Adam Burroughs

A hiring plan provides your company with a path forward to reach its goals through its staff. It’s designed to answer questions such as, ‘How do we realize our vision and whom do we need to help us get there?’ Without such a plan, a company may make hires that don’t fit into the overall goals of the company.

“People are a company’s No. 1 asset,” says Jarrod Daniel, CEO of The Daniel Group. “You have to make sure that asset can help your company achieve its goals.”

He says that once a company has set its vision, it should create a hiring plan that outlines who should fill each of the roles that are necessary to succeed. But it is a perpetually evolving task.

“You have to continuously examine your hiring plan and the staff that you currently have in place to determine what can be improved,” Daniel says.

Smart Business spoke with Daniel about comprehensive hiring plans and how they can help a company realize its potential.

What are the elements of a comprehensive hiring plan?

There are quantitative and qualitative elements to your hiring plan, but it starts with knowing what your vision is as a company. You want to bring in the right people and align them with a plan that lays out what you want to achieve as a company, which is your overall vision.

A good hiring plan involves onboarding, sourcing people to determine the right qualifications and setting their career paths within the company. Part of onboarding occurs during the interview by letting people know what is expected from them to help the company reach its ultimate goals. If they know the expectations up front, they can always be working toward that, regardless of the time it might take to get there. Having a career plan for individuals that incorporates what they can potentially do for your business down the line is an important element of hiring.

Otherwise, you have to balance a person’s technical skills with their ability to fit within your company culture. It doesn’t do much good to hire a smart, technically sound individual if that person can’t gel with your company’s culture.

How often should a company revisit and adjust its hiring plan?

You should adjust your hiring plan every single time you want to hire somebody. Things change within your hiring plan, so it has to be flexible. There are many divisions within a company, each with different strengths that help meet the company’s overall goals. Further, each department has a distinct hiring plan, as does each position. It is important to continuously adjust the short-term goals of your plan to stay on track with your long-term goals.

In addition, every time you hire someone, you will also need to plan out your expectations for his or her development in that position. If you continue to have to hire to fill that position, you need to review your plan and your past hires to determine what is going wrong.

How far into the future should the plan project?

That depends on the size of the company and the type of position to be filled, but generally, any time you plan for growth, you have to have a strategy. Say a large company has hiring needs that are project based, in which case, its plan might look four months ahead to determine the manpower necessary to complete a job.

However, if it is a cultural hiring plan — a company looking to hire a new vice president or CEO — it could take a few years because, as you go up the hiring triangle to a position that requires more specific skills and experience, it will takes longer to find a qualified candidate.

A company might also be in a position where it needs to hire to the gap, which refers to the difference in age you have between the people in management — say they’re in their 50s — and the next in line who can do the job, who we’ll say are in their 20s. That’s a significant age gap, so it’s important to make a plan to hire to fill it, say with someone in his or her late 30s.

Who determines the course and goals of the hiring plan?

Management and ownership usually collaborate on the hiring plan. Ownership will determine the plan when a company is just getting started, then management will take over this duty once its members are clear on the company’s vision and can align a hiring plan to meet company goals.

Management and human resources should have a forecast for hiring for a period covering three months, six months and one year. In that forecast, they need to have a hiring plan in place so when the time comes to bring someone onboard, it can happen quickly.

Companies should be working on their hiring plan on a daily basis because things could be going great while you are fully staffed, but anything can happen tomorrow to change that.

How can a staffing firm help a company with its hiring plan?

A staffing agency can serve as a third party that can consult with a company without the bias that might exist from within a business. It can go in and look at the situation from a counseling standpoint to give an objective perspective of the culture and the technological skillsets of the staff and offer clarity.

Staffing firms have seen many hiring plans, and this broader perspective and experience can be applied to companies that are just forming their plans by compiling best practices into a custom strategy.

Jarrod Daniel is CEO of The Daniel Group. Reach him at (713) 932-9313 or

Insights Staffing is brought to you by The Daniel Group

When a company gets into a position of missing payments on a loan, the loan originator could possibly sell your debt to a third party. Once your commercial loan is sold, the velocity of both money and information becomes critical.

“Don’t panic,” says Brian R. Forbes, a member with Dykema Gossett PLLC. Instead, he suggests being proactive.

“The more proactive and transparent you are, the more likely the asset manager responsible for your loan will internally advocate options that may allow opportunities for a mutually acceptable restructure,” he says.

As a borrower, you have the chance to start your lending relationship over because there is no previous history with your new lender. Forbes says there is a possibility that you can restructure your debt on terms more favorable than offered by your original lender.

Smart Business spoke with Forbes about how to handle your distressed debt after it changes hands.

How do you define distressed debt?

Distressed debt would be any debt or credit that has one or more missing payments, either partially or in whole, or is in imminent danger of missing one or more payments without the ability to cure. If you are a borrower who has reached this critical point, there is a possibility your debt will be sold to a third party.

At what point does debt get sold?

Distressed debt can be sold at any given time. The third party that buys debt often has a different objective than the original lender because they are seeking to maximize their investment returns in a shorter time frame. Since the distressed loan frequently is purchased at a discount, an opportunity exists to negotiate terms more favorable to the borrower. The new lender could potentially offer more creative workouts, such as allowing the borrower more time to refinance, extending payments, stretching amortization or allowing a discounted payoff. A new lender is not always negative for the borrower.

How would you know your debt has been sold?

Most loan sale agreements require a borrower be notified immediately upon the closing of the loan sale. The loan buyer will contact the borrower quickly to ensure all payments due under the loan are going to the buyer and not to the seller. If the debt is in distress and there is a default, a workout specialist or asset manager will contact the borrower for updated information. In the best-case scenario, the borrower’s financial statements are complete and easily reviewed and verified, which enables the asset manager to quickly assess the situation and recommend a course of action.

The anticipation from an asset manager’s perspective is that information flows between parties within a month of closing. If the debt involves real estate, such as an office or apartment building, the asset manager will want to see rent rolls, pro forma financial statements and detailed budgets. The less information the asset manager receives, the more difficulty the asset manager has evaluating the credit and recommending a mutually favorable solution.

What’s at risk once it has reached this point?

The velocity of money and information is critical to the third-party debt purchaser. The new lender is making a decision as to whether there is a workable solution between it and the borrower. Many third-party buyers prefer to work quickly to resolve the asset with the borrower in either a full or, if justifiable, discounted payoff. In order to do this, the asset manager needs accurate information quickly to pursue the most cost-efficient action.

The remedies third-party buyers often exercise if they are forced to operate without the requested information include foreclosure, but generally third-party buyers do not want to own the property. Third-party buyers can enforce other remedies under any guarantees of the loan and pursue their rights against the guarantors and the underlying collateral. Third-party buyers will pursue a general workout strategy if it makes sense for both parties.

What should a company do when its commercial loan gets sold to a third party?

If a third-party buyer purchases your debt, anticipate that the new lender will be proactive in exercising its remedies under the loan documents in an effort to resolve the credit and that you should provide the new lender such information required under the loan documents. Remember, many debt buyers contractually respond to investors and lenders in the same manner as the borrower responds to the lender under the loan documents. It is advisable to have your asset manager well informed of your credit and circumstances in order to facilitate the best solution. Without sufficient information, new lenders often immediately exercise remedies.

Be forthcoming. Obtain counsel and with his or her advice gather and give your accounting information to your new lender who can evaluate and understand your credit as quickly.

What are the best-case outcomes once a company has reached this point?

The best scenario is the borrower obtains the opportunity to keep its business going, resolves a current credit that by its size may be limiting opportunities for the borrower, obtains for any guarantor a release from his or her guaranty for consideration, and either purchases the debt or refinances the debt at a price discount that corresponds to the current fair-market value of the asset serving as collateral or the value of the business. Do not panic. Everyone is interested in finding the best solution, which often means the borrower refinancing the debt with another lender.

Should a borrower get counsel involved?

Retain an expert representing borrowers in this context immediately to determine whether restructuring is viable and the best option. Counsel can help structure the best solution given the facts and circumstances of the underlying credit, while identifying and minimizing potential adverse tax consequences.

Brian R. Forbes is a member with Dykema Gossett PLLC. Reach him at (214) 462-6403 or

Insights Legal Affairs is brought to you by Dykema Gossett PLLC

Cybersquatting is a fairly common practice that enables another entity to cash in on the goodwill someone else has established with a name or destination on the Internet.

“Cybersquatters direct traffic away from a valid website, often to a website with a list of advertisements that relate to the industry, brand or subject being searched. These ads could actually lead traffic to competitors,” says Sandra M. Koenig, a partner and intellectual property attorney with Fay Sharpe LLP.

While the hope is that visitors realize they’re not on the correct website and move along, some might see a link to the same product or service on the imposter site and proceed to the imposter website instead of seeking out the correct website, she says.

“Worse yet, your visitors might land on a disparaging website where negative things are said about your business,” Koenig says.

Smart Business spoke with Koenig about cybersquatting, how you can reduce your exposure to it, and how an increase in top-level domain name options might make the fight against this type of fraud more challenging.

What is cybersquatting?

When a trademark is used in a domain name with the intent to profit from the goodwill of another existing mark, it is considered cybersquatting. The Anti-Cybersquatting Piracy Act states civil action can be taken against any person who in bad faith uses, registers or traffics in a domain name that is confusingly similar to another’s trademark.

For example, someone might establish a domain name by transposing or omitting a few letters of a brand or company name or introducing or eliminating punctuation between words. They also could use a different top-level domain name — such as .net rather than .com — to confuse potential visitors into landing on their site instead of the site a visitor intended to access.

What is a top-level domain name and what is the Internet Corporation for Assigned Names and Numbers (ICANN) doing with them?

A top-level domain name is everything to the right of the dot, for instance .com or .gov.

ICANN has opened the door for businesses to establish their own top-level domain name beyond the 22 that already exist. The owner of the designation would become the administrator of a contrived top-level domain name, such as .google. A purchaser could also register the name of its brands or establish ownership of a generic name, such as .coupon. However, the window of opportunity to apply for a name has closed and about 2,000 applications, at around $185,000 each, have been made for a top-level domain. All of these applications are being evaluated by ICANN and likely won’t be used until around 2013.

How does ICANN allowing companies to file for and purchase top-level domain names affect cybersquatting?

On one hand, cybersquatters likely won’t seek to purchase these top-level domain names because they cost too much and there is a lengthy examination process required to prove you have the ability to administer it. Also, ICANN has put safeguards in place to eliminate duplication. Domain administrators will likely have protections in place to deal with trademark infringements on top-level domain names. The domain administrators will be controlling who gets to use the name and could potentially keep it for internal purposes or for use with suppliers.

However, for the generic names, such as .green or .wine, there’s a lot of opportunity for cybersquatting. The increase in these names expands the opportunities for cybersquatters to infringe on a company’s reputation.

What sort of resolution can a company pursue from cybersquatters?

If you are the brand holder and someone is cybersquatting on your property, you can take them to court under anti-cybersquatting legislation or pursue relief through less costly arbitration proceedings. In the latter case, you would file a complaint with an arbitration forum designated to handle this type of case and submit evidence of the bad-faith use of your name or mark and why you — and not the cybersquatter — should have the rights to the domain name. If the cybersquatter does not prove its right to the domain, the infringing domain name is either canceled or transferred to you. However, the other party might have a legal right to use the name even though it’s a similar trademark, such as a company with a similar name that works in a different, non-interfering industry.

How can a company protect itself from cybersquatters?

In many ways it is getting more difficult to guard against cybersquatters. Not that long ago the advice one would give would be to think of all the potential misspellings of your brand or company name or variations using punctuation, but it is a lot of work and expense to attempt to get every adaptation registered in your name, especially with the proliferation of top-level domains. However, it is still important to make sure you try to protect yourself in at least the .com and .net fields, and it is also beneficial to own other domains as described below.

Be proactive and protect yourself as best you can. While the increase in domain options will offer legitimate businesses greater possibilities for branding on the Web, it also creates more opportunities for cybersquatters to take advantage of the goodwill you’ve established through your brand and company name.

Here are five strategies to protect against cybersquatters:

  • Register your trademarks in the U.S. Patent and Trademark Office.

  • Register your important trademarks as domain names with several different top-level domains.

  • Register variations of your domain names including common misspellings, typographical errors and punctuation edits.

  • Secure disparaging domains, e.g., or domains that may put you in an unfavorable light for your industry, e.g.

  • Be aware of the new top-level domains that will be available beginning in 2013 and seek registration for those that might be relevant to your business or industry.

Sandra M. Koenig is a partner and intellectual property attorney with Fay Sharpe LLP. Reach her at (216) 363-9000 or

Insights Legal Affairs is brought to you by Fay Sharpe LLP.

In one way or another, life is always in flux. Transitions sometimes bring opportunity and sometimes pain and sadness. The more thoughtfully we experience them, find the good in them and prepare for the next life phase, the more satisfying life can be. Transitions happen throughout our lives — graduation, a new career, getting married, having children, a sudden increase in wealth, the death of a parent, serious illness or accident, your retirement and the sale of your business, to name a few.

Each transition requires you to adapt to new circumstance, as it can change the way you think, the way you approach taxes and investments, your lifestyle, your advisers, your circle of friends or your lifestyle choices.

“Some people have a real hard time with that,” says Norman M. Boone, founder and president of Mosaic Financial Partners Inc. “When a significant change occurs, some stick close to what they’re used to, while others refuse to acknowledge the change and others simply embrace it.

“Points of transition happen to everybody,” he says. “How you think about, plan and prepare for them and how you adapt your behavior is best done by being intentional, by considering the implications of your decisions, by thinking about your new circumstances and by determining what you need to do to optimize your new situation. Getting good advice can be critical.”

Smart Business spoke with Boone about how to deal with life’s major transitions without compromising your financial future.

Is transition a bad thing? Why or why not?

Transitions themselves aren’t good or bad. The issue, from a financial planning perspective, is how you approach them. Regardless of the type of change, allow yourself time before you make any major decisions.

Having the right professional assist you can help you avoid mistakes and take advantage of opportunities. The best adviser is one who has helped many people with situations similar to yours. People don’t often go through the same major life transitions twice. If you only have one time to experience something, it’s likely you’re going to make mistakes, sometimes minor and other times with important consequences. An experienced adviser can help you avoid those mistakes.

As a caution, be sure to ask yourself, ‘What is this person’s incentive?’ For example, the wrong insurance agent might think more about how much he or she will be paid, rather than what is best for you. You need to ask questions when you’re working with an adviser and understand if he or she has something to gain from the advice being offered.

When you’re going through a transition, you’re typically more vulnerable than at other times in your life. It’s critical to choose your advisers carefully.

Is there reason to be cautious when talking with advisers?

Be open and freely share information with your advisers, once you’ve chosen them. They need the whole picture. However, initially, when you are interviewing advisers or looking for the right one, you can and should be discreet about how much information you share. It’s important to find someone who has the experience, knowledge, capabilities and good chemistry with you, if he or she is going to serve you well.

What is a good way to research potential advisers before meeting them?

Go to your smartest and most objective friend and ask him or her to help you create qualifying questions. Almost every wealth manager, attorney, accountant or insurance agent wants you to pick them, and most are skilled at convincing you that they’re likeable and knowledgeable. You need to be able to get beyond that. It’s important to ask a similar set of questions of each so you can compare their answers — see how they treat your questions, how thoughtful their answers are and who appears to have your best interest in mind.

What are some important characteristics of a wealth management firm helping someone who is in transition?

At minimum, a wealth management firm should be able to clearly explain its investment philosophy and discipline. It also needs to offer proactive advice about taxes, insurance, charitable strategies, debt management and expertise in the full range of personal finance issues.

Perhaps even more critical are the firm’s values and characteristics. Are advisers fiduciaries — do they accept a legal obligation to put your best interests first — and if so, are they willing to put that in writing? Do they disclose all potential conflicts of interest? Do they treat all your questions with seriousness and respect? Are they rushing you to make decisions? Do they offer alternatives and allow you the time to understand, consider and make a choice? Transitions can be unsettling and take adjustment. A good adviser will help you get through that period rather than push you into something prematurely.

It can also be helpful to work with a firm large enough to have a team that offers the skills and resources needed to apply to today’s questions and the needs you’ll have tomorrow. You’ll eventually have more than one kind of transition, and a team is more likely to be able to offer a solution for each, thanks to a greater depth of resources.

What should you keep in mind when entering a life transition that could impact your financial future?

Don’t assume that you understand the situation you’re in, especially when it comes to a major transition, because your choices can have long-term implications. Mistakes can significantly cost you without first getting expert advice. Most times, it’s important to not make a decision until you’ve done research and gotten expert advice. Before acting, ask yourself, ‘How might this impact my life today and in the future?’

Norman M. Boone is founder and president of Mosaic Financial Partners Inc., which is celebrating, this year, its 25th anniversary. Reach him at (415) 788-1952 or

Insights Wealth Management & Family Business Consulting is brought to you by Mosaic Financial Partners

To finance purchases, a company usually has a number of options, including equity financing from venture capitalists, mezzanine financing, a line of credit or growth capital. But there is also an interesting option called off-balance sheet financing, or project financing, which can help fund large projects and is particularly well suited to the purchase of clean technologies, especially solar development.

“Off-balance sheet financing has been around for a long time — nearly 100 years — and it’s available to many development corporations or manufacturers,” says Scott Reising, senior vice president of the Energy and Infrastructure Group for Bridge Bank.

“But it now is being applied to clean technology companies — those that manufacture renewable sources of power and the infrastructure to support it — because they often struggle to get financing. This is a unique option to finance the purchase and sale of their products,” he says.

Smart Business spoke with Reising about the off-balance sheet financing option and how it can allow companies to fund noncore projects, including those related to clean energy technologies.

What is off-balance sheet financing?

Off-balance sheet financing could be considered a single loan to a specially designed company that has a single purpose. A separate entity or ‘company’ is established on paper that will channel the purchase of a large amount of equipment from a corporate manufacturer to a purchaser. A contractual arrangement is established that allows the purchaser to pay for the product over time to the special, new project company that has been created in the transaction. Oftentimes, through this model, installation is also covered and a fee is assessed for the risk that’s being taken.

This financing structure allows the manufacturer to complete the sale and get paid in full, while the purchasing company receives the goods up front and pays for them over time. As a bonus, the return on investment realized by the purchaser often can offset much of the payment made for the product. This is especially true when financing clean technologies, as the energy savings can be equal to the payments.

What are the advantages of off-balance sheet financing?

The debt being provided is less expensive than the cost of equity. Also, debt terms are amortized over time to match the asset life of the product purchased. Additionally, in project financing, typically there are higher levels of debt, often between 60 and 70 percent. A large portion of the debt is financed over a longer period of time, so it dramatically lowers the upfront cost.

Why might this option be more attractive than other types of financing?

A big corporation’s function is to develop its core business, not to spend time on ancillary things. Even though large corporations can access capital through other means, off-balance sheet financing has its own accounting code as opposed to being in the core business. If you can set up the means through a new project company to finance and manage the maintenance and installation of a clean technology project you’re better off.

On the seller side, the issue is scalability. If a manufacturer of clean technology has to create its own loan to fund a purchase it will likely have to lend funds for each sale, which is unsustainable.

What does a lender need to evaluate a project for this type of financing?

Lenders typically need to quote all information related to the product. They need to understand the technology and would want to have the company get them comfortable from an engineering point of view. A bank will use an outside consultant to verify what the company has stated to be the specifications and performance characteristics. Often a company has its own data to back up its product claims because it wants to prove its technology works and has worked for some time.

Banks also will want to look at the sale and purchase contracts that have been established for the equipment. A bank will need information on the purchaser including its audited financials, creditworthiness, its ability to make payments and its business plan.

How do banks view the creditworthiness of clean technology?

There are three reasons clean technology is being utilized right now. The first is corporate social responsibility, which allows companies to publicize that they are using environmentally friendly and sustainable energy.

Second, renewable products are very cost competitive in terms of present value.

Third, a company stepping into clean technology is making a statement to its customers and competitors alike that it’s going to be there for a long time. To a bank, the perception of longevity increases its willingness to lend.

What should a clean technology company look for in a potential lender?

A clean technology company should look for a lender with a strong understanding of the company’s needs, its products and how it works. It also should seek a bank that has a willingness to work on scalability.

The seller wants to develop a smooth, long-term relationship with its bank in order to provide financing to its buyers, so it should work with a bank that has done this before. Additionally, it should look for flexibility in the financing structure because each buyer has different credit backgrounds, contract needs and risk/reward expectations.

The company also needs the right size bank to handle the volume it wants. If the project size is small, a large national bank might not deal with it. Also, ask if the bank’s credit committee has approved this type of asset in this industry in the recent past and how frequently.

Scott Reising is senior vice president of the Energy and Infrastructure Group for Bridge Bank. Reach him at (408) 556-6508 or

Insights Banking & Finance is brought to you by Bridge Bank

Over lunch, a CFO recently shared the difficulties C-level management face since the enactment of Sarbanes-Oxley (SOX) with Kathleen M. Marcus, Shareholder at Stradling Yocca Carlson & Rauth and Chair of its Compliance and Corporate Governance Practice Group. He spoke of joining a company whose books and compliance policies are “a mess” and his struggle to put the company on the right path without alienating the team.

“In recent years, SOX and the Dodd-Frank Wall Street Reform and Consumer Protection Act have put a new emphasis on compliance programs,” says Marcus, a former Enforcement attorney with the SEC.

SOX effectively requires a code of ethics for public companies, the implementation of a complaint hotline and raises the bar for management on financial statement accuracy. Dodd-Frank took it to the next level with financial incentives for employees to bypass internal company reporting and become whistleblowers. Today, public and private companies face a very aggressive regulatory environment. For any company concerned about an unwanted visit, letter or subpoena from any number of regulatory agencies, having a legal compliance audit can ease the pressure.

Smart Business spoke with Marcus about what compliance audits involve and how an audit can ensure your policies are up to date.

Why would a company need a compliance audit?

Any business operating in heavily regulated areas, such as the medical device or pharmaceutical industries, government contractors or businesses with international offices or sales, needs to be wary of regulations. Compliance audits are not just for public companies. In fact, the explosion of regulatory enforcement activity has begun to usurp private litigation as the bigger overall threat.

In a company’s early stages of growth, only a few basic compliance policies are required. As companies mature, they frequently enact new policies without revisiting the old ones. This can result in incomplete, inconsistent or outdated policies with large gaps in utility. A compliance audit streamlines the total compliance package, places policies under a single source of control and provides a plan for routine updating and distribution. The audit report is a roadmap for a company to take advantage of all the protections offered by a comprehensive compliance program and provides peace of mind for executives. Notably, compliance audits are not expensive, and some changes can be easily made in-house.

As a former SEC enforcement officer now in the compliance business, what would you say are the key benefits of a compliance audit?

By altering certain high-risk practices, compliance audits can protect individuals and entities from becoming the subject of an investigation. Audits also help facilitate organic conversations about topics such as the wisdom of certain business or reporting practices and corporate risk appetite. In addition, in the critical period following a crisis, a streamlined compliance program ensures pre-designated individuals have a plan for taking immediate action in the best interests of the organization.

When investigations do occur, the audit and/or the policy improvements can provide significant protection for the company and its management. At the onset of an investigation, government regulators routinely request relevant compliance policies. Robust policies lessen sanctions because they demonstrate a genuine culture of compliance and best efforts by management.

With so many compliance-related organizations in the marketplace, who is best suited to perform a compliance audit? And, what does it involve?

A customized compliance audit report developed by an attorney is not discoverable in an investigation or lawsuit. Therefore, hiring an attorney to perform your audit and provide recommendations gives executives control about whether and when to implement changes.

The audit itself is fairly simple. A law firm should first provide an industry-specific audit checklist to help identify existing policies. Be certain to search for policies in various departments, as they may be housed with human resources, the CFO/CEO and/or the legal team.

The audit should then begin with a full policy review by a team of attorneys. Lawyers analyze the policies in their specific practice area and provide assessments. The firm should then author a privileged report highlighting the strengths and weaknesses of each policy and detailing recommendations. Depending on the complexity, a company can choose to close the identified gaps itself or seek help.

Upon request, a law firm should provide training to company personnel. Training is a vital component of compliance, particularly in complex legal areas such the Foreign Corrupt Practices Act or the False Claims Act where enforcement activities are skyrocketing. One estimate suggests the government is recovering $15 for every $1 it invests in the enforcement of False Claims Act violations in the health care arena.

What could happen if a company’s policies are not comprehensive?

If investigated and found in violation, outcomes range from career-ending industry bars for executives to massive financial penalties for management and entities. Government settlements usually involve some aspect of compliance reform. Regulators may mandate:

  • The appointment of a compliance monitor paid for by the company to oversee compliance activities;

  • Mandatory self-reporting by the company to the government concerning any violation, no matter how small; or

  • Stringent amendments to compliance policies.

In contrast, when a company has adopted a comprehensive compliance program, it provides a layer of protection for the company, as well as board members and management. A customized compliance program may prevent an investigation entirely, and should an investigation occur, tailored policies provide an excellent defense.

Kathleen M. Marcus is a Shareholder and Chair of the Compliance and Corporate Governance Practice Group at Stradling Yocca Carlson & Rauth. Reach her at (949) 725-4080 or

Insights Legal Affairs is brought to you by Stradling Yocca Carlson & Rauth

As the country’s population ages, a growing number of people will, unfortunately, suffer from diminished capacity, which can arise from conditions such as Alzheimer’s disease and dementia. “This is occurring more as businessmen and women work into their later years, and they become more susceptible to these conditions that affect their ability to make business decisions,” says Suzanne Fanning, an attorney with Garan Lucow Miller PC and co-chair of the Washtenaw County Bar Association Probate Section.

If someone with diminished capacity to make decisions enters into a transaction, that decision may be later subject to challenge in court.

“If it is established that the person did not have the requisite legal capacity to enter into the contract, the court may set the contract aside, to the detriment of the other party that entered into the contract,” she says.

Smart Business spoke with Fanning about how to take the legal precautions necessary to protect your business when concerns arise about another party’s possible diminished capacity.

What is diminished capacity, and who does it affect?

Diminished capacity is essentially an impairment of daily cognitive functioning, which can impact memory, reasoning, language and insights, all of which are skills critical to good business decision making. While the majority of businesspeople will not suffer from diminished capacity, as the population ages, there is a greater likelihood that it will become an issue.

Diminished capacity can also impact younger businesspeople who have been injured or who suffer from serious illness. This could be temporary, such as when medical treatments impair mental capacity, or permanent, such as when a person is in a serious accident.

What are the signs of diminished capacity?

There are no standard set of criteria, but there are red flags to consider if you are engaged in business transactions with someone who appears to have diminished capacity. These can include memory loss or forgetfulness, problems with the ability to communicate, loss of mental acuity, calculation problems, diminished comprehension, disorientation, inflexibility during negotiations, susceptibility to manipulation or even fraud by third parties.

Are there different standards of capacity for different business transactions?

Yes. Legal capacity has different legal definitions depending on the transaction and the applicable case law and statutes in the state in which you are operating. In Michigan, for example, the legal standard for the capacity to contract is whether the person in question possesses sufficient mental capacity to reasonably understand the nature and effect of the contract.

The more complicated the contract, the higher the level of understanding that is necessary to have the legal capacity to make that contract.  In a real estate transaction, such as signing a deed, the standard is whether a person has sufficient mental capacity to understand the business in which he or she is engaged, to know and understand the extent of the value of the property and how to dispose of it.

It is important that businesspeople be aware that a transaction can be set aside by a court if the other party is later found to have lacked the requisite legal capacity at the time the transaction was undertaken. Therefore, it is important to take appropriate steps to protect yourself and your business when concerns arise that the other party may lack the legal capacity to enter into a transaction.

How can you protect your business in the event that your business partner is showing signs of diminished capacity?

One way to address this concern is to create a durable power of attorney, in which you and your partner name each other as the agent to transact business in the event the other suffers from a diminished capacity. You can also name a trusted employee or adviser to this position.

Having a durable power of attorney will also prevent a spouse or family member of the incapacitated person from gaining the authority to transact business matters on that person’s behalf. This is especially important when those family members have little or no experience in business.

What can be done if a client or third party to a transaction appears to have diminished capacity?

One option is to ask for a capacity evaluation by a doctor to ensure that the person has the capacity to enter into that particular transaction. Of course, this topic must be approached with great care. Another option is to make the transaction contingent on a court guardianship or conservatorship in which the court will grant authority to a third party to act on the person’s behalf.

For example, while a person with diminished capacity might not be capable of signing a deed necessary to a business deal, his or her court-appointed guardian or conservator could be granted authority to sign the deed on behalf of that person and proceed with the transaction.

Clearly, such a scenario can be extremely difficult. It may be a client with whom you have worked over many years. It can be difficult to extricate yourself from the relationship, but it may be necessary to protect yourself legally because these transactions can be set aside. It may be a matter of approaching the client’s partner or spouse, explaining that you are having concerns and bringing in a third party to make sure the transaction is protected.


Suzanne Fanning is an attorney with Garan Lucow Miller PC and concentrates her practice in probate and trust litigation and planning.  She is co-chair of the Washtenaw County Bar Association Probate Section. Reach her at (734) 930-5600 or

Insights Legal Affairs is brought to you by Garan Lucow Miller PC

Dealing with the daily responsibilities of running a business can distract an owner from the big picture. To take some of the burden off of CEOs running small and mid-sized companies, Professional Employment Organizations offer services that handle outsourced aspects of daily business, including recruiting, payroll, workers’ compensation, risk and safety management, and training and development.

However, selecting the right PEO for your company requires thoughtful consideration. And J. Richard Hicks, CEO of HR1 Services Inc., says that working with a PEO requires cooperation and commitment.

“This is really a partnership to help streamline and make your company more cost and time efficient. You need to work closely with your vendor and treat the relationship like a partnership to make it work for you,” Hicks says.

Smart Business spoke with Hicks about what to look for when choosing a PEO.

How does a PEO work?

A business and a PEO establish a three-way relationship — a co-employment arrangement — among the PEO, the client company and the company’s employees. This means the PEO co-employs your work force and becomes a legal employer responsible for such functions as payroll, recordkeeping, benefits and services, and participation in hiring, evaluation and firing. This frees up business owners to focus on the core operations of their business.

What do companies need to understand about the co-employment relationship they establish when working with a PEO?

The co-employment relationship allows your employees to participate in the PEO’s benefit programs, as well as its risk management programs. The employer retains control of the workplace, but when it comes to government compliance, the PEO takes those burdens off its hands.

What differentiates one PEO from another?

PEOs can be grouped by the range of services that they provide. Some could be considered turnkey and take care of the company’s employees from top to bottom. Others simply provide payroll and workers’ compensation services.

Every company has its own specific needs. Generally, the more people you employ, the more important HR functions become. Conversely, fewer employees mean fewer stresses exist on that aspect of your business, and all you would likely need to outsource are a few administrative services.

There are also PEOs that specialize in certain industries and you want to work with one that has experience relevant to yours. When you evaluate a PEO, ask whether it’s done work with companies in your field because that experience helps with the back end legal responsibility and mitigates your exposure. A PEO will never completely remove your legal exposure, but it will greatly reduce your risk.

Does hiring a PEO mitigate any legal risks associated with the services it provides?

It does mitigate them, but they never go away completely. An example of some items that will go away when you enter into a co-employment relationship with a PEO are 401(k) fiduciary requirements, health care fiduciary responsibilities in terms of COBRA administration and workers’ compensation liabilities.

Working with your PEO can also help protect you from many types of employee lawsuits. While the arrangement doesn’t prevent a lawsuit from being filed against your company, having a relationship with a PEO can greatly increase your protection.

Companies should make sure that their PEO has employers’ liability insurance, as well as errors and omissions coverage in suitable amounts that cover its entire block of business. You should also look into what resources it has available in terms of legal counsel.

How can a company rate a PEO’s affordability?

Look at your business and the issues you’re having with running it, specifically with issues such as all forms of insurance administration, insurance procurement, employee administration and federal, state and local compliance. Brainstorm those items out, pencil in who is doing that work and how often it’s being done. Typically when you’re looking at a company with about 35 employees, the person doing most of that work is the owner or CEO. Even if he or she doesn’t do it all, that person is involved in a lot of it. As a result, your cost for handling those issues increases dramatically, both with the owner’s time and with opportunity costs in terms of the time lost pursuing company growth.

The best way to evaluate the savings impact of a PEO is to look at the cost of employing someone to do that job, including salary, continuing education, vacation, coverage for when that person is on vacation and turnover cost, as well as any software or hardware expenses associated with a new position and new full-time employee.

When you hire a PEO, you’re hiring a team of experts, not just one person. The organization will have experience across a broad range of areas, and it never calls in sick, goes on vacation or asks for a raise every year.

How can a company determine which PEO is right for it?

The most important thing when choosing a PEO is to find a company that believes in doing business the way you do business — that treats employees the way you do. You should feel confident that you can reach the right person within the PEO to get a problem resolved. It comes down to finding people you want to do business with and who treat employees the way you want them to.

It’s not for every company, but if you have fewer than 200 employees, a PEO is something you should consider.

J. Richard Hicks is CEO of HR1 Services Inc. Reach him at (800) 677-5085  or

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When it comes to hiring, staffing agencies are the experts. They know what it takes to create lasting employment relationships and can find a qualified full-time candidate quickly and efficiently, saving you the hassle of wading through hundreds of applications, says Rachel Ferguson, a recruiter with The Daniel Group.

“Agencies have a database of applicants they’ve screened and know what potential candidates are looking for in a company, job type and pay,” says Ferguson. “A recruiter will save you time and money, working to place the right candidate quickly so you don’t have to repeat the process if an applicant doesn’t work out due to a poor hiring decision.”

Smart Business spoke with Ferguson about how staffing agencies can help companies with their full-time hiring needs.

When working with a staffing agency to find a permanent employee, what is the first step?

The first and most important step is providing a detailed job description to the staffing agency you’re working with. The more information you can provide up front, the easier the process will be for everybody involved. When an agency only receives a barebones description of what is needed, the result can be multiple rounds of interviews to flesh out precisely what skills an employer needs, and that can result in frustration.

A clear job description allows the agency to get to work locating candidates. As the employer, you should expect applicants to be thoroughly screened and qualified before they are presented to you by the agency. You may only see three to five resumes out of hundreds screened in the search process. These are the candidates that your recruiter believes to be the best fit for your opening. You should consider your recruiter as a business partner who can guide the hiring process and who has the best interests of your organization in mind.

How does a staffing agency screen candidates?

With today’s technology, traditional interviews are not necessarily the only means of prequalifying applicants. Candidates may live out of state or have a demanding work schedule that can limit their ability to travel to an office for an interview. Skype interviews are increasingly common, and it’s not unusual for recruiters to talk to candidates multiple times per day by phone to gather more information.

Social media is also making a mark on the screening process. Recruiters can research any public profile the candidate has on sites such as Facebook or LinkedIn to get a better impression of his or her personality. Personality and skill assessments are great tools to gauge whether a candidate will fit a company’s culture.

What characteristics indicate a candidate could be a good choice for permanent employment?

Always look at a candidate’s tenure when evaluating a long-term fit. However, given the current job market, many people have been forced into working contract positions, so it has become tougher to judge work history based on tenure. A general rule is that the fewer jobs someone has held, the better indication of that person’s long-term employability.

Recruiters also look at whether a person has made multiple, broad, cross-industry career changes, which can be a sign the person doesn’t have a clear vision of career progression and may be more likely to leave a job when it gets tough.

Asking a candidate about hobbies can give a recruiter a broader picture of personality and help determine if he or she will fit with your company’s culture in the long term.

Is conducting interviews enough, or should there be on-the-job observation?

That depends on the company and the type of position it is filling. For many professional, senior-level roles, recruiters are interviewing candidates who are employed but considering new opportunities. For these, it’s much less common to see temp-to-perm strategies. It may be considered too risky for the applicant to leave a permanent position with benefits for a temp-to-perm role that could fall through. It is important to have candidates interview with key staff members they will potentially interact with and get detailed feedback.

Many characteristics can be discovered through a trial period, but if your recruiter is experienced and thorough, these can be uncovered before the candidate is hired.

What level of involvement should a company expect to have in the hiring process when working through a staffing agency?

Expect to be engaged from beginning to end. During the process, your recruiter may need to regularly follow up with you to fine-tune how candidates are selected. Communication is vital to ensure the right person is hired. Give feedback after interviews to discuss with your recruiter what is and isn’t working. Many times, hiring managers will make the mistake of interviewing and then falling silent for too long without feedback. Candidates in today’s market expect quick feedback, and an unresponsive client can leave a bad taste in an applicant’s mouth. While the employer has the final say in who it hires, your recruiter is responsible for narrowing the field, and communication is the best way to build trust.

Once a candidate is chosen, how can a company improve its chances of that person accepting the job offer?

The job offer is one of the most important parts of the hiring process. You may have conducted great interviews, but if you don’t have a lucrative job offer, you could lose the candidate. Undercutting a strong candidate at this stage says that you don’t value what they can do for you. Not only is the salary you offer important, but a strong benefits package goes a long way.

Also, secondary benefits such as health and wellness packages, contests and other perks can be appealing. Make sure you communicate to the candidate what special offerings your company has and build excitement to improve the chances that your preferred candidate will accept your offer.

Rachel Ferguson is an engineering services recruiter with The Daniel Group. Reach her at (713) 932-9313 or

Insights Staffing is brought to you by The Daniel Group

The Akron/Canton area has seen a lot of commercial real estate activity recently. The area’s industrial vacancy rate has gone down slightly, from 8.7 percent last year to 8.5 percent this year. While that rate is slightly above the Cleveland market’s 8.2 percent, it is still well below the national average of 9.7 last year and 9.2 percent this quarter. The office vacancy rate sits at 10 percent this year, up from 9.3 percent last year but still below the national rate of 12.1 percent this year.

Some of the biggest news out of the Akron/Canton area includes the expansion of Struktol. The rubber and plastics supplier is expanding its operations in the area and recently leased 97,000 square foot in Stow, in addition to its existing space in that area. Also illustrating industrial growth in the area, The Timken Co. recently moved into 28,000 square feet of additional space to expand its operations.

Smart Business spoke with Terry Coyne, SIOR, CCIM, an executive vice president with Grubb & Ellis, about real estate trends in the Akron/Canton markets.

What are the factors behind the changes in the office vacancy rate in Akron/Canton this year?

Office space is typically a lagging indicator and industrial space is a leading indicator. The region is experiencing significant occupancy by new players in the oil and gas industry. Without them, the vacancy rate would rise.

While the vacancy rate for manufacturing has remained flat from the year prior, sizable companies such as Struktol and Timken are expanding.

The increase in the office vacancy rate seems to be correlated with an jump in total square footage in the region, which increased by 268,813 square feet in the second quarter. It therefore seems that the increased vacancy rate could be due to new construction that has not yet been filled, or from companies that have moved into newly constructed buildings and vacated their previous building.

What is the news beyond what the numbers reflect in manufacturing real estate?

A lot of vacancies have been bought up. Getting someone in the large Lockheed Martin building was fortunate, but there are also some emerging trends that are leading to these numbers. First, many manufacturing companies are reshoring, meaning they are moving production from abroad back to the U.S.  Second, the oil and gas industry continues to attract business. Third, many existing manufacturing buildings are being razed, which is reducing the inventory and shrinking the market for existing properties. This causes vacancy to go down and rents to increase. Although the industrial numbers appear flat, the market is improving.

In the Akron/Canton market, existing buildings are filling up with tenants. What does that say about commercial construction in the area?

It’s really very hard to get financing for the speculative construction of office buildings. The area will continue to see rents increase and vacancies decline until banks decide they will provide the loans necessary for the construction of speculative office buildings. What will likely happen is that more businesses will begin building to suit themselves. But the interest rates that make this the best case scenario are not there yet, and many companies are hampered by the amount of equity they need to get a loan, which can be near 30 percent.

The area will likely not see a substantial pace of speculative office building construction for another two and a half years. While this might not be good for construction companies, it is good for landlords who will benefit from increased occupancy and the ability to charge more for rent as the market tightens.

How is the Akron/Canton area real estate market faring compared to the nation?

Net absorption rates in the Akron/Canton area in the second quarter were 651,525 square feet for industrial properties and 25,662 square feet of office space. This year, to date, absorption for industrial properties is at 1,447,517 square feet and office properties are at 111,678 square feet.

Conversely, the industrial vacancy rates in the Akron/Canton area have improved slightly, from 8.7 percent this past year to 8.5 percent this year. In comparison, the national vacancy rate was 9.7 this past year and has shrunk to 9.2 percent this quarter.

Looking at office vacancies, the Akron/Canton saw its rate of 9.3 percent last year, grow to 10 percent this year. This opposes the trend that is being experience across the U.S., which had office vacancy rates of 12.5 percent last year that tightened to 12.1 percent this year.

How do you expect the year to finish in both office and manufacturing real estate?

I expect that you will continue to see a decent pace of absorption on the office side, but industrial absorption will slow.

In terms of new construction, we’ve seen industrial slow down and office keep its pace. There haven’t been any sizeable properties shutting down recently and there’s not a lot of unsettled market right now. In that sense, the good news is that the bad news is over. In 2010, we hit bottom and all the negative noise that appeared every day of another building shutting down has stopped.

Getting rid of any dilapidated supply — when it holds more value as a commodity than as an underlying asset — helps underlying asset values. While it can be understood that razing existing buildings might hurt because it increases the price of existing properties, pricing in this area is still extremely low. If you are looking for office space, it’s tough to find a better deal than in the Akron/Canton area.

Terry Coyne, SIOR, CCIM, is an executive vice president with Grubb & Ellis. Reach him at (216) 453-3001 or

Insights Real Estate is brought to you by Grubb & Ellis