Detroit (1202)

Sunday, 31 December 2006 19:00

Leading with respect

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Michele Hodges puts a great deal of stock in respect. “The hallmark of healthy leadership is respect,” says Hodges, president of the Troy Chamber of Commerce. “Respect has a very broad definition. It must be shown to your employees or customers. But it must also extend to processes, history and every entity your business affects.”

Hodges’ philosophy has served her well as she works to make a difference in the business community.

“Helping make businesses more successful, as well as helping to enhance all aspects of the community, keeps me motivated,” she says.

The Troy Chamber serves 800 business members and a community of more than 85,000 residents living in Troy and 120,000 who work there.

Smart Business spoke with Hodges about why it’s a waste of energy to battle change and why you should never do anything you don’t want plastered on the front page of the newspaper.

Q: What characteristics are critical for a successful leader?

Respect is absolutely the underlying foundation. I believe the challenge is in not leaving out any stakeholder and, depending on the issue under consideration, allowing each stakeholder the appropriate weight in the decision-making process.

Often, decisions are made without a holistic view of how everyone will be impacted. That is when leaders run into problems. You certainly cannot please everyone, but you can — and must — respect all who are impacted.

I lead with respect and balance. There is always an emotional side to every issue. But when you look at the entire decision-making pie, the emotional aspect should be outweighed by facts.

Q: How do you manage change?

The secret is in not fighting it. The changes we experience in Troy are plentiful, including the trend toward outsourcing, changes in manufacturing and deregulation.

If all data points suggest change is inevitable, you are wasting energy battling against it. The wiser move is to find opportunities instead of focusing on the losses.

It’s human nature to resist change. That is why leaders play such a pivotal role in leading change. Great leaders are persuasive and communicate that the stakeholders are going to land in a safe place, despite the changes under way.

Look at change as an opportunity to manipulate your product and build a competitive advantage. That’s where leaders’ energy needs to be spent, rather than fighting the inevitable.

Q: How do you make decisions?

I use what I call the ‘newspaper test,’ and it has worked very well for me. No matter what the decision is, personal or business, I ask myself this question: ‘How am I going to feel when my decision is plastered on the front page of the newspaper tomorrow morning?’

Basically, will my decision hold up to scrutiny? Will people impacted by my decision read the paper and wonder why they were not consulted? Is there any aspect of my actions that I cannot fully justify?

This mindset helps me involve all resources before taking action. It forces me to take the time needed to make thoughtful decisions that I will not regret in the future.

Q: How do you define success?

Many leaders define success as perfection, but I have never held myself to this standard. As a lover of theater, I use this analogy — if the performance has some bumps in the road and is not flawless, that does not mean it isn’t a success.

At the end of the play, does the audience reward the performers with a sincere standing ovation? Does the whole cast feel positive about the outcome as they stand on the stage and take their bows? If so, it’s a success.

Likewise in business, there will be failures. However, if they are leveraged to the fullest degree, they can lead to overall success.

The focus cannot be on the bumps in the road, it must be in the final outcome when defining success.

Q: What is your best advice to CEOs?

I recommend the 10 Minute Rule. No matter what the communication forum, whether it’s a routine weekly staff meeting or a feedback session with an employee, take 10 minutes to mentally prepare. Think about it carefully and remember it is worth your full attention and focus.

Leaders can easily become overconfident and complacent over time. You must be on guard for this, because not staying fresh and current means you will become dispensable.

Stay cognizant of the fact that nothing you do can become routine. Every communication you participate in is worthy of your full attention and at least 10 minutes of mental preparation.

HOW TO REACH: Troy Chamber of Commerce, (248) 641-8151 or www.troychamber.com

Friday, 24 November 2006 19:00

The Jackson file

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Born: Detroit

Education: Bachelor of science degree, accounting, Morris Brown College; MBA, Clark Atlanta University Graduate School of Business First job: Controller for Stroh Brewing Co.

What is the best business lesson you’ve learned?

Make decisions based on information and not emotion. That’s not to exclude some level of gut feeling in making decisions, but if you make decisions based solely on emotion, you are doomed to fail.

What are some universal truths you’ve learned about leading a business?

Be honest, be direct, and always be consistent with your decision-making.

Jackson on delegating authority: You have to be willing to delegate. That’s extra important. Any good CEO is probably going to put more on himself than he should. It’s just the reality of the seat you sit in.

Jackson on time management: It’s a phenomenal skill because there are just not enough hours in the day to really get it all done. That’s why it’s important to have people around you, people who can assist you. You try, to some extent, to incorporate the ‘WIN’ principle, or ‘What’s Important Now,’ into time management. And to do that, you have to be focused on the ultimate game plan. You’re constantly balancing that, and there’s no secret to it. It’s a struggle.

Saturday, 28 October 2006 20:00

Interest rates

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Depending who you’re talking to, today’s economy is either down, picking up nicely or very healthy. With so much uncertainty how does anyone know which is the best way to go when considering applying for a loan?

Is a variable rate loan the smart idea? Or should business owners look toward fixed rates?

“Right now business owners should take a look at fixing the interest rate on some of their loans,” says Craig Johnson, president of Franklin Bank. “The 10-year treasury loan rate today is about 4.60 percent and you’ve got the prime rate at 8.25 percent.”

Smart Business talked to Johnson about getting the best possible interest rate on a loan.

What is an inverted yield curve?
Historically, short-term rates are the lowest rates on the curve. As you go up the curve, or further out in time, rates go up. Today you have a prime (short-term) rate at 8.25 percent and the federal discount rate is at 5.25 percent. Meanwhile, the 3-, 5- and 10-year treasuries are essentially the same, around 4.60 each so y short-term rates are significantly higher than long-term rates. The best way to visualize this is to draw a box graph. At the top are interest rates, and the bottom is time. Generally speaking, as time passes, interest rates go up. But what you have today is almost the opposite. Rates are high on the short-term and flatten out and even become inverted in the long-term. That is called an inverted yield curve. What does it mean to business owners? It means there is uncertainty in the market and that long-term outlook is potentially more favorable than short-term interest rates imply.

Is now a good time for business owners to fix the interest rates on their loans?
You really have to look at a couple of factors. First of all, what is the likelihood that the Federal Reserve will lower rates for the next 12 to 18 months? The reserve didn’t raise rates during their last two meetings, and their comments have indicated that they are taking a neutral position relative to future rate increases at this point. Given that, along with indications that economy is strengthening, one might assume that rates will trend downward in the next 12 months. As for whether business owners should fix interest rates on their loans, this is a risk-reward scenario. I advise clients to look at a long-term horizon, fix a portion of the debt and keep a portion of it variable. History will tell you that you’d be better off with a balance. By doing this, you are essentially buying yourself a bit of an insurance policy. Keep in mind that fixed rate loans will carry pre-payment penalties so if you try to refinance them when rates come down it will cost you more.

Does it matter if it’s a business or residential loan?
From a residential standpoint, today there is not a material difference between a variable rate loan and a 30-year fixed loan. For example, a five-year adjustable rate mortgage is around 6 percent today, while a 30-year mortgage is around 6.5 percent. From a homeowner’s perspective, there is not much of a risk-reward for taking the five-year loan over the 30-year loan. From a businessperson’s standpoint, I refer back to the last question and advice clients to balance risk over a period of time with some variable-rate and fixed-rate debt.

Do interest rates effect the housing market?
Certainly they can whoever I don’t think in today’s environment that interest rates are the significant driver in the slowdown in the housing market. If you evaluate long term mortgage interest rates as a whole, they are not materially different than they were 12 to 24 months ago. There are outside factors other than interest rates that effect interest rates in the housing market - for example, uncertainty with the economy and marketplace. In Michigan, we are affected by continued uncertainty with some of the areas major employers. So the housing market slowdown more likely has to do with individual’s uncertainty with their jobs and with the economy in the local market.

So what’s your advice?
I think that from a business owner’s perspective, you need to look at balancing debt with some fixed and variable rate debt. I think from a homeowner’s perspective, there is little risk-reward to a variable rate loan. They can always refinance later if the curve changes and rates change for the better.

Craig Johnson is president of Franklin Bank. He can be reached at (248) 358-6459 or clj@franklinbank.com.

Sunday, 29 October 2006 11:22

Emotional intelligence

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Elaine Kelly is convinced that emotional intelligence is the key to success.

“I would highly recommend Daniel Goleman’s books, including ‘Working with Emotional Intelligence,’” says Kelly, president and CEO of Payroll 1, which provides payroll and tax services. “It clearly describes why leaders — everyone, for that matter — should strengthen their emotional intelligence.”

Kelly says that soft skills such as self-awareness, personal motivation and social skills can make or break an individual and an organization.

“We have raised awareness in our company on these competencies,” she says. “In fact, we feel so strongly about them that 50 percent of each staff member’s performance evaluation focuses on emotional competencies.”

In 1992, Kelly was working as a CPA for Coopers & Lybrand and was not considering a change. But when she was offered the opportunity at Payroll 1, she took it.

“The more I thought about it, the more appealing it was to run my own business,” she says. “The challenge intrigued me, so I decided to take the leap.”

At that time, Payroll 1 had 40 employees and annual revenue of $4.5 million. Since then, under Kelly’s leadership, both those numbers have more than quadrupled.

“I did not rush into action,” she says. “I was slow and deliberate, taking the time to talk and, more importantly, listen to as many staff members as possible. The company was very successful when I joined it. My challenge was finding a way to grow it creatively.”

Smart Business spoke with Kelly about the importance of being open-minded and the one thing that can kill a company’s growth.

How do you motivate your staff?
I am not sure you can motivate anyone. My opinion is that motivation comes from within. I do, however, know that poor management can de-motivate staff members, and that is what leaders must guard against. There are a few ways staff can be de-motivated: being underpaid, being ignored, and facing undue or harsh criticism.

Close-minded leaders put a real damper on the enthusiasm of an entire organization. It is a basic human need to want to be heard and respected. Without that, I think it is difficult, if not impossible, to maintain motivation or generate momentum in the organization.

As for as my own personal motivation, I have to guard against negativity. I am naturally persistent and resilient, but when the mood is dark around me, I can be pulled down. During these times, I concentrate on changing the mood.

What one thing can bring a company down or prevent growth?
The first thing that comes to mind is overextension. It’s easy to fall into the trap of trying to do too many things. This dilutes the effectiveness of the company and is a quick way to lose competency.

A full 80 percent of technological initiatives are never completed. Scope creep happens too easily and ends up wasting valuable resources and time. My advice would be not to be overly optimistic or ambitious when setting goals and diversifying the company.

Be honest about what you don’t know. Keep things simple and stick to what you do really well.

Also, be willing to ask for advice. Tapping into others’ expertise can save you a lot of time and money. Don’t be too prideful to ask for help.

What have you learned from your mistakes?
The quality of the staff members you hire is critical. It’s human nature to see talented new hires as flawless. I’ve learned to pull myself back and remain objective at all times, including the honeymoon period. I need to honestly assess whether each staff member not only has the right skill set, but also is a proper fit for the organization.

It has also been a challenge to remember that everyone is wired differently. It is tempting for high achievers to assume everyone wants the same things from their career. That can lead to a lot of frustration.

How do you define and measure success?
The organization cannot be successful unless the staff members feel successful. Therefore, we strive to manage the needs and objectives of each individual with that of the company. We ask probing questions during the interview process and after they come on board.

My strategy when interviewing is to find out as much as possible about what makes the candidate tick. I ask about their hobbies, background, prior jobs, likes and dislikes. It helps me place them in the right role.

For example, if someone hates it when their calls are not taken, I know a sales position would not be a good fit. However, a payroll specialist might be, since their calls would be anticipated and welcomed.

HOW TO REACH: Payroll 1, (888) 999-7291 or www.payroll1.com

Saturday, 28 October 2006 20:00

Local flavor

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 Ten years ago, Little Caesars was a marketing force on the national stage. The company flexed its marketing muscle with national TV commercials featuring its cartoon mascot, Little Caesar, and his “Pizza! Pizza!” tagline, one of the most famous in the food service industry.

Historically a takeout chain that focused on maximum value, Little Caesar Enterprises Inc. was even attempting to broach the delivery market, where it would go head-to-head with other pillars of the pizza business.

But then a change occurred, says David Scrivano, a former pizza store manager who has been with Little Caesars since 1999 and president of the Ilitch Holdings-owned company since 2005.

In the late 1990s, the company disappeared from the national spotlight, refocused itself as a value-centered takeout chain and reinvented its marketing strategy.

“In the late ’90s, we decided to move ahead with a marketing strategy where we moved off national air,” Scrivano says. “We decided to move away into local-based advertising.”

While other pizza companies kept pouring their advertising dollars into national campaigns, Detroit-based Little Caesars decided to operate below that radar. It still formulates electronic and print ad campaigns, but those are meant for small, local audiences. Individual franchisees decide which materials they want to use to promote their stores.

It’s a marketing strategy that goes against the bigger-is-better grain of the pizza industry but one that has allowed Little Caesars to appeal to customers on more of a grass-roots level. To Scrivano, Little Caesars’ stores — which number in the thousands nationwide, though the company does not give out specific figures related to its operations or revenue — are the most important part of the company. The store is not only the place where pizza is made and sold, it is the customer interface.

Scrivano says the store managers and franchisees are the people who know their customers the best, so they should be given as much control as possible over how they appeal to customers.

The philosophy of pushing decision-making to the local level has grown beyond just marketing to include the menu, franchise opportunities and even how senior managers are trained.

Local tastes
At Little Caesars — which had an estimated $435 million in sales last year, according to Hoovers.com — Scrivano says corporate management’s job is to keep all stores, both company-owned and franchised, pointed in the same direction. The management teams oversees keeping the customers central, the ingredients uniform and the logo prominently displayed. Beyond that, much of what happens at the stores is in the hands of the store managers and owners.

In addition to placing marketing in their hands, the Little Caesars menu is also full of optional items. Essential items such as pizza and Crazy Bread are mandatory, but a store manager can piece together a large portion of his or her menu based on what is popular in that particular area.

As with the local ad campaigns, Scrivano says it goes back to appealing to customers on their terms, something that is essential for any business in a crowded mass market.

“We believe it is important to offer our franchisees options so they can pick up from the local market,” he says. “Our franchisees know their markets the best.”

Market research and surveys determine what items Little Caesars puts on the optional menu. Through sales figures and store feedback, the company’s research and development wing discovered that optional items such as salads sell well in the Midwest, while barbecue wings sell well in markets such as Kansas City.

Scrivano says the optional menu evolved as an outgrowth of the local-based advertising strategy. It has worked well for the corporate leaders and has been well-received by store managers because of its adaptability.

“The optional menu and local-based marketing campaign allows us to be more flexible and more quickly respond to market changes,” he says. “We can quickly turn around and give our customers what they are asking for.”

Communication matters
Scrivano says giving store managers and owners the latitude to manage their own markets is not an indication that Little Caesars’ management members are laissez-faire leaders. While they do give store managers a lot of freedom, they also expect a lot of feedback.

The company’s leaders rely heavily on communication from the store level to get a picture of how the Little Caesars brand is faring in a given market.

“Each day, I pick up the phone and call franchisees, or they call me,” Scrivano says. “I don’t think many days go by where we don’t talk to franchisees. We are in constant communication.”

Scrivano says he looks at his relationship with store managers and franchisees as collaborative. Input comes into the corporate headquarters from the store level, and problems and solutions are identified at the corporate level and communicated back to the franchisees, who might refine the ideas and suggest something else back to corporate.

Scrivano says it’s that back-and-forth that produces ideas and concepts that benefit an entire company.

“I think it’s extremely important to maintain communication both ways,” he says. “I always want to hear from the people in the field and what their needs are, and that will give me an opportunity to solve any issues that pop up from day to day.”

Scrivano says store owners and managers can also benefit from being exposed to each other. Annually, Little Caesars brings all store managers and franchisees come together for a national business conference, giving store leaders an opportunity to compare their numbers and performance. They find out which stores are bearing the most fruit and which ones are lagging. Allowing store managers and owners a chance to interact on a large scale allows them to push each other to do better.

It also allows a forum for the company to receive store feedback on a large scale. Some of the best ideas that get relayed to the company’s corporate leaders come from large gatherings of store leaders.

“At a business conference earlier this year, a franchisee told me she was having problems understanding our new customer satisfaction survey,” Scrivano says. “She told me she had an idea to train people on the new survey by using the Web. I made a phone call to our corporate headquarters, and now our franchisees can get live training on how to understand the new survey online.”

Training days
Scrivano says the corporate managers of Little Caesars aren’t judged based on whether they can bake a pizza or ring a sale, but that doesn’t mean they shouldn’t know what goes into running a pizza store.

To drive home the store-centered focus of the company, all new corporate managers must go through a one- or two-week training session at a Little Caesars store. During the session, the new managers set aside their dress shirts and ties for aprons and comfortable shoes and participate in every aspect of running the store.

The program was implemented by Scrivano after he became president in January 2005, and he, himself, was a part of the inaugural training class. He says he feels it’s important to not only teach incoming corporate managers the ins and outs of the business but to also foster camaraderie between those in the corporate office and those in the stores.

“It helps us bridge that gap that sometimes exists between the corporate level and the stores,” he says. “Personally, spending eight or 10 or 12 hours in a store revs me up. I love making pizzas and servicing the customers.”

New managers are rotated to various parts of the store over the course of their training period. They spend several shifts at the front counter interacting with customers and making sales, several shifts in the back with the pizza makers and several shifts with the manager learning how a store is run.

“They actually make the dough; they learn how the flour and water and oil are put together,” he says. “They move on and learn how a manager trains his crew. It’s an intense, two-week training session where they learn every aspect of the store.”

Scrivano says the hands-on training in the store environment is an interactive way to teach newcomers about the company. Instead of hearing about how the company does business in a classroom or seminar setting, new hires are thrown straight into the work environment that they will, directly or indirectly, be managing.

“I believe everybody we bring in must understand our business philosophy and understand what our business is,” Scrivano says. “This program allows our new managers to understand what our operating principles are, what our crew is like, what our customers are like, and to understand the core values of our business.”

Scrivano also believes strongly in continuing education. Once managers are educated in how Little Caesars does business, he sends them to seminars and trade shows to help sharpen their awareness of the industry.

“We really try to develop their expertise, then get them to learn and build on that by keeping them up-to-date on current trends within the industry,” he says.

Focus the strategy
Scrivano says that at its core, Little Caesars’ store-based philosophy is driven by a desire to carve a unique niche within the pizza business.

While other chains focus on delivery, which is based on the quickness of the store-to-car-to-doorstep process and counts the front door of the customer’s house as the primary interface, Little Caesars’ leaders wanted to go in a different direction, one that would take the company away from the crowded pizza delivery market and into its own niche.

Scrivano says what Little Caesars excels at is creating value for its customers. He wants Little Caesars to be able to produce a quality product at minimal cost and pass that savings on to the customer.

With that in mind, the company has approached the first decade of the 21st century with a renewed emphasis on low costs and takeout service, and the response has been positive. Scrivano says that every year since 2001, the company has experienced significant same-store sales growth.

“It’s crucially important for success in any organization,” he says. “You must find what works and stick to your guns. It’s not wavering and going on to the next big thing that everyone says will change the way you do business.”

To Scrivano, business is less about silver bullet ideas and more about performing the basics with consistency, day after day.

“I don’t believe in silver bullets,” he says “I believe it’s about mastering 100 things that are related to the core values of your company and focusing on blocking and tackling those basics every single day.

“It’s everything you do up to that which is the everyday managing of your business. Never take your eye off the ball.”

HOW TO REACH: Little Caesar Enterprises Inc., www.littlecaesars.com

Thursday, 21 September 2006 06:47

Better business management

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Developing and implementing a business plan demands that you incorporate a sound business strategy as well as a sound corporate strategy.

“The focus of corporate strategy is to satisfy the needs of the shareholders,” says Lisa Fairbairn, a professor and lead faculty at the DeVos Graduate School of Management, Northwood University, Midland. “The focus of business strategy is to satisfy a select group of customer needs better than anyone in the defined competitive marketplace.”

Smart Business spoke to Fairbairn about how to develop the best the business strategy for your company.

Why is the distinction between business strategy and corporate strategy important?
Primarily because head-to-head competition really only exists at the business strategy level. Of course, the two strategies go hand-in-hand, and there’s an assumption that if business strategies satisfy customer needs better than competitors, then shareholder value will be enhanced — which is the underlying premise of corporate strategy.

What constitutes a successful business strategy?
The ultimate measure of success is whether or not it is sustainable in the long term. The key to sustainability is having a forward-looking strategy based on true customer needs (as opposed to products and product attributes) that are differentiated in the marketplace.

In the purest sense, customer needs don’t really change over time. For example, customers didn’t say, ‘Hey, we need cell phones,’ but they did have the need to communicate more efficiently and conveniently. If the aim of your strategy is to be the best cell-phone manufacturer, you will likely become obsolete, as others focus on how to better fulfill customers’ communication needs. Products are not strategies.

This underlying focus on customer needs doesn’t mean that the company should strive to fulfill all customer needs; in fact, the opposite is true. To provide unquestionable focus, strategy should be just as much about which customer needs a company chooses to dismiss.

Finally, execution of the business strategy must focus on the internal alignment of the organization’s activities with customer needs. The goal is for all functions to contribute in harmony to the fulfillment of the selected customer needs. Outcomes that reinforce functional silos should be replaced by outcomes that mandate synergy from people and activities throughout the organization.

Why do many companies not have a sustainable business strategy?
Trying to be everything to everyone inhibits long-term sustainability. Many companies find it difficult to walk away from customers and their long list of needs ... after all, they are paying customers! The problem is that it is virtually impossible to be the best at everything for any length of time. In addition to diluting what you do best, it can confuse both customers and employees alike.

Another common problem is that companies tend to conceptualize their business strategy with a 10,000-foot view. Many companies profess that ‘customer service’ is what differentiates them in the marketplace. But what does customer service mean? Most friendly, most efficient, most personalized? If the needs that are driving the strategy aren’t drilled down to a real specific level, there is too much room for individual interpretation by the employees ... which likely results in the inconsistent delivery of the intended strategy.

Finally, you can craft the greatest strategy in the world, but if it’s not communicated properly, if there isn’t buy-in, and if there is no accountability for its implementation, it’s just another business exercise without any impact.

Who is responsible for developing business strategy?
While many might think that strategy is a management-only ritual, it needs to be viewed as a company-wide initiative that is constantly revisited. As customer needs are the key ingredient, understanding market data and the ability to respond to it quickly is critical for success. Front-line employees seem to have a better pulse on true customer needs and how adequately they are being fulfilled. As a result, the company is best served by all employees understanding, contributing and embracing the business strategy.

LISA FAIRBAIRN is professor and lead faculty at the DeVos Graduate School of Management, Northwood University, Midland. Reach her at (800) 622-9000 or fairbair@northwood.edu.

Thursday, 21 September 2006 06:28

Reaching new heights

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Cheryl Bush has found a winning combination in her love for travel and her business acumen.

Bush is president and CEO of Aerodynamics Inc., where she started her career as a secretary in the sales department in 1978. Since that time, the company — which provides complete aviation support for Fortune 500 companies and small businesses — has grown from 40 employees to 285.

“Assuming the lead operational role at ADI was somewhat daunting, however (founder and chairman Frank Macartney’s) faith in my abilities, along with the mentoring he provided through the years, gave me the confidence I needed,” Bush says.

Smart Business spoke with Bush about the strategies she used to take her business to new heights.

What one thing can bring a company down or prevent growth?
Poor leadership. Employees are looking for direction and want to provide input. They want to contribute more and feel like part of the team’s success.

In other words, they are looking for management that inspires them. Not being in touch with employees and customers is the most common example of poor leadership.

Leaders who are poor listeners, think they have all the answers, or are more comfortable in their office than interacting with staff or customers can expect morale problems.

How do you make decisions?
Ethics are a big deal at our company. When you have the guiding principle of always doing the right thing, it makes business decisions simpler. However, the reality is that operating with integrity often comes at a high price, and you must be willing to pay it.

I make it a point to get input before moving forward on decisions. I listen to perspectives of each side and weigh them carefully. But, again, the principle of integrity is the ultimate guide.

How do you balance the demands of your job with those of your personal life?
It’s definitely easier now that my children are grown. I have always been the optimist who handles stress well. Keeping busy tends to create more energy.

I live in the moment, keep myself organized and rely on a strong support system. I have always been fortunate enough to be able to separate my business and personal lives and give them both the respect and time they require.

How do you set and review goals?
We have an annual off-site senior management retreat at which time we review where we are and where we want to go. We set goals and bring them back to the managers for input.

Once the annual corporate goals are finalized, we share the results with the entire staff. Each team then develops group goals that are aligned with our corporate goals. We also require employees to set personal goals to make sure they continue to grow professionally.

How do you recognize business opportunities?
There are two types of opportunities. First, those that fit in well with the current business plan and generate reasonable returns. Those are the easy ones.

The other type of business opportunity is trickier — they involve a longer-term strategy, oftentimes with less profit initially. An example was our 121 certification process, which was a $5 million investment, including two years of manual writing, personnel overhead and maintenance inspections.

Until the first day of operation, this business opportunity yielded no profit. It ultimately allowed us to differentiate ourselves from other aviation companies in that we not only provide aircraft support, we are also a full charter airline.

How do you lead change?
Change is always difficult, regardless of the type of business, even for those who are flexible. One of our biggest challenges came during the time we were going through the 121 certification process, which involved stringent safety reviews.

We discovered areas we could be more proactive, which led to changes. Employees were a bit resistant — and resentful — because they felt we were already extraordinarily mindful of safety.

The tactic we used to manage the change was to involve employees in the process and deliver consistent and repetitive messages.

What qualities do you look for when hiring?
We want employees who are creative and ambitious. Those that require lots of hand-holding don’t last long here. The airline industry seems to attract people who are independent and self-reliant.

Teamwork goes with the territory. When you think about it, there has to be a lot of trust. The pilots trust the crews and mechanics, and vice-versa. Most people in this business have a genuine passion for what they do — they are not necessarily in it for the money.

HOW TO REACH: Aerodynamics Inc., (800) 235-9234 or www.flyadi.com

Tuesday, 19 September 2006 20:00

Blueprint for success

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 When FH Martin Constructors was designing its Warren headquarters last year, President Andy Martin included in the plans a centralized lunchroom called The Collaboration Caf.

“It’s easy to get holed up in your office or job sites and not communicate with each other,” says Martin, the company’s third-generation leader. “Yet there are a lot of good ideas out there.”

The caf’s environment encourages Martin’s 51 employees to spend time together bonding and brainstorming about how to continue growing the firm, which had 2005 revenue of $71.5 million, up from $53.5 million in 2003.

Smart Business spoke with Martin about how he creates partnerships with and among employees to help his company succeed.

What techniques can other business owners use to grow their companies?
Hire talented people and give them some room to grow. Years ago, I felt that in order to do the job right, I had to do it myself.

You know what kind of expectations your customers have and what expectations you have about how you want to deliver your projects. It’s hard at first to let go of that, but I’ve found that as I have, our people have stepped up to the challenge.

I try to instill in them the basic values of what we’re about. They understand that we’re about serving our clients, delivering our projects and maintaining a high level of integrity. There are always a lot of details, but focusing on the core values of the company — the way we want to treat our clients — the rest of it falls in line.

Getting the right people first is the key to that, people who take that responsibility seriously and are willing to embrace it and solve their own problems. I’m still very involved with the business, but I don’t necessarily have to be at every job site and see every piece of paper.

How did you learn to trust your employees?
I learned out of necessity because of growth; they go hand-in-hand. Growth comes from doing good things for our clients but, at the same time, I can’t be at all places at all times.

Once I realized that (trusting others) was not only possible but really helped us thrive, I embraced that more as a philosophy of management.

What are the main qualities that business owners should look for in the people they hire?
We use a tagline: Integrity, experience and results. Integrity is first, so I look for people of high integrity, who are honest, stand by what they say and will follow up on things. In the long run, operating with high integrity will come back to us time and time again.

How can business owners make decisions regarding growth?
It’s a plan to grow, and you have to have the people in place first. It’s not, ‘Go get the work and then figure out how to do it.’ Get the people in place, make sure they’re properly trained and appropriate for the work that you’re doing, and then go get the work.

I’m a firm believer in doing what we say we’re going to do, and I can’t go out and sell work to a customer if I don’t feel comfortable that we can deliver on what we’re promising. It’s just not in my makeup to go tell somebody we can do it when I don’t have that confidence.

How did you create your growth strategy?
A step prior to that was deciding if we wanted to grow. It’s important to look at. There’s really nothing wrong with companies that say, ‘We’re going to do this very well and keep doing the same thing.’ We just decided it wasn’t the direction we wanted to go.

Once we decided we did want to grow, and although construction is a competitive and price-driven business, we also determined that the level of our client service and trust was still a big component.

It might be easy to say, ‘We’ll only deliver the minimum that the clients ask for because that’s all we can afford to do.’

By going above and beyond expectations, clients come back to us and give us positive referrals. There is a reason for stepping up, doing things the right way and delivering quality. At times, it costs us extra money to make things right, but it’s a long-term proposition. It’s not about how much money you can make on this one job.

How you grow is the next step. There are lots of charts, graphs and theories on that. Being the low-priced, low-cost solution is clearly one place to be, and there’s room for that.

We decided that our growth would come in being competitive from a cost standpoint but also delivering a good-quality, on-time, high level of service. We build buildings, but we also develop relationships.

HOW TO REACH: FH Martin Constructors, (586) 558-2100 or www.fhmartin.com

Wednesday, 30 August 2006 03:09

Healthier employees

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Health care coverage can be a major expense, so companies often search for the least expensive alternative to reduce costs.

Integration of health care processes is crucial to improving outcomes, says Gilbert Burgos, M.D., chief medical officer of Care Choices. Employees receive better overall health care if a plan is utilized that integrates everything from wellness programs to pharmacy, disease and care management programs. This creates more effective leveraging of resources to better serve the patient.

Smart Business spoke with Dr. Burgos about implementing health programs into the workplace and how health care plans can help employers to achieve better overall health.

How can an employer decide what programs to implement into the workplace?
Many health plans identify members who will benefit from disease management and wellness programs by analyzing medical and pharmacy claims as well as information collected through Health Risk Appraisals.

Health plans often have a tool known as a predictive risk modeling to help employers assess future medical costs by quantifying the relative health status of their employees. Therefore, if an employer identifies a large number of diabetics, he or she might decide to implement or provide additional outreach for a diabetes disease management program.

How can employers encourage employees to join programs or lead a healthier lifestyle?
Due to the rising cost of health care, employers are beginning to implement high-deductible health plans, coupled with a Health Savings Account or a health reimbursement account. This means that employees are accountable for more of the cost of their health care.

Additionally, employers are beginning to base the level of employee contribution on health-related issues. For example, smokers may have a higher contribution to premiums than nonsmokers. It is important, however, that employers provide appropriate tools and programs to encourage and help their employees adopt healthier lifestyles if they intend to base financial incentives on those measures.

Another tool that can be used to encourage employees to take control of their health is a Health Risk Appraisal (HRA). The results of the HRA can guide individuals toward disease management or other programs of specific relevance to their current health status.

How can employers motivate employees and implement incentives properly?
The key is to be constructive. Incentives should be used to make people want to participate. A health plan should offer incentives as well as the tools needed to change unhealthy habits such as medications and counseling to help people with addictions to nicotine.

Encouraging people to participate in programs not only to help their overall health but also to cut their cost of health care will help them see a direct correlation between health care programs and their overall health. People need to see the immediate effect their habits are having on their lifestyle to begin to change.

Implementing exercise on lunch breaks or short walks can help improve both health and concentration.

What are the benefits of having healthy employees?
Having healthier employees means less absenteeism and, in general, a healthier, more productive workforce. This can contribute to the overall profitability of an employer.

When employers look at the cost of health care, they tend to focus on the cost of premiums and how much they increase each year. There is another component that is often overlooked but can play a major role in providing efficient health care. Absenteeism and what is referred to as presenteeism — physically being present but not being mentally focused — often are not measured. This is because they are hard to quantify, but there is a correlation between the implementation of health care programs and the improvement of these factors.

Can managed care plans assist in making employees healthier?
According to a 2004 study by the National Committee for Quality Assurance, nearly 66.5 million avoidable sick days — at a cost to employers of more than $9.6 billion — can be traced to the health care system’s routine failure to provide needed care for just five health care conditions: asthma, depression, diabetes, heart disease and hypertension.

Managed care plans usually have disease management programs available to reduce the frequency of expensive hospitalization and disease complications. Once these members are identified, they are provided with disease-specific information through mailings or work site seminars to help better manage their disease.

GILBERT BURGOS, M.D., is chief medical officer for Care Choices, a nonprofit health care organization and a subsidiary of Trinity Health. Care Choices HMO is ranked as No. 12 among 257 commercial plans nationwide and is the top-rated plan in Michigan, according to U.S. News & World Report/NCQA “America’s Best Health Plans, 2005.” Reach Burgos at (248) 489-5004 or (800) 261-3452.

Tuesday, 29 August 2006 20:00

Earth to investors...

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Looking for a new office in the metro Detroit area? Want to purchase undeveloped property outside of town to build a facility? Whether you’re thinking about converting a strip-center space to accommodate your business or starting from scratch on barren land, a bank will ask you to investigate the property’s past before financing a real estate loan.

“You should do your homework on any commercial real estate you buy as a risk mitigation tool,” says Craig Johnson, president and CEO of Franklin Bank, Southfield, Mich. “You don’t want to realize later that there was a leaking tank under the property.”

Brand-new buildings and decadent landscape can cover up what lies beneath. Contaminants can leach into groundwater, contaminate soil and offgas into the environment without your knowledge.

Basically, ESAs protect anyone who enters into a real estate agreement. The borrower generally picks up a $1,500 to $2,000 tab for a Phase I study (Phase II tests can cost up to $5,000), but this investment serves as a type of insurance.

Environmental Site Assessments (ESA) are a matter of due diligence. “They alleviate risk for the banker and the borrower,” says Johnson. “Whether you are paying cash or acquiring property through a land contract or some other mechanism, you need to do your homework. Get advice from an environmental attorney, a reputable environmental consulting firm, or go to a bank and ask for recommendations.”

Smart Business asked Johnson to explain why even business owners who do not obtain bank financing for real estate should engage in ESAs.

Why do banks require ESAs?
If for some reason the borrower doesn’t pay back the loan and we have to foreclose on the property and become the owner, we want to make sure it is clean. The type of environmental study a bank will require depends on the loan size and known prior uses of the property. If it is vacant, residential land, we may only ask for a transaction screen. That is a database record search that reports who owned the property historically and whether there were underground tanks or documented environmental issues. If the screening is questionable, then we’ll ask for a Phase I and/or Phase II study.

What happens during a Phase I assessment?
Phase I tests are an assessment of the overall property. They involve physical site inspection and interviews with current and past land owners. An engineering firm or environmental consultant performs the assessment. They might review aerial photographs, maps and city directories, and agency records, including local fire, health, building and water quality. A visual survey will note any asbestos-, lead- and PCB-contaminated materials.

When must a borrower also obtain a Phase II study?
If the Phase I assessment identifies potential risks, the next step is a Phase II. Generally speaking, the Phase I won’t tell you what the problem is, it will just tell you there is a problem. Phase II digs deeper. The engineering firm will send out drill trucks to collect soil samples and analyze them for contaminates.

Can a business owner still purchase the property if it is contaminated?
Yes; the important part is that you disclose environmental information with the bank. For example, we worked with a dry cleaner that created environmental issues with regard to their cleaning solvent. Chemicals leached into the soil. We ordered an environmental consultant to review the property, and he gave us an estimate of how much it would cost to clean it up. We escrowed for this amount and closed on the loan.

Also, in Michigan there is a mechanism called a Baseline Environmental Assessment (BEA). A buyer can purchase a piece of land that contains known contaminants and be indemnified from any cleanup risks. BEAs allow for properties to transfer at full market value.

Say you wanted to purchase a former gas station site. The gas tanks were demolished and removed, but there was a leak. The buyer can get a BEA and buy the property knowing that he will not be liable for subsequent cleanup costs. Also, the government-sponsored BEA program allows the bank to be more comfortable with the buying and selling of properties that contain known contaminants.

Where can a business owner find a consultant to conduct ESAs?
Your bank can suggest several reputable engineering firms or environmental consultants. Banks align themselves with firms that provide true value.

CRAIG JOHNSON is president and CEO of Franklin Bank, Southfield, Mich. Reach him at (248) 386-9860 or clj@franklinbank.com.