When faculty members from eight Northeast Ohio institutions of higher learning decided to develop a major project together, they first had to put aside the differences of their competing institutions and learn to work together as a team.
Members of the Entrepreneurship Education Consortium needed to build a trusting relationship before they could work together, something they did through understanding and sharing goals, listening to each other, and creating a clear vision, says Phil Bessler, associate professor and director of the Business Clinic at Baldwin-Wallace College.
“The sharing of goals is a critical first step, so you can find a common objective,” Bessler says.
Members had varying opinions and ideas, so it was important that they listened to each other. Bessler says that to work as part of a team, you need to listen to other people during a discussion and refrain from telling others what to do. And if someone is having trouble with a concept, other members of the team should jump in to help that person understand the point.
“It’s not one person debating with another, but rather a third, fourth or fifth individual getting in, paraphrasing, maybe suggesting an alternative way for moving forward that makes sense to all parties,” he says.
Bessler says that too many times, people in a conversation are thinking so hard about their own next comment that they aren’t really listening to what the speaker is saying.
“The second speaker should respond to the first speaker’s comments before they add new information,” he says. “If a question is on the table, the question gets answered before a new question is introduced.”
During the discussion, Bessler says you need to follow the rules of brainstorming — don’t evaluate, judge or critique — have just one person facilitate the session and set the amount of time you’re going to spend on the issue. And don’t judge other people’s ideas, even if you disagree with them.
“Some thoughts and ideas are going to be way off base, and without that trust, you end up being judgmental, and that gets in the way,” Bessler says. “Some of the most off-base ideas may trigger someone else’s idea that brings it right back in line with what’s appropriate.”
The next step is to formulate a vision. Bessler says a good vision is one that everyone can buy in to and that can be felt by those listening to it.
“I want them to put me in that place three to five years from now, so I could close my eyes and, as they’re describing it, I’m painting the picture and I am moved to that place,” he says. “I can place myself there because they’ve articulated it in a way that takes me from my present state to their future state.”
Even on the best of teams, disagreements will occur as individuals with differing opinions work together. When that happens, Bessler says you should let the problem sit for at least 24 hours, so that team members can gather the necessary information on it.
“Time is a wonderful catalyst for creating clearer perspectives, so if a resolution could wait 24 hours, let it wait,” he says.
Bessler says it’s important to be a leader and not a manager for a team to be successful.
“Be open to the valuable input from each of the team members,” he says. “Build on each other’s ideas. And have no hidden agendas.”
HOW TO REACH: Baldwin-Wallace College, (440) 826-2083 or www.bw.edu
The Entrepreneurship Education Consortium
Faculty from eight Northeast Ohio institutions of higher learning created the Entrepreneurship Education Consortium in 2006 after meeting to discuss each person’s respective business departments. The consortium is made up of faculty from the University of Akron, Baldwin-Wallace College and Ashland, Case Western Reserve, Cleveland State, John Carroll, Kent State and Youngstown State universities.
The goal of the consortium was to help college students develop and launch their own business in Northeast Ohio, encouraging them to stay in the area following graduation and create more jobs for the local economy, says Phil Bessler, associate professor and director of the Business Clinic at Baldwin-Wallace College.
“We felt we needed to do something to help them create opportunity here, look at the infrastructure of the entrepreneurial community and the resources that are available to them, and create an experience for them that would encourage one or more groups of students to launch new businesses,” he says.
The first program in August at Cleveland State University was a success, Bessler says.
“We were unbelievably impressed with how well this program went, and that’s a result of our commitment and our skills,” he says. “We pulled off a great program. We could have made it better, and we know there are things we will change for next time.”
The consortium is committed to continuing the program, and this year received a grant from the Burton D. Morgan Foundation for funding, with a commitment for funding the following year.
Know your organization. It’s important for a leader to get to know the organization and the people when they first come in. You cannot lead an organization if you do not know it inside and out.
Part of this is knowing the dreams and aspirations of those within the organization. History, traditions, policies and aspirations need to be understood. Once they are, a leader is in a position to promote and embrace those that are positive, challenge those that need to be modified, or abandon those that no longer are relevant to the organizational success.
You need to spend the time in order to be able to make an informed judgment of where things should go. Sometimes a mistake can be made when someone comes in and feels like they need to make all the changes right away.
Don’t set lofty goals. In creating a vision, you need to identify the strengths and the opportunities for your organization, and then work with your team to create a vision that is consistent with the mission of the organization but forces the organization and the individuals within it to stretch to be better.
You also make sure that if they stretch it, it is within their grasp to attain it. If you have goals and a vision that are unattainable, if people recognize that they’re unattainable, then they no longer become motivators. You have to have steps along the way that people can attain and see the vision becoming a reality. It is important to celebrate milestones that contribute to the fulfillment of the vision.
If you set the vision just beyond the level that people think they can accomplish, they tend to rise to be able to accomplish it. A good leader can make people accomplish more than they feel they can accomplish themselves.
Have the courage to accept change. Anticipate the future. Analyze the past and learn from it. Evaluate the present and study the emerging opportunities and challenges both in the immediate and long-range future.
Expect and embrace change. As much as you try to plan, you know that your plans are going to have to change. The successful leaders recognize this, and they embrace change as a fact of life, and they’re willing to adapt.
It’s important not to be afraid to fail, not to be afraid to take chances, not to be afraid to take risks. Only if you do that are you able to push the envelope of progress.
The leader must create an environment where people cannot be afraid to fail. If they have setbacks or failures, you accept them, but you don’t emphasize them.
For example, when a vice president fails in a certain task, you might want to spend the time assessing why things didn’t work out. But it isn’t that you’re angry at them or you’re mad at them. You want to encourage them to try things so that you realize that sometimes it’s not always going to work out the way you want it to.
An environment that fosters change involves taking calculated risks. Guard against being satisfied with the status quo.
If everything seems under control, an organization is not moving fast enough.
Acknowledge that change is always occurring and is not to be feared. It is natural and should be comfortable not scary.
Give positive reinforcement. Reward progress and accomplishments. A good leader is constantly giving positive feedback. This can take many forms, from a simple pat on the back to public acknowledgement to performance-based rewards.
Financial rewards are great; however, people want to know that their opinions are valued, that their contributions are recognized, and oftentimes, that’s just appropriately placed comments at the right time. When people receive that positive feedback, they tend to strive to do even better.
Be aware of changing relationships. You have to be careful not to get too close to the people that you work with because you have to maintain a little bit of a distance. You don’t want to be perceived as favoring somebody over someone else.
You want to be close to your people on an everyday basis at work, but more outside of work, you have to consciously decide that, to a certain extent, being the head of a company is a little bit lonely. You can’t have the friendship levels that you had outside of work with people at work, like you might in another position.
Prioritize and stay on top of tasks. Make sure that you’re making the best use of your time, in terms of setting priorities for and responding to what’s really important and not just what’s imminent. You are always confronted with a host of small issues that seem like they demand your immediate attention but may not be the most important use of your time.
Put together some kind of support network with your assistant or with other people so they can handle some of those emergencies, and you can focus on some of the bigger issues.
HOW TO REACH: Mount Union College, (330) 823-6050 or www.muc.edu
Live your vision. Creating a vision comes from your head and your heart. A leader can draft a vision, but it takes a group to perfect it. You have to really help employees relate the vision to what they do.
You've got to put it all in perspective. You can't just pass out a sheet of paper and say, 'Oh, here's our vision, by the way.' You have to get input, and you have to bridge that gap in terms of the vision itself and how employees see themselves relating to it and how they are going to be a part of helping to achieve it.
You have to create that shared ownership of the vision. People have to feel passionate about their vision and their goals, so when they go home at night, they think, 'I did a good thing, I helped somebody.' If you can ask yourself that, and you can get excited about that, then you are living and sharing the vision.
Everybody's job is important. And if everybody doesn't do their job, the vision isn't going to get accomplished. Everyone has a role to play, and it's an important role.
Walk the walk and talk the talk. If you, as a leader, aren't willing to do what you are asking others to do, you're not going to have that trust. But if you do that, you will most likely have a trusting relationship with your employees.
You have to be consistent in what you do. And be accessible. These are all things that build trusting relationships.
You get better through perseverance, just continually trying to grow in that area. Staying in touch is very important. Leaders are like everybody else; they only have 24 hours in a day, and there's a lot to be done. But communication has got to be a priority; you have to be disciplined to make it a priority.
Do whatever works best in your own environment. Certain things work well in one company and not another. And still, you'll get folks that say, 'Well, I didn't know about that.'
Evaluate performance. It's important for employees to know how they are doing. You can't expect employees to improve if you haven't told them what they need to improve in and also get their buy-in to that. They have to know the reasons why you feel they need to improve in certain areas.
Stay focused. Realize that you can't be all things to all people. When you lead a company, you want to be all the things you can be to all the people, and you can't do that. You have to stay focused. When you focus, you have a much better chance of leading your company and carrying out their vision and their goals.
Stay true to your core competencies. It's trying to look at what you can be the best at and going about and trying to be the best and not getting diverted into things that you're probably not going to be the best at. Or leave it to others. But you can't dilute your energies. It's hard to stay focused; it takes a lot of discipline to do that. You can hear about a new program and think, 'Golly, we should try that,' but maybe you shouldn't do that. Maybe someone else could be better at that than your organization. You have to continually reassess and stay with your core competencies and your core business.
Model your culture. Culture goes back to an organization's values, and those values are a reference point for how employees should live their professional lives as a reflection of the organization. You promote a healthy culture by having good two-way and honest communication with employees, by modeling culture, by having those good hiring practices, and that ongoing nurturing and building of trust.
I like to greet new employees. I always thank them for choosing us for employment because there are a lot of different places that they can go for employment, and I want them to know that we appreciate that they have chosen us.
Create synergy through passion. There's power in synergy. A good idea brings out the best in people, and it brings the best people. You put synergy around a good idea, and good people will come forward.
The people you talk to about the idea have to sense that you're very passionate about it. I can't imagine ever doing something that I didn't want to do or believed so passionately in. If you don't get up in the morning and look forward to what you're going to be doing, you're probably not in the right position. You never should come to work thinking any day is going to be normal, because it isn't.
If you truly do believe in your vision, and you truly do try to live the values of your organization, that‚Äôs what keeps that excitement alive.
HOW TO REACH: Visiting Nurse Service and Affiliates, (330) 745-1601 or www.vnsa.com
Most employers offer employees a variety of benefits, from health and dental insurance to 401(k)s and other retirement plans. The cost of many of these benefits is charged to employees, but many companies, including Enerco Group Inc., are beginning to implement other benefit programs that cost employees nothing.
Cleveland-based Enerco, which manufactures portable wall-mounted heaters and other heating devices, implemented an employee benefits program through National City Bank about 15 years ago, after a bank employee spoke with the company about the work perks program and how it could benefit the company and its employees.
“He thought that would be great, just to help with the whole flow of paperwork,” says Lelia Coleman, Enerco’s human resources coordinator.
The work perks program includes a free checking account for all employees, with direct deposit set up for their paychecks. Employees also receive discounts on other banking services, including ATM fees, safe deposit boxes, loans and mortgages.
Coleman says it is easy for other companies to find similar benefit programs to implement into their business.
“If you have a great relationship with your bank, you can sit down and talk to them and ask what they could do to help you to move forward and have these great benefits,” Coleman says.
Most companies offer direct deposit to employees, and at Enerco, it’s the only option ensuring employees have cash available at the earliest possible time. And a banking benefits program could also be an incentive in companies where the employees are not too keen on setting up direct deposit.
An employee benefits program can benefit your company, as well as your employees.
“Reconciling the payroll account is a lot easier; it doesn’t even have to happen anymore because everything just clears that day,” Coleman says. “Also the ease of using it. You can open a checking account as I’m sitting here at the desk with an employee without them having to take time out of their busy day and go to the bank. It’s so easy for us and the employee.”
Coleman says response to the program has been great. Nearly all of Enerco’s 93 employees are enrolled in the work perks program.
Enerco’s program has been updated quite a bit since its inception 15 years ago. The company receives regular communication from National City about additions to the plan, so employees can take advantage of them, and work perks coordinators visit companies enrolled in the program every few years to talk to new employees and present information on new benefits.
Coleman says having an employee benefits program has made a big impact on how Enerco employees bank, and implementing one at your own company can be as simple as talking to your bank about finding a program or talking to other companies to see what type of programs they use and how their programs run.
HOW TO REACH: Enerco Group Inc., (216) 916-3000 or www.enerco.com
Finding the right benefits program
Implementing an employee benefits program is something all companies should do, says Todd Wade, vice president in National City Bank’s commercial banking group.
“It is simple, there’s no cost to it, and it’s a benefit to employees,” he says.
Implementing a program is good for the company because unlike benefits, such as health care, there is no cost to the employer, which Wade says, is especially important with the rising cost of health care packages.
“Any time an employer hears something as far as a benefit that doesn’t cost them anything, I think that is appealing,” he says.
According to Wade, there are several questions companies should ask when trying to find the right employee benefits program.
- Will the bank make it easy for employees to participate? This includes ongoing communication through on-site visits and offering the ability to open accounts at the workplace.
- Are there any size, participation or minimum balance requirements for the program?
- What is the breadth of the product offering? What are the advantages of that particular program?
- Do employees see the value in participating in the program and in the information provided from the bank on products and services?
- Is the program easy to administer? Companies should consider how they want to provide ongoing information to employees, such as through on-site visits from the bank or by distributing materials directly to employees.
Wade also recommends companies revisit the program every few years to give new employees a chance to learn about and enroll in it.
HOW TO REACH: National City Bank, (216) 222-2000 or www.nationalcity.com
Dan Sokolowski got his start in the transportation industry straight out of high school, working for an expedited trucking company moving trucks around a terminal yard. Sokolowski was able to work his way up from a yard jockey to CEO of the largest independently owned provider of ground transportation in North America.
In 1992, Sokolowski started Panther II Transportation with $5,000 in capital, one partner and no employees. He restructured the company and partnered with private equity sponsor Fenway Partners in 2005 and transformed it into Panther Expedited Services, which now has more than 370 employees.
Panther, located in Seville, deploys a 100 percent owner-operator fleet of 1,500 cargo vans, straight trucks and tractor trailers on a regional basis, mainly covering the area east of the Mississippi River. Panther’s more than 4,000 customers include third-party logistics providers, large automotive and industrial customers, and the U.S. government.
Sokolowski has grown the company in many ways. He created an owner-operator business model instead of having a fleet of company-owned trucks operated by employees. This allows for greater flexibility and lower investment costs.
Sokolowski also varied Panther’s customer base beyond automotive and other manufacturers by launching Elite Services in 2002, which services customers with specialized requirements. He also expanded the company from expedited ground freight transportation to premium logistics solutions and launched its transportation brokerage business in June 2005. This allowed the company to be a single-source logistical provider.
Sokolowski also brought in new technology by equipping all vehicles in the company’s owner-operator network with satellite communication and tracking equipment.
In July 2006, Panther acquired its biggest competitor, Con-way Expedite & Brokerage, and in March 2007, it acquired Integres Global Logistics. Sokolowski believes more acquisitions will be pursued in the future.
Sokolowski expects an increased demand in the expedited and premium logistics markets in the coming years and that Panther will continue to grow as the customer supply chain becomes more complex.
HOW TO REACH: Panther Expedited Services Inc., (330) 769-5830 or www.pantherexpedite.com
The economic recession has taken a toll on many aspects of business, including defined contribution plans. These plans, including 401(k) and 403(b) plans, took a hit over the last several years. Many employees have scaled back the amount that they have contributed to these plans and some employers suspended their matching programs in order to decrease expenses.
As the economy is bouncing back, so are defined contribution plans. It’s important that you properly manage these plans to make sure you get the most of them and are properly saving for your retirement.
“Employees need to understand that they are responsible for their retirement with a defined contribution plan, because they’re contributing their own money,” says Mike Kozlowski, CPA, director, assurance and business advisory services at GBQ Partners.
Smart Business spoke with Kozlowski about how to properly manage defined contribution plans.
What are some important attributes of defined contribution plans?
Defined contribution plans are becoming the norm, as defined benefit plans are going away. The difference between the two is that a defined benefit plan will actuarially determine what the employee’s benefit will be when they retire. Additionally, the employee may not necessarily have to contribute their own money to the plan.
With a defined contribution plan, the employee has their own account where they’re contributing their own money. The employer may be matching those contributions but is generally not obligated to do so. Whatever your individual account grows to would be your benefit at retirement or when you terminate employment with the company.
What are some key items you should understand about defined contribution plans?
Under defined contribution plans, employees take more responsibility for putting money into the pension plan, and generally are in charge of their own accounts. The employee makes the investment decisions based on the available investments options that the employer has chosen for the plan.
These plans will typically have a third-party administrator who can assist the employee in selecting which funds are best for them depending on their tolerance for risk. Most plans have between 10 and 30 investment options to pick from with varying degrees of risk. This allows an employee to properly diversify their investments and will take some of the risk away from the employer.
How does the employer properly manage a defined contribution plan?
There are three areas that employers need to pay careful attention to. The first is timely remittance of contributions. Amounts are withheld from the employee’s paychecks after each payroll and the company will submit those amounts into the plan. Those funds must be remitted as soon as administratively possible, no later than the 15th business day of the month following the month in which the contributions are withheld.
For example, if payroll occurred on Sept. 15, according to the rule, they would have until the end of the month and then 15 business days following that to get those funds into the plan. However, The Department of Labor is more concerned about ‘as soon as administratively possible.’ Funds should be remitted to the plan within a few days of payroll in order to avoid potential penalties.
The second area is the investment options that are offered in the plan. Proper diversification within your plan is important. The plan should have a good mix of different types of investments. Most plans use mutual funds and offer large cap, small cap and mid cap funds. Within those sectors the plan should have growth and value funds or a mixture of both, which would be a blended fund. Other options are available as well, like international or hedge funds. The plan should have some sort of fixed income or money market fund, so those employees who are risk averse or nervous about the stock market can have a relatively safe investment option.
The third area is plan expenses. Plan expenses are hard to determine, because many fees are hidden. Both the employer and employee need to know what expenses are being paid for within the plan. There is direct compensation, which is usually paid by the employer and includes fees to administer the plan, and there are indirect compensation fees, which are paid from plan assets and will impact the employee’s overall investment returns. These include management fees, sub-transfer agency fees, brokerage commissions and 12b-1 distribution fees. All those fees are being charged one way or another within the plan, and they’re usually hidden, so you don’t necessarily see them coming out of your account. They are basically netted against plan earnings and the employee’s individual account. These fees will vary depending on what share class of mutual fund the plan has invested in. If an employer does not know what fees are being charged they should have a cost audit performed to determine what the fees are and whether they can be reduced.
What are the benefits and risks of defined contribution plans?
The benefit of 401(k) plans is that the employee is saving for retirement. Contributions generally come out pre-tax, so the employee is not getting taxed on the amount that they have put into the plan. Some plans also allow for Roth contributions, which mean the employee is putting post tax dollars into the plan. If certain conditions are met when the Roth amounts are taken out of the plan, those amounts plus the earnings would be tax free.
The risks are similar to any investment risk out there. Over time, these investments should be appreciating in value, but it’s possible that you could incur losses in certain years as was the case in 2008 when many 401(k) plans had losses of 30 percent or more. The market bounced back in 2009 and has performed well so far in 2010.
Mike Kozlowski, CPA, is the director, assurance and business advisory services at GBQ Partners LLC. Reach him at (614) 947-5256 or firstname.lastname@example.org.
There’s a lot to think about when purchasing a facility for your business, or even constructing a new one. Regardless of how the building is purchased, building owners need to consider the benefits of cost segregation. A cost segregation study could help enhance the tax depreciation associated with the real property.
A cost segregation study analyzes the cost of purchasing or constructing a building and properly allocates the cost into the correct asset classification. This classification is important, as the general rule for the tax depreciable life of a commercial building is 39 years. Therefore, a cost segregation study saves the business owner current taxes by accelerating depreciation using a shorter depreciable life. It is important to note that a cost segregation study does not increase the overall depreciation allowed. However, it is a great tool to accelerate depreciation in the early years of owning a building.
“If you’re going to depreciate the building over time, regardless if you use cost segregation or not, you’ll get more money in your pocket today by saving tax dollars versus depreciating a commercial building over 39 years,” says Tim Schlotterer, CPA, director, tax and business advisory services, GBQ Partners LLC. “Ultimately you’re still going to depreciate the full cost of the building, but it’s just a matter of how quickly you want to and are able to depreciate it.”
Smart Business spoke with Schlotterer about what you need to understand about cost segregation and how to prepare for a cost segregation analysis.
What are some key things you need to understand about cost segregation?
You should consider doing a cost segregation study for any building purchases made over the last 10 years that have not been examined, based on your current tax situation. It may not make sense if you’re in a loss situation. Any taxpayer who owns a building that is profitable should consider cost segregation to reduce his or her tax liability.
How can you prepare for an analysis?
You need to provide the individuals conducting the analysis with some details about the building. This includes drawings of the building and tax depreciation schedules if the building has been placed in service in previous years. If the building is newly constructed, you should provide the final pay application (schedule of values) provided by the general contractor, which documents all costs associated with construction.
What steps should you take after a study is completed, and how can you use that information within your business?
There are two components. If it’s an existing building that you’ve owned for the last 10 years, you need to consider any missed depreciation over the time you’ve owned it. That correction of depreciation can be taken within the current year’s tax return as an automatic change in method of accounting, which gets reported on Form 3115. This correction of depreciation could provide significant tax savings to the building owner, depending on how long the building has been owned. If you have a building you’ve just purchased or built, an owner of the building needs to consider the cost versus benefit analysis and determine if there’s an estimated tax savings. It’s important that the tax savings be done in present value dollars versus over a period of time, so you can better understand what the true dollar value tax savings is in the current year, versus the cost of doing the study itself.
What type of savings can you expect from cost segregation?
It’s difficult to pinpoint. A lot of the savings depends on use of the building. Special use type buildings that are designed or created to support services offered within the building could bring about significant savings. The saving could be as high as 25 to 35 percent of the building being reclassed from 39 years to a lower depreciable life. Even a building that’s just standard use, like a distribution center or warehouse, can still result in a considerable amount of savings anywhere from 10 to 15 percent of additional savings. The amount really depends on the building’s intended use, design of building and cost.
What are the benefits and risks associated with cost segregation?
Cost segregation gives you a present value savings of tax. By doing a cost segregation study, you’re accelerating the tax depreciable life of the building and getting the benefits now, versus over a longer period of time.
Cost segregation is an acceptable process by the IRS. The risk is the professional services firm you use and engage to complete the study. There are many boutique firms out there that will offer this type of service. When deciding on a firm, you need to make sure you have two players involved a good tax professional and an engineer. The engineer should understand building structures and be able to use those skills, and the tax professional should use his or her knowledge of tax law to make sure the proper classification of assets is performed. These two components will provide assurance to the business owner that the cost segregation report will be upheld under an IRS exam.
Tim Schlotterer, CPA, is the director, tax and business advisory services, with GBQ Partners LLC. Reach him at (614) 947-5296 or email@example.com.
Many factors come into play when choosing the right tax structure for your company, and not sifting through every factor can lead to the wrong decision. Some important items to consider include the size and nature of your business, your vision for the future and the level of control you want to have within the organization.
With the economy slowly beginning to turn around, now might be a good time to assess your current tax structure to determine if it’s the best one for you. You want to make sure your company is getting the most out of the tax structure, and if it’s not, it might be time to think about restructuring.
“You need to set up a meeting with your team your accountant, attorney and business partners and determine if you are doing the best things for the company, and if you could be doing things better,” says Dennis R. Mowrey, director, tax and business advisory services at GBQ Partners LLC. “It’s important to choose the best tax structure to be able to take advantage of vital tax benefits and have the right legal flexibility, and to maximize the value of the company now and in the future.”
Smart Business spoke with Mowrey about factors to consider when choosing a tax structure.
What are some key things you need to be aware of when choosing a tax structure?
- The level of control you want to have
- Legal liability and protection of personal assets
- Tax implications
- Expected profit or loss
- Reinvestment opportunities
Who should be involved in the decision making process?
The best people to have involved are your accountant, attorney and other business advisors you may have (such as bankers). All should be consulted as soon as you start to think about setting up a business. All should also be consulted as you make decisions regarding the company moving forward.
Your team, especially your accountant, can also help you decide which tax structure is right for your company. It’s good to be as upfront as possible with your team so the best decision is made and all avenues are explored. Too many times people do things and think about the consequences afterward, and then wonder why things did not turn out as they expected (i.e., getting a tax assessment for taxes they were not expecting to pay).
What are the different types of tax structures available to businesses?
A sole proprietorship is the easiest and least expensive way to set up a business. You just start up a business and it’s there. You have complete charge of your business there’s no one else to tell you what to do or how to run the company you’re in complete control. All profits come to you, and if you need to dissolve the business, it’s fairly easy to do.
A partnership is also fairly easy to establish. There are three types: general partnerships, limited liability partnerships and limited partnerships. The most important thing in a partnership is to draft a quality agreement between the partners. Make sure all partners are on the same page and have everything spelled out in writing. Many times what the company and the partners who own the company start out to do changes over time. Partnerships help bring new energy to the company, and allow more than one person to reach the best decision for the company.
There are several different types of corporations C corporations, S corporations and limited liability corporations. These have the most protection against legal liability. Any debt of judgment against the company goes against the business and not against your personal finances. Most people can only be held liable for their investment of stock in the company.
What are the risks and benefits of these different structures?
Sole proprietorships have unlimited liability and are legally responsible for all debts against the business, which puts your business and personal assets at risk. It may also be harder to raise funds or to hire high-caliber employees who may want to own their own business in the future.
Partnership profits are shared among all partners and therefore decisions need to be made by all partners (which can sometimes lead to disagreements). Partners are liable for the business actions of their other partners. Partnerships may also have a limited life, and can be inadvertently terminated by a death or withdrawal of a partner.
For corporations the process of incorporation requires more time and money than the other forms of organization. A shareholder of a corporation also deals with double taxation, where the corporation and dividends to shareholders are both taxed. Corporations tend to require more paperwork since they are monitored by federal, state and local tax agencies. Corporations raise funds easier through the sale of stock, and are allowed to deduct some benefits paid to officers and other owners.
Can you change your tax structure down the road, and how easy is it to do this?
Companies should continue to look at and monitor their tax structures as the business grows and develops. As time goes by and tax laws change, your accountant and attorney can help you make decisions as to what is needed to modify your tax structure.
You can change your tax structure over time as you grow or reduce your size, but it may or may not be easy, depending on your current structure. It also depends on the size of your company. If you have a two-person corporation that wants to become an S corporation, it would be very easy to make that change. But it’s harder with a large corporation with thousands of shareholders to get everyone on the same page and to sign off on a change to the structure.
Dennis R. Mowrey is the director, tax and business advisory services, at GBQ Partners LLC. Reach him at (614) 947-5273 or firstname.lastname@example.org.
Every company uses the same basic building blocks as the foundation of its business, but each company also brings unique factors to the mix to set it apart from competitors and draw clients to it.
As a business leader, you need to identify these special components and focus on them in your daily practices so your business can succeed.
“It’s a lot like serving a stew,” says Joe Cullinane, adjunct faculty member at Northern Illinois University. “All stews have carrots, meat and potatoes, but the real trick is adding that special ingredient or sauce that keeps people coming back. It’s the same in business you need to determine what makes you different and special.”
Smart Business spoke with Cullinane about how to determine these special ingredients and incorporate them into strategic planning and artistry.
What do you mean by ‘serving the stew,’ and why is this important for businesses?
It’s a metaphor for the dish that only you and your organization can serve to the marketplace. Just like every individual, every company has an identity. The stew represents all the ingredients that go into identifying the company and defines it in terms of what it brings to the world in a way that no other entity can.
It challenges you to think creatively about what makes your organization compelling and special. You then focus on those items, or the special sauce, and apply it to everything you do. It’s a marketing strategy to identify authentic differentiations and work from your strengths.
Cultivating a deep sense of the organization’s identity is the most effective way to navigate endlessly rapid change and fiercely competitive markets.
How can companies use their different ingredients in everyday business matters and strategic planning?
You can focus on doing more of it when you’ve identified what makes your business special. For example, Google’s specialty is innovation, and we see that in the vast array of products it launches every year.
Apple combines advanced technology and elegant designs to create items such as the iPad. Four Seasons Hotel has unparalleled customer service in everything it does, and Disney sprinkles its magic on the total customer experience.
Some of the most successful companies are leading the field just by really finding out what makes them special and focusing on it. This really helps you stay focused on what matters.
What is strategic artistry, and how does it relate to the serving the stew philosophy?
This is a right-brain approach to strategy that enhances the left brain. Most business strategies are about numbers, forecasts, projections and spreadsheets, while strategic artistry is about creativity feelings, relationships, finding the muse and having fun. It’s finding what’s right and doing more of it. The stew is part of this process.
For example, if you look at the movie ‘Avatar,’ it couldn’t be created until the specific technology was evolved. In one sense, you’re looking at highly left-brained items such as 3D technology, but on the other hand, you have this artistic vision that went into creating the most successful movie of all time.
The same can be said for Apple products, such as the iPad and iPhone. You combine this technical left brain with this artistic right brain to see what kind of results you can have.
What are some of the benefits and risks of strategic artistry?
The benefits are that you can become innovative and generate more ideas because you’re focused on the positives and strengths. Businesses often spend so much time focused on problems, compliance, taxes and other issues, so being able to focus on the creative opens up a lot of opportunities.
It also creates organizational focus. You can really focus on the stew and special sauce once you determine those items, and everyone in your company will have something in common. Customers also know it, so they know what to expect of you. It gives you an opportunity for real, authentic differentiation.
The risks are that you may take your eye off the ball on some of the mundane business tasks you have to do. You still need to execute as a company, and you can’t stop doing it.
The greatest risk is that you don’t find something special with your company, and that’s scary. Then it becomes about how you can actually do something that’s special.
What steps can businesses take to begin practicing these philosophies and incorporating them into their business practices?
The first step is to determine what the stew and special sauce are and use this creative artistry process to do it. Discover what your customers really love about you that your competitors don’t do.
Then you need to get agreement and alignment as an organization around that special sauce and stew. The leadership starts it, but there has to be some sort of agreement and alignment because it has to be authentic.
Then you find more ways to do it, sprinkle the special sauce on everything you do, look for the ‘bright spots’ and communicate it across the world so everyone can understand what it is that makes your company special.
Joe Cullinane is an adjunct faculty member at Northern Illinois University. Reach him at (650) 391-9725 or email@example.com.
Each year, organizations invest millions of dollars in good intentions. Unfortunately, these good intentions don’t generate a good return on that investment.
One of these well-intended investments is time spent on performance management processes that provide only views of the past about employee performance. Instead, organizations would be better served by looking forward, with an eye toward maximizing organizational performance and generating a return on investment in their most important asset, their people.
“Managers need to understand how to get people to perform better, leverage their strengths and serve customers in the most effective way possible,” says Keith Robinson, director of leadership development in the department of accountancy at Northern Illinois University. “The current methods of performance management are antiquated and don’t give firms the opportunity to actively manage their portfolio of human assets.”
Smart Business spoke with Robinson about how to manage employees as valued assets in a portfolio and how to change performance management processes to align with this strategy.
How can a company begin to manage people as valued assets and invest in them for the future?
Most businesses will agree that people are their most important asset, yet manage them as a short-term expense. Company financial statements and human resource processes reinforce this notion, especially in lean times.
Firms need to shift their thinking. Would managers act differently if employees were listed on the balance sheet as assets instead of the profit and loss statement as a compensation expense? Doing so would force managers to shift their thinking by creating ways to minimize risk and maximize return.
Managers begin to think prospectively and manage actively, as opposed to current performance management processes that drive retrospective thinking and are static. Managers set an expectation that they will invest in their employees’ futures if they manage them as long-term assets, but they also set an expectation that the asset will perform and generate a return. Under this scenario, employees (assets) will perform, remain motivated and serve customers more effectively.
When managers get people motivated about performing, it builds business and generates return over the long term. However, one of the greatest temptations and biggest risks is cutting expenses by cutting people. Doing this sends a message that employees are just a business expense. Managers risk giving back the investment they made by reducing the assets that generate return, weakening the business and its ability to perform over time.
How can a company change its performance management processes?
Most performance management processes are ineffective and archaic. Managers generally complete performance management twice a year, and do it solely to meet company requirements. And when they find no value in it, the result is a report on the past that generates no return for the future. Taking an active investment approach forces managers to look at the assets in their human portfolio of talent on an ongoing basis, set an expectation for performance and then work with their assets to generate the highest probable return. This means they must continually adjust their portfolio, get feedback on their assets’ performance, look at market conditions that impact their talent strategy and adjust as they go.
What tools are available to manage your human investment portfolio?
There are several tools to actively manage assets, adjust the portfolio, spot trends and replace old processes. These include:
- Comparative values assessment, which assesses values and helps managers ensure alignment with the organization.
- Comparative performance grid, which compares and assesses the performance of assets on an ongoing basis so managers understand relative performance to expected return (goal performance versus actual performance).
- Ability grid, which is used to assess the key attributes of the assets and give managers a view of skill and ability on an ongoing basis.
- Performance return map, which compares the true performance of all assets in a manager’s portfolio against the expected performance and not just against other assets. Old performance management processes are about forced ranking and comparing people against one another, which is a mistake. Instead, managers need to compare assets against the expected performance (return) in ongoing market conditions.
- Asset allocation map, which is used to determine the optimum mix of assets in the manager’s portfolio and adjust for market changes.
What else do you need to consider?
There are several questions leaders should ask when looking to change their performance management process.
Are our processes forward or backward looking? How often do I complete these processes, and do my employees and managers find them valuable? How do people feel when we write and deliver them? Energized or drained? What kind of value do these processes provide? Do they make the company smarter, better and faster? Does our performance management approach generate a return?
What are the benefits of changing your management processes?
Doing so allows managers to actively manage their business risks and opportunities prospectively in a dynamic business environment. People are wired to look toward the future, and this approach leverages that for greater employee engagement, which minimizes risk and maximizes return, thereby making the business stronger.
Keith Robinson is director of leadership development in the department of accountancy at Northern Illinois University. Reach him at (815) 753-1592 or firstname.lastname@example.org.