objectives are and, ultimately, how to come up with a very good decision, very quickly. Employers value that. By the time you’re done with the program, this approach is so ingrained in how you approach opportunities and problems; it’s like driving home from work.

As a faculty member, what can you teach entrepreneurs about making decisions?

When faced with volumes and volumes of data, people can get mired in it. It’s like not being able to see the forest through the trees.

The benchmarking skills you can learn allow you to come up with data triages very quickly. The data doesn’t matter; it’s the knowledge that matters. Over time, you learn to mark trends and you learn to benchmark. You learn to say, ‘At what point do you have enough information to make the call?’ That’s what education does. It teaches you to be able to discern those critical points where you have enough information to make the call.

Can people besides entrepreneurs benefit from furthering their business education?

I personally can’t imagine a single person on whom this education would be wasted. I’ve heard a lot of people say, ‘Oh, you don’t need an advanced degree for this or that.’ But when things get really competitive, an advanced education can be a differentiator. As an employer, if I have to choose between two attractive candidates, the one who is going to step up and get the position is the one who has better credentials. All other things being equal, that ends up being the factor that triggers your decision.

How can an advanced education increase employability?

You add a lot of credibility to your resume if you are teaching or studying with a university that is progressive. Those are the exact same skills that employers now need.

What I think is important is entrepreneurism is relevant to everybody. It doesn’t matter if they happen to have a job right now where one company gives them a paycheck. Entrepreneurism is attitude; it’s work behavior. It’s how you approach your work much more than it is who’s paying your paycheck. You can get your paycheck direct from the end customer or from somebody in the middle, but it doesn’t change the nature of entrepreneurism. The only way to really be successful is to either be an entrepreneur or an intrepreneur and to learn the skills that go along with that.

LAURA KUHL is a faculty member at University of Phoenix’s Cleveland Campus. University of Phoenix, the largest private university in North America, serves a diverse student population, offering associate’s, bachelor’s, master’s and doctoral degree programs from campuses and learning centers across the U.S. as well as online throughout the world. University of Phoenix Cleveland Campus serves students online and at locations in Independence, Beachwood and Westlake/Crocker Park. To learn more, contact University of Phoenix at (216) 447-8807 or (800) MY SUCCESS or www.phoenix.edu.

Thursday, 26 March 2009 20:00

Your company’s right size

Whether you call it downsizing, “right-sizing,” a layoff or a work force reduction, one thing remains indisputably true: Letting employees go is one of the toughest things an employer ever has to do. Before moving forward with a reduction, employers need to consider all alternatives.

“Setting up a framework to consider a work force reduction is necessary; look at all these planning factors first,” says Kerry Davidson, an attorney in the Labor & Employment Service Group with Levenfeld Pearlstein, LLC.

Smart Business spoke with Davidson about how to ensure the reduction process runs smoothly.

How do you plan for a work force reduction?

The key is to never lose sight of the business reasons for the change. Is a business reacting to something short term? Is there a possibility of less drastic alternatives, such as reduced work schedules, unpaid leave alternatives, voluntary separations, hiring freezes, wage freezes or delayed capital expenditures?

First, trace the work flow. Determine what work is being affected without even thinking about what individuals could be impacted. Trace the flow of that work to see what job positions touch the work. Then, determine the impact on those particular positions. You may need to eliminate a single position, or you may have a flow of work that affects parts of many different positions.

What is the next step?

Determine how the remaining work will be done. Once you have considered all the positions that are directly and indirectly affected, then you can look at the individuals in those positions and define the relevant population of employees.

Next, you should consider your selection criteria. This may be based on seniority or ‘last in, first out,’ which is often the easiest and most defensible criteria. On the other hand, you may find this does not meet your business needs because you want to retain your best performers. Many employers then look to performance.

What are the possible mistakes business owners can make during a reduction?

One of the most common mistakes is failing to define your legitimate business reasons before looking at the relevant employee population. You can also have problems if you do not conduct due diligence to make sure your personnel documentation supports your selection criteria.

Additionally, you can run into trouble if you react too quickly or fail to consider alternatives. For example, there are state and federal laws that require prior notice of larger reductions. There are wage and hour laws governing termination payments. You may have contractual obligations based on a union relationship or written policies. If you want to pay severance in exchange for a release of legal claims, special waiver requirements may apply. Lastly, don’t forget that the key to effective rightsizing is retaining the appropriate work force.

How do you make sure company morale remains high despite the downsizing?

Morale is one of the challenges that employers face in rightsizing and downsizing. First, treat your departing employees with dignity and respect. So many lawsuits are filed not because an employer did anything wrong but because of the way the individual was treated at the end of the relationship. Second, poor morale can spread among your remaining employees if you fail to treat employees in a way that is perceived as fair or shroud your business decisions in mystery.

Communication is absolutely essential. What you say may need to be tempered by various laws and individual confidentiality concerns. On the other hand, you should be keeping people in the loop and giving them as much guidance and hope as possible, without making promises. If you’re doing reductions in several different waves, you should communicate when one wave is over and when you expect the next wave will be. In some cases, employers need to consider retention bonuses if there are key employees they really do not want to lose.

How can a decision-maker avoid making mistakes in the reduction process?

Employers need to see downsizing and rightsizing as part of ongoing succession planning. They need to ensure that it is part of their long-term goals.

Because so many reductions are based on performance or skill and ability, it’s key to document and stress performance issues when they arise. If there are performance issues, you should address them. If employees are not meeting your expectations, they should be warned. If they don’t respond to warnings, then they may not be the right employees for those positions. One of the keys to finding your ‘right’ size is to have the ‘right’ people doing the work.

The last way to avoid mistakes is ensuring that you reach out to an expert who understands the many laws that may apply and how these laws intersect and who has the practical experience to understand the many factors at play.

KERRY L. DAVIDSON is an associate in the Labor & Employment Service Group with Levenfeld Pearlstein, LLC. Reach her at (312) 476-7596 or kdavidson@lplegal.com.

Thursday, 26 March 2009 20:00

Down the line

In the havoc of the economic downturn, many business owners, like many private investors, have seen their retirement savings decline by 40 to 50 percent in value. Jim Caswell is a founding partner and vice president with Peachtree Planning Corporation. He is a certified financial planner and has been providing sound financial advice to his clients since 1984.

“If you go back to 1926 the average annual return of the Dow Jones was 10.5 percent,” he says. “If you suffered a loss of 40 to 50 percent last year, it will take almost 10 years of 10 percent annual returns just to recoup your 2008 losses. What this means is that, if your retirement goal was two to five years, even 10 years, you’re probably going to work longer than you thought or you are going to have to start saving at a higher rate than you were.” Caswell says your financial planning should reflect this new reality.

“Everyone needs to be taking stock of their financial health and have a clear understanding of how these market declines will affect their ability to achieve future goals.”

Smart Business spoke to Caswell about how to make sure your plan has what it takes to keep your business protected.

What are the key concepts to personal planning for business owners?

Business owners understand business cycles and anyone who has a successful business has operated in both good and bad times. They understand an old slogan: ‘Tough times don’t last, tough people do.’

Their business is their most important personal asset. Their business and personal financial planning are almost synonymous. The important thing is to help the client differentiate between business and personal goals and to understand how the risks assumed in business affect the ability to achieve personal goals. There are many advantages to owning your own business especially when it comes to saving on taxes. With a proper structure, you can utilize those advantages to enhance both your business and personal planning.

What can business owners do to make sure their business is protected?

During a recession, if a business begins to suffer problems from reduced cash flows, business owners will sometimes neglect their personal planning. I try to help these clients understand how important it is to pay attention to cash flow in this type of business environment.

Properly understanding and forecasting both your business and personal cash flows may be the most important way to ensure your business survives. This can require some tough decisions and people don’t like doing that kind of planning. It is absolutely critical that you plan with realistic numbers for what you expect to happen for the balance of 2009 in both your business and personal life.

How can business owners ensure their plan is financially strong?

It doesn’t happen by coincidence, it happens by design. First, seek out a professional. Get another pair of eyes to look at what you’re doing. Maybe two or three pairs. Find someone who can work with you and probably your CPA to make sure you are getting good timely information. Then perform what I call a financial physical. You go to your doctor for an annual physical to get a professional to tell you if something is wrong. The same thing is true with your finances. Your financial physical should look at everything that affects your financial life. Insurance protections: home, auto, health, life, disability, long-term care. Legacy planning: wills, trust, future giving. And retirement, tax and investment planning. All these things need to be analyzed and coordinated into an effective plan. If something is wrong with your financial plan, when would you want to know about it? Now, or 10 years from now?

How has the economy affected personal planning?

Back in the ’90s, everybody thought they could get 18 to 24 percent on their 401(k) every year. They thought that was the norm. They didn’t need to worry about cash, interest rates were relatively low; a great deal of wealth was created. Those days may be over for everybody. People are now very concerned about their world and they are naturally gravitating toward more and better financial planning.

It’s critical to make sure your mentality and mindset is correct for this economy; you need to remain positive. These are tough times but with good planning and quality leadership we will come through. You have to demand timely and quality information and you have to be realistic and flexible with your planning. Investors can continue to learn more from us in the months to come about how to thrive in uncertain economic times.

JAMES M. CASWELL III, CFP , is vice president of Peachtree Planning Corporation. Reach him at (404) 260-1600 or james.caswell@peachtreeplanning.com.

Monday, 23 February 2009 19:00

Precise planning

In the seven years that he’s been running Precision Practice Management Inc., Mike Barnell has probably used thousands of sports analogies.

The president and CEO of the medical billing company says that he sees a strong connection between sports and business, and he uses that connection to motivate his 85 employees.

“People get the concept of never giving up until the whistle blows, giving the extra effort, or knowing that races can be won and lost by tenths of a second,” he says. “When you apply that to business, that delivers a message that strikes home with people.”

Smart Business spoke with Barnell about how to communicate your message effectively and how to develop a vision your team will believe in.

Q. How do you create a vision your employees can buy in to?

You have to really know your business. That comes from being involved in a lot of the day-to-day things going on in all parts of the company.

You obviously can’t do that on a full-time basis, or you’d be micromanaging people. But if you are able to step in and step out of various issues, your people pick up a lot from you as the CEO from that process, and you get to know your business.

As you’re developing your vision, you had better know what your capabilities and limitations are because you’re the top guy who is trying to set the vision for where the company’s going. You obviously have to know your competitors and the industry you’re in — the big picture. It’s a great idea for the top guy to be involved in a trade association so you can make sure there’s not something big that’s happening in your industry or about to affect your industry that you’re not aware of.

Then your goal would be to carve a path for your company that is not just tracking where your larger competitors are going. That can be tempting — there’s someone bigger than you that has been successful, and you think, ‘If we just do what they’re doing, we can be successful, too.’

I’d much rather believe the Wal-Mart or Enterprise car rental examples, where they took a different path in an already well-established industry and carved a different niche for themselves.

Q. How do you avoid copycat visions?

If your vision is really somebody else’s vision, something you picked up from reading a book on Jack Welch or something, then your staff is going to pick up on that.

Your vision has to be real. It should come from the core, inside of you. Otherwise, you’ll find out over time that your staff just doesn’t buy in.

Then, you have to go live the vision. It’s one thing to say what you believe and what you think the company should do. But if you don’t yourself live and breathe that vision every day in terms of your actions, they’re going to pick up on that, as well.

It’s like the manager of a baseball team telling his players to be on time for every practice, and then the manager shows up late himself. Obviously, he’s lost a lot of credibility if that’s what he does.

Also, be consistent in your vision. If you’re changing your vision every 10 days, it’s not much of a vision after all. Not to say you don’t adjust what you do with new facts and circumstances, but there should be some consistency in the message you send to your staff and your clients.

Q. How do you make sure everyone gets the message?

When it comes to communication, I’ve found as our business was small and growing larger, I found the total volume of information that had to be managed, the total amount of detail that had to be taken care of was huge. We had different people struggling to communicate with each other on those various details.

So one thing we did was set up a client/staff meeting. Every two weeks, we have a meeting that actually takes a full day. You can imagine the commitment that it takes — one day out of 10 is devoted to all the senior management getting together, going over every single client, talking about what’s going on with that client.

But look at the results: On a routine basis — not random — we have a structure where everybody gets together and is able to share information about what took place in regard to a specific client or issue. And it updates everyone on what got taken care of, what new issue needs to be decided.

We do the same thing on a monthly basis with our operating teams — staff members who do the day-to-day work with clients.

I’ve found it eliminates the e-mails, the phone calls, the other meetings that might otherwise have taken place between those two weeks. We all get to influence each other, trade a lot of good information. Then, we depart for two weeks and get our business done somewhat independently before we have the next meeting.

HOW TO REACH: Precision Practice Management Inc., (314) 787-0681 or www.precisionpractice.com

Monday, 23 February 2009 19:00

Don’t give up without a fight

Joe McClure refuses to sugar-coat the dire economic outlook for his employees at Montrose Travel.

“We’re probably going into the darkest time of most of our lives,” he says. “Some of the folks around here have seen economies worse than this one, but most of the people in our company haven’t. It’s going to be an absolute bloodbath.”

Despite the economy, Montrose topped $110 million in sales last year, but the company’s president has prepared his employees to go into battle to survive in 2009 and beyond. To do so, he developed a two-pronged plan: get aggressive in sales and marketing by quadrupling the advertising budget, while conserving cash through delaying IT upgrades, terminating four unproductive employees and 100 percent salary reductions for the company’s three owners: McClure, his wife, Julie, and his sister, Andi.

“Most companies at this time go into their bunkers and hunker down,” McClure says. “We don’t hunker down. We don’t retreat. We stand up tall and go in and fight.”

Smart Business spoke with McClure about how to find out what motivates each of your employees and how to make sure your employees are meeting their requirements.

Look inside your existing business for new business.
We are in the midst of turning this entire company into an army of selling machines. Every single person in this company, whether they are on the front lines or in a support role, has individual requirements to go get leads.

We weren’t doing the simple things. For example, we have a corporate travel division that handles multimillion-[dollar] travel budgets from major corporations around the country. When our travel counselors were talking to individual travel coordinators and/or travelers, they weren’t asking the simple question: ‘Have you booked your 2009 vacation yet?’ We weren’t cross-selling our own divisions.

For our leisure division, our travel counselors were not asking people calling up for a seven-day cruise: ‘Who does your corporate travel? Do you travel for business?’

So we started this very intense effort of truly cross-selling all of our divisions. All of a sudden, the light bulbs went off, and just in the 48 hours of Friday and Monday, people are really engaged and they are really producing leads for all of our sister divisions.

Monitor to motivate.
I don’t believe that people don’t do what you expect them to do. I believe people do what you inspect them to do.

We are engaging all of our managers to truly get down to the agent lines and inspect what we expect them — what we need them — to do, then manage and monitor it on a daily basis. We’re actually getting down to every individual on a daily basis and making them log what new leads they’ve given to their sister divisions, and then we’re posting that.

Like, Suzie gave four corporate leads. Mark gave seven vacation leads yesterday. Then, you create this friendly, competitive nature. Now when results get posted and they’re easily seen, it just drives that activity that we want. Unfortunately, even though we are a strong company, I believe that if we didn’t post the results, wins and successes on a daily basis, it probably wouldn’t drive the behavior that we want.

As a leader, you need to make sure you identify the different personalities in your business.
People are motivated for different reasons. There is no one-size-fits-all motivation.

Some people in our organization are very motivated by money. The more money they can earn, the harder they’re going to work. Others are very motivated by reward and recognition. Others are very motivated by additional paid time off.

So long as you can create and understand the right motivator that affects every individual and create a communication plan and an incentive program that truly touches each individual, then you can get everybody engaged.

If you create an incentive program that misses the mark on half the personalities in your company, you’re not going to get the results you want.

If you want to know, just ask.
Annually, we create a little Web survey with about 10 questions to get down to what motivates them. Is it that their job is interesting and challenging? Does the job itself motivate? Is it recognition and reward? Is it job security; is it time off? Is it lunch with me [or] more time with me?

We don’t ask them to put their name to it. That’s not important. What’s important is that we understand the different motivators in the company and then create an incentive that touches all of those. People get leery when they have to put their name to questionnaires like that, and sometimes you don’t get the honest answers.

Talking to them personally one on one is the best way. Over the past week, I’ve had a good 40 percent of the individuals in my company sitting on the other side of my desk, looking into their eyes and asking them questions. I ask them for their advice and opinions, and I take it seriously.

There is no substitution for one-on-one face time with a leader and his employees. Beyond that, the follow-up process is very important. If you do ask for feedback and opinions from your team, make sure they know that feedback is taken seriously and listened to.

I don’t always act on all the feedback, but I always give an answer. And I always let them know why or why not it will be implemented.

HOW TO REACH: Montrose Travel, (818) 553-3200 or www.montrosetravel.com

Monday, 23 February 2009 19:00

Getting straight A’s

Chris Tjotjos occasionally asks himself, “Am I valuable to the organization?” It may seem like an odd question for the founder, president and CEO of LOGOS Communications Inc. to ask, but Tjotjos says he does it to reinforce his commitment to lifelong learning.

LOGOS, a provider of IT network communication solutions, posted $22.5 million in 2007 revenue and exceeded $30 million for 2008.

Smart Business spoke with Tjotjos about balancing your place in the organization and how playing golf with potential employees can help you find “A” players.

Q. How do you assemble a good management team?

It’s got to start with finding ‘A’ players. ‘A’ players attract ‘A’ players. If you don’t have the right members in place, it’s hard to put the team together.

We try to have a rigorous recruitment process. We’ve been blamed for taking too long to make a decision, but it’s really hard to tell if somebody is great or not in one or two interviews. Sometimes it takes three or four.

Plato said you can learn more about a person in a day at play than a year at work. We’ve taken that to another level. We might take someone out to dinner. If the opportunity comes up, we might even take them on a round of golf.

That way, you can see how that person acts when he hits a bad shot. Does he bump the ball when no ones looking? Does he cheat and prop it up? Is he cordial about this or that? Is he aware of the other person [or] if he’s walking in their line? These are things you can’t get out of an interview, but you can get from a day at play.

Someone can hold an interview for an hour, then you hire them and you say, ‘Gosh, I didn’t notice they did this,’ or ‘They really annoy me about that,’ and if they annoy you, they’re probably going to annoy your customers.

Q. How do you know if an interviewee is the right fit?

We can’t play with everyone. It has to be the right timing and the right role. Plus, not everybody golfs, and we haven’t taken anyone bowling yet.

So you really have to see in the interview. Is it one of those where you set it up for an hour, and after the hour, you don’t want to stop talking to the person? Or is it one of those where you set it up for an hour, and 20 minutes into it, you want it to end?

There’s just something not there — they’re not energizing you at all. They’re not giving you any new ideas. They haven’t read anything recently that changed their thinking; they’re just the same kind of person they were 10 or 20 years ago.

So I listen to see what they are reading, what new ideas they are putting in their heads. Because if you’re not a student of lifelong learning, you’re probably not going to be that exciting and energizing to me.

Q. Once you’ve got employees in place, what is the next step?

The next step is making sure they are all on the same page as the goals of the company. If you can do that and get them to buy in, you’re on your way to being able to accomplish that.

A lot of times you ask somebody, ‘What’s the vision of the company; what’s the mission statement?’ And you’ll get eight different answers. So you have to start with what you are in business for. Is it to make profits; is it to take care of the customers? You have to all be on the same page, or you have eight different people going in different ways.

Q. How do you keep everyone on the same page?

One way we do it is communicating often. You can start with a goal in mind, but if you don’t keep going back and checking where you’re at and making sure you still have the same vision — things haven’t changed — people start to go off-plan.

In a great football team, you can only run so many plays without a huddle. We try to have short meetings often [to] make sure we’ve got the same strategy. You can plan the whole week for a team, and then they come out and throw a new quarterback at you.

So you can have these elaborate plans, but once you get in the field, things change.

Q. How do you adapt to change?

As a leader, you always want people to follow, but sometimes you can let them lead, as well. You don’t want to pull. If you have to pull too often, you’re going to get tired, and they’re going to get tired because they’re going to be resisting it.

If you have the right team around you, they’re going to want to do it. You tell them, ‘This is the goal; this is the way we’re going to get there.’

All you should do as a leader is tweaks. If you have to do more than that, you’re not really a leader. You’re just gestapo.

HOW TO REACH: LOGOS Communications Inc., (440) 871-0777 or www.logosinc.com

Monday, 26 January 2009 19:00

Learning to lead

Being a leader didn’t come easy for Kurt W. Gampp. The co-founder and chief operating officer of Synergetics USA Inc. was a tradesman with no college education who made the company’s first microsurgical instruments in co-founder Gregg Scheller’s garage.

Since its humble beginnings in 1992, Synergetics has grown into a burgeoning public company, earning $50.1 million in revenue in fiscal 2008, and Gampp has learned how to be a business leader.

Scheller left the company in August, and finding a new CEO has been a whole new challenge says Gampp.

“I feel like I just got a divorce, and I’m on my first date,” he says.

Smart Business spoke with Gampp about how he learned to manage with an open mind and how to empower employees to make decisions.

Q. How do you empower your employees?

I’ve always told my people the worst decision they could make is not to make a decision — and that’s a decision in itself. You can’t be afraid to make decisions. Sometimes they’re wrong, and I tell my people that that is OK. You can’t make a good decision every time.

The worst thing that can come from a bad decision is not learning from it. I always try to tell my people that. Make a decision, and we will live with it. We will correct it if we need to, and we will learn from it.

Q. How do you create a culture in which your employees aren’t afraid to make decisions?

The people I lead have been with me a long time. I’m not one to chastise people, if you will, over making a bad decision. Like I said, a bad decision gets made, it’s OK. Let’s sit down and, first of all, let’s figure out how we’re going to correct it.

Then, what did you learn, what did we learn from that? So that way, we ensure that a decision similar to that gets made correctly in the future. I’ve earned the respect of my people, and I respect them in the same way. Just that culture of mutual respect and trust that has been created here gives us some results.

Q. How do you build that trust?

I create that by being an example to them — by showing them that I do trust them and I do respect them. We come together as a team to mutually figure out problems and make decisions. And of course, being able to figure out who fits with the team.

You have to be able to staff properly and pick the people you want as part of your team, and you want to lead that fit with that culture and have the same type of morals and respect of people that you have and the rest of your people have.

Put together a team that fits together, that has like morals, interests and goals. We all work well together and know each other well. That culture comes out of that situation.

Q. How do you work together with your team?

One thing I always say to people is that you have two ears and you have one mouth. So listen twice and speak once. That is probably the biggest thing. I see so many people who just run over people. It’s talk, talk, talk, talk, talk, and they don’t listen.

You have to be knowledgeable about what you’re communicating, and you have to show an interest in people and what they are saying.

Q. How do you get employees to buy in to your vision?

As far as coming up with the vision, you’re listening. Listening to your customers, your employees, your salespeople. Listen to other people within the industry that you’re in. Once you’ve done that, come to a consensus of what all of those people are saying and align that with the organization’s mission and core competencies.

Inclusion of the people is the easiest way to get them to buy in to anything. Of course, you may have some differences there, but displaying a true confidence in that vision and having a passion for it goes a long way toward getting people to buy in to it.

Q. How do you include people in the decision-making process?

Basically, you want to give them as much information that you’re gathering about the industry as you can: what the doctors are saying, what the salesmen are saying and ask, ‘What do you think about this?’

You get some good input from those people. Everybody’s got good ideas, and everybody’s got opinions — some good, some not so good. Just basically, sit down and discuss things. I don’t do things in a vacuum. I believe in people and people’s ideas and they feel that.

Close-mindedness is a downfall for anyone who’s trying to lead people, because you need people to run a business. The people are the corporation’s greatest asset. They have ideas and opinions, and in order to lead those people, you have to consider those. And lo and behold, they come up with things that are better than I come up with anyway.

HOW TO REACH: Synergetics USA Inc., (636) 939-5100 or www.synergeticsusa.com