When building an organization, Lisa Stern says it’s important to bring the right people on board to succeed.
Stern, founder and CEO of Big Communications Inc., which posted 2007 revenue of about $17 million, uses the interview process to find out if someone will fit into the health care communications agency’s culture.
“The right people for us are not always that they have 50 years of experience in the technical skills that we need them to have,” she says. “Much of the time, it’s more about their innate makeup and the values that they have as part of their DNA that make them a good fit with us.”
Smart Business spoke with Stern about how asking the right questions during the interview process can help you find the right people to develop a solid organization.
Q. How do you know a potential employee is the right fit for your company?
It’s important to ask the right questions. I think behavioral-based questions really help to get an understanding of how a person would act in a certain situation. It’s really about asking questions to really (seek) out who they are at their core.
When you have clearly defined for yourself what those things are that you are looking for, it’s harder for a candidate to hide. As an example, we look for people that are detailed. So, one thing that I might ask them, depending on what position they are going to be in, is how you plan your day, how you organize your day. That’s a benign question. I don’t say to someone, ‘Are you detailed?’ I ask them about something specific that they can say, ‘Well, I find that I’ve got a great memory and that I always know what it is that I need to get done.’
To me, that is not a detailed person, it’s not a process person, and all I’ve asked them is how you organize your day. I may interview somebody that has been in a position before and I’ll say, ‘Tell me about a system at your current job or some other job that you really thought could have been better, that you really thought could have been made more efficient. If you were king or queen, what would you have done?’
If they don’t have any ideas, then I know they aren’t a systems person. I know they aren’t going to be thinking about process and how could we be more efficient.
If they’ve got a lot of ideas, that’s just inherent you can’t fake that. If you are making up ideas that you could have had, then you are still thinking about process. But if you can’t think of anything you can’t fake that in my mind.
Q. How do you know what you want out of your organization?
If you are starting a company from scratch and you are saying, ‘Here’s what we’re going to establish is going to be our culture,’ that’s different than if you’re already in the middle of the organization and you’re like, ‘Oh, I better think about this cultural thing because it sounds like it’s kind of important.’ So, how do I analyze what we have here, and then make it better?
Q. How do you define your culture?
When we had about 20 people, we really liked our company, we liked our culture, we liked the feeling; we had no definition for it at the time.
But we kind of liked the ‘big’ feeling, and so we said to ourselves, ‘What is it that makes it so great here?’ We broke it down into people and what qualities those people had that, if we just had 100 of these three people, we could just change the world.
So, what are those adjectives that define those people? Then, pare it back even further to say, ‘What are the top five or six or seven?’ I think we’re at eight that really define who we are and who we want to be and who we want to continue to be because we liked where we were.
Then, our next step was to look at the leadership team and say, ‘OK, do we have these things, because if we don’t, it’s going to be very hard to live by them.’ So, if I’m not detailed, that can’t really be one of our cultural values because how am I going to lead by example? How am I going to teach people how to be detailed, how are we going to do that if we are not inherently ourself which is not to say that every person in the organization on a scale of 1 to 10 needs to be a 10 in all of the cultural values because you aren’t going to find that.
HOW TO REACH: Big Communications Inc., (248) 246-5200 or www.bigcommunications.com
For nearly a decade, Kevin Chase bucked the family tradition of entrepreneurship, instead choosing to work for large corporations.
While his father and five of his siblings owned their own businesses, Chase took a different road and worked for plastic suppliers. But while on the job, he recognized that the industry was moving away from personal interactions and customer service, things he felt were important. So, sensing a need in the market, Chase left his job, and he and his wife, Carole, founded Chase Plastic Services Inc. in 1992 with a commitment to superior customer service.
The Chases Kevin is president and Carole is vice president have built the business on six core values: customer satisfaction, execution, independence, high expectations, teamwork and integrity, which permeate the culture at Chase Plastics.
They also build relationships within the company, promoting teamwork from the top down. The couple have worked in every function in the company including operating forklifts and delivering orders promoting strong relationships with employees and generating loyalty.
Chase Plastics has also achieved success by not being tied to one specific industry; the company generates substantial revenue in the medical, marina, automotive and furniture industries. The Chases have passed on opportunities to supply global organizations when they felt they would lose some control of operations and deviate from their core values.
HOW TO REACH: Chase Plastic Services Inc., (248) 620-2120 or www.chaseplastics.com
Joseph A. Pascaretta was only 11 in 1999 when he launched himself as an entrepreneur.
He loved airplanes and took pictures of them for his friend Aaron Dowen now his business partner to put up on a Web site.
With their knowledge of the Web, the friends designed a Web site for a local construction company, pitched it to the firm and had their first customer. With the help of a co-signing lawyer, the boys were able to sign contracts despite their age and grow their IT business, which is now Alps Technology International.
In 2002, when a client mentioned that keeping up the grounds of his business was a big expense, Pascaretta saw a new opportunity and started The Alps Lawn Co. He began by cutting lawns and landscaping, growing his client base until he needed to hire managers and employees to take over.
When he turned 15, he added another aspect to the business, capitalizing on his interest in planes and earning his pilot’s license, allowing him to take aerial photos of clients’ landscaping. And his IT company gave him an additional advantage, as he developed software that lets clients see what the finished landscaping will look like before they commit to the project.
With all of his success, Pascaretta has no intention of slowing down. In the next five years, he plans to become immersed in the Asian market and get into the health care field through software. He also plans to take The Alps Lawn Co. national and is moving it into several states beyond Michigan.
Terry Terhark believes so passionately in his mantra, “Do the right thing and good things will happen,” that he named his company after it.
The RightThing Inc. provides recruitment process outsourcing, providing the staffing function for its clients by finding the best candidates for full-time positions with the clients.
Terhark has built the foundation of the company on its core values: flexibility, adaptability, commitment to each other, accountability, empowerment and trust, and expects these values to be apparent in interactions with both clients and employees.
Living these values has led to tremendous growth in the past five years, allowing The RightThing to grow into a company with 90 clients, including Wal-Mart and Coca-Cola. Terhark also attributes his success to a tremendous need for talent as more people leave the work force than join it, outsourcing becoming more accepted and cost-effective, and his company’s solid reputation. He also credits his relationship with his employees to an organization that has few managers and empowers all employees to make decisions.
As his company continues to grow, Terhark envisions global expansion. Many of his clients do business globally and have staffing needs worldwide. To accomplish that, he is seeking out equity investors capable of helping him grow The RightThing. His biggest challenge in growing is staying connected to his employees and maintaining a small-company feel, and he works hard to achieve that by holding small group meetings and addressing employee concerns.
HOW TO REACH: The RightThing Inc., www.rightthinginc.com or (866) 788-4464
Dilip Dubey always encourages his 1,000-plus employees to do the right thing, even if it isn’t the easiest thing, a philosophy that has led Netlink to annual growth of more than 100 percent.
Dubey founded his company with a partner in 1997, with each one contributing $1,000 in capital and taking on one project from Chrysler. The early years were tough at Netlink, an information technology solutions and outsourcing company that bases its approach to service delivery on Dubey’s Delta Platform, which streamlines various systems to provide a high-quality product at a significant savings. Investors and potential clients alike called Dubey’s idea for a new delivery model “brain dead” and said that, even if validated, it was far too big an idea for a start-up. Today, clients include GM, Ford and Starbucks, and Netlink has a five-year backlog.
Netlink’s typical sales pitch is less than five minutes, and it offers two competitive advantages: services are provided on a fixed-fee basis rather than an hourly rate, so Netlink takes on the financial risk, and a 20 percent savings is offered upfront to customers.
Other factors contributing to Dubey’s success are his belief in empowering employees to make key decisions independently, doing the right thing and emphasizing that family commitments come first.
Dubey says that given Netlink’s phenomenal growth, the challenge is no longer just to grow but to achieve the company’s full potential, and when it does so, he predicts it will be the largest ITO/BPO global company in the midmarket.
While Lapeer Industries Inc. has been in business for nearly 35 years, it is just in the last several years that business has really taken off.
The company was founded by Carl Schreiber in 1974 to build turrets for Cadillac Gage which it still builds today and eventually, Schreiber’s three sons became involved in the business. In the last couple of years, following buyouts and retirements, Daniel Schreiber was the only family member left, giving him free rein to take the company a precision machining and fabrication firm that assembles primarily for the defense and aerospace industries to the next level. Today, Schreiber has majority stock ownership, and the company is known as an industry leader in design, machining and fabrication, and it is dedicated to providing top-quality products.
As president, Schreiber’s strategy was to solidify his existing customer base and build around that pedestal as he pursued other business. But as the business grew, sales and orders outpaced Lapeer Industries’ building capacity. Looking at the situation not as an obstacle but as an opportunity, Schreiber sought out low-cost financing to support additional buildings, machinery and other items to meet sales objectives and customer obligations.
In the next few years, he would like to see the company stabilize its growth while focusing on reinvesting in state-of-the-art technology in manufacturing its armored products. He also plans to engage in larger programs, such as engineering, prototyping and tooling, and in cost-efficient manufacturing.
HOW TO REACH: Lapeer Industries Inc., www.lapeerind.com or (810) 664-1816
When Brian A. Demkowicz and his partners founded Huron Capital Partners LLC in 1999, they had two employees and an angel investor. Nine years later, Huron has acquired about 80 companies that employ about 3,500 people.
To maintain a competitive advantage and maximize returns for investors, Demkowicz and his team use a differentiated investment approach coupled with rigorous and disciplined decision-making. They seek to create equity value in three ways: by acquiring platform companies at attractive prices through strict discipline in the sourcing, screening, structuring and due diligence processes; by building and managing each portfolio company with a hands-on operational approach in partnership with portfolio company management teams; and by successfully realizing investments by making them more attractive to a broader base of buyers and using a competitive sales process upon exit.
To achieve these goals, Demkowicz places a strong emphasis on culture. To create a culture in which employees and the company can succeed and thrive, he has developed five fundamental core values: foster an atmosphere of trust through honesty and integrity; advance team goals ahead of individual goals; have a relentless and conscientious effort to achieve success; act with respect, humility and gratitude; and lead a balanced life and have fun. Living these values ensures that everyone is moving in the same direction and is focused on common goals.
As a result, no senior investment professionals have left Huron since its inception, and Huron is now ranked in the top 10 percent of all private equity firms in the U.S.
HOW TO REACH: Huron Capital Partners LLC, (313) 962-5800 or www.huroncapital.com
In 2004, the tech bubble had burst and Southeast Michigan’s economy was suffering.
But while many people thought it was a bad time to start an IT services firm, Bradley Waite and his partners disagreed, risking their financial well-being to found Halo Group.
Waite felt the biggest hurdle was recruiting the highest-caliber people and getting them to stay. So Halo developed an eight-step hiring process phone interview, face-to-face with salesperson, face-to-face with recruiter, technical screening, reference check, resume, represent them and hire them. And to make his company a more attractive place to work, he also offered recruits the option of becoming employees, with full benefits, or working directly for the client. Waite based his strategy on empowering both client and employee, giving them the ability to choose what works best for them. The process also ensures that Halo delivers quality professionals, allowing the company to charge 40 percent more per hour than the industry average.
And as part of his people initiative, he’s created staff development manager roles to maintain contact with employees working at various locations. As liaisons, they are responsible for meeting monthly with consultants to make sure they’re satisfied and to help with career development. As a result, Halo has a higher retention rate than other IT staffing firms, giving it a competitive advantage.
Last year, Halo opened an office in Dallas, and Waite’s long-term goal is to grow it into a national IT staffing company, with five to seven offices across the country.
HOW TO REACH: Halo Group, www.halogroup.us or (248) 489-9500
Any business, no matter what the economic cycle or stage of growth the company is in, is looking for ways to free up capital and increase flexibility.
“Any business that owns real estate should evaluate a corporate sale lease-back transaction as an efficient means to accomplish some or all of these objectives,” says Patrick Shannon, vice president of the Investment Group at Grubb & Ellis in Detroit.
The economy is still in a state of near-recession, so investors are looking to diversify their portfolios. Commercial real estate is an asset class that more and more investors have gravitated to over the last 10 years.
“There are still far more investors in the commercial real estate arena than there were 10 years ago,” Shannon says. “Corporate sale leasebacks are attractive options to real estate buyers because of the immediate cash flow and long-term value of real estate. Businesses, meanwhile, are open to corporate sale lease-backs because they are a commonly accepted and economically efficient means to raise capital.”
Smart Business talked to Shannon about the benefits and drawbacks to a sale leaseback agreement.
What exactly is a corporate real estate sale leaseback?
In its simplest form, a sale leaseback is a financial transaction whereby a company sells its real estate to an investor, who then leases the property back to the seller. Typically, the leaseback term is for a period of 10 to 20 years and is structured under a triple net lease.
How are that and other sale leaseback terms determined?
The two most significant negotiable factors of the sale leaseback transaction are the price and the rental rate. Factors that influence price and rental rate include the market rent and values, comparable sales, the tenant’s creditworthiness and the length of the lease term. The longer the lease term, the more the pricing becomes influenced by the credit of the tenant. The shorter the lease term, the more influence market value and market rent will have on the property.
With many variables subject to negotiation and market influence, it is important to fully comprehend the ‘big picture’ of the deal structure to ultimately negotiate terms most favorable to you.
What are the benefits of a corporate sale leaseback?
The sale leaseback turns noncore assets into investment capital. The transaction is essentially an alternative financing method that provides up to 100 percent of value, whereas other financing methods may have a threshold of less than 100 percent of value.
What are some of the drawbacks?
From the buyer’s perspective, there are obvious risks. The tenant can choose to leave the building, the tenant might not maintain the building to marketable standards, or the tenant might go into default on the lease. But all of those factors are examined before the agreement is signed, and their risk is priced accordingly.
From a corporation’s perspective the seller’s perspective one risk is that you might grow out of the property, but owning the property wouldn’t change that. If real estate values jump, then there could be seller remorse. Real estate values could go south, too, making a sale lease-back an even better strategy.
Other risks include a lease that may limit your ability to make structural improvements and reaching the end of the lease’s term without renewal options.
What about timing? Would it be better to do a sale leaseback now or wait until the market improves?
A business argument can be made for doing it now. You want to put all your money into the core business to yield the largest return possible. That’s a good decision at any time. The cash proceeds from the sale may not be as great, but the return on your business investment might well be better.
The current market is tending to lengthen lease terms. That gives the buyer more stability, but if you’re looking for a longer term anyway, such an arrangement could serve your needs.
Experienced real estate agents can help clients understand those factors based upon their experience. They can judge how the market can perceive each of those items and reasonably estimate expected proceeds based on various sale leaseback terms.
PATRICK SHANNON is vice president of Grubb & Ellis Company’s Detroit Investment Group. Reach him at (248) 357-6593 or firstname.lastname@example.org.
Spurred by a softer real estate market, recasting leases renegotiating them before term’s end is becoming more common and more beneficial to tenants and landlords alike. While recasting often saves money, it doesn’t require any more due diligence than you would normally have to undertake later.
“Your lease is an excellent place to look for cost savings,” says Daniel Canvasser, CCIM, an associate in Grubb & Ellis Company’s Detroit office.
Adds Senior Vice President Ray Husband, “However, before recasting a lease, you should be satisfied with the building because you will have to take on additional term. Admittedly, you are taking a chance on market fluctuations, but I would be surprised if the market gets any weaker.”
Smart Business spoke to Canvasser and Husband about the opportunities that recasting a real estate lease creates.
Is recasting a lease normally something that occurs to corporate executives?
Husband: It may or it may not, depending on whether they approach real estate decisions strategically. Typically, real estate brokers have to approach executives and explain the process, show them where the market is today versus when they signed their lease and show them the savings that can be affected by recasting. Before the market went soft over the past couple of years, the early recasting or renegotiating of a lease really wasn’t an alternative. But today, a company can save a significant amount by recasting leases that have been in place for five to 10 years.
Canvasser: Because real estate is one of the largest overhead costs, it’s an easy way for companies to immediately reduce operating costs and overhead. Brokers can do a full lease analysis, which involves reviewing major terms and conditions, operating expenses and additional costs. They can show executives how the market at that time affects lease rates and conditions.
What are the benefits of recasting to tenants?
Husband: The first benefit is related to economics: the ability to lower lease costs. The second benefit is seeing if the space is being used efficiently and if there’s an opportunity to reduce total square footage. When employee layoffs are involved, a company may be stuck with excess space.
Canvasser: A major market trend is toward less square footage. If brokers need to bring in an architect or a space planner to increase space efficiency, they will do so.
What are the benefits to landlords?
Canvasser: Because there’s so much availability in the market, if your landlord can secure your commitment well before the lease expires it takes away the possibility of you shopping the market, thereby increasing the landlord’s security with another long-term lease.
Husband: If you do start shopping the market and the landlord loses you, he or she will run into the same costs in terms of paying commissions, making improvements, free rent, giving away moving allowances to refill that space.
What options can tenants receive by recasting?
Canvasser: You usually receive rent relief immediately, beginning the day the new lease is signed. Leases in the Detroit area normally include annual escalations, so as the lease nears its term, payments are the highest. Immediately lowering rent by $3 or $4 a square foot can create big savings.
Husband: You also can build in expansion options, just as you would on any other lease you sign.
Can companies recast leases on their own?
Husband: You could, but brokers supply an understanding of the market and what tenants can ask for. The landlord understands that when you bring in a broker, you’re bringing in a market expert. The landlord understands that, if he or she does not negotiate in good faith, you will be out in the market looking at alternatives.
Canvasser: A broker serves as an intermediary to keep the discussions and negotiations on a cordial basis. The process the lease abstract, reconfiguring space, finding inefficiencies involves taking a look at space from a different angle than most business owners would. Brokers are involved in the transaction from the start to the finish, working with clients hand-in-hand to make sure everything is handled to their satisfaction.
Husband: Brokers can build in the most flexibility possible within the lease document itself. So economics are not the only consideration.
Canvasser: Most of the larger landlords prefer to deal with brokers because they know their tenants are serious. If the space works and the building works and you are happy, it’s an easy way to save time and effort instead of going out and looking for new space.
RAY HUSBAND is senior vice president in the Grubb & Ellis’s Office Group. Reach him at email@example.com or (248) 357-6561. DANIEL CANVASSER, CCIM, is an associate in Grubb & Ellis Company’s Detroit office. Reach him at (248) 350-8141 or firstname.lastname@example.org.