When then-President George W. Bush signed the Troubled Asset Relief Program (TARP) last fall, he knew that if he wanted to turn around the economy he would have to find a way for businesses to re-establish credit. One of the main objectives of TARP was to encourage banks across the country to increase the amount of money they lent to businesses.
One of the first symptoms that the economy was sick was a lack of incentives for banks to lend money. On Oct. 29, 2008 Wells Fargo received $25 billion in TARP money, one of several banks across the country that received funds to help strengthen the banking industry.
“Chief Executive Officer John Stump reported that we’ve lent $225 billion to U.S. taxpayers since last October, which is nine times the amount we received from the TARP program,” says Stephanie Arceneaux, business relationship manager, AVP, of Wells Fargo Bank. “We also reported a profit for first quarter 2009.”
Smart Business asked Arceneaux about the state of commercial lending in the United States.
How have commercial loans overall been affected by the economy?
Commercial loans have definitely been impacted by the economy. Sequentially our total commercial and commercial real estate loans have been down about 3 percent and commercial lender requests have slowed down through the first three-month period of 2009 as we are starting to see borrowers reduce their receivable and inventory levels in order to conserve cash. They’re paying them down a little bit.
Now, while our commercial lending is down, it’s important to note that lending is up significantly in other areas, such as mortgage origination. Further, sales of Wells Fargo Business Services® packages (business checking accounts and at least three other business products) is up 37 percent from the prior year.
Are companies still taking out loans?
Companies are definitely still taking
out loans. However, many commercial borrowers are de-leveraging their businesses, meaning they are voluntarily reducing their debt levels. As consumer spending has substantially decreased, companies must adjust their debt balances to fit with their current cash flow and revenue. This is a prudent posture but Wells Fargo is still making loans to creditworthy borrowers.
Are companies still buying equipment new or are they trying to make what they have last longer?
Historically, the lion’s share of equipment lending that I’ve done has been to purchase software or other IT equipment. In these economically challenging times, I’ve seen companies curtail their IT spending. Equipment lending is cyclical, and the economy is at a low point in the cycle. As the economy improves, I expect to see equipment lending rebound as there will undoubtedly be some pent-up demand for many types of equipment.
Does it look like the economy has turned the corner at all?
It does appear the economy has started to improve somewhat. More specifically, to cite one metric, after a 74 percent decline from the peak in July 2005, new U.S. home sales appear to be bottoming out. The pace of home sales, which hit a record low in January, jumped in February and was flat in March, the Commerce Department reported last week. Additionally, interbank borrowing rates, such as LIBOR, have declined materially since the onset of the credit crisis. To the contrary, the unemployment rate, which is 8.5 percent nationally and 6.5 percent in Houston, is trending higher and must stabilize in order for consumers to feel confident enough to resume discretionary spending.
What type of lending suffered first when the economy started to show signs of trouble?
The first sign of trouble was on the consumer side with regards to subprime lending. Secondly, consumer lending, credit cards, mortgages and loans. Finally, commercial lending, mainly in commercial real estate. The consumer side was definitely hit first and then the downfall trickled over to the commercial lending side. I would like to think that once the consumers are more comfortable with spending, we will start to see the economy turn around.
Is the lending atmosphere different in Houston than it is in other areas of the country?
I do see that. We’re still going forward on our end. In many other states you see a lot of pull back, but we are still seeing a lot of loan requests in Houston. So I do think that Houston is blessed that our economy is still moving at a pretty good pace. Some people are hurting but not as much as in other cities and other states.
How has commercial construction been affected?
The commercial construction side has definitely slowed down quite a bit. Many financial institutions are definitely underwriting tighter than in the past with regards to the terms and structure of repayment as it relates to down payments, LTV and percentage preleased prior to construction.
STEPHANIE ARCENEAUX is a business relationship manager, AVP, of Wells Fargo Bank. Reach her at (713) 662-1160 or email@example.com.
The transportation industry has taken a hit in the past couple of years first pummeled by fuel costs, now endangered because of lack of product demand. Even though the economic forecast may be grim, this is a prime time to evaluate your current network to find wasted money and inefficiencies that may be hurting your customer service.
Delivery delays and poor packing and routing methods can all cost your company money.
The good news is that there are software solutions out there that can help you fix your problems with a minimal investment and lower your logistics and transportation costs by 8 to 15 percent.
“Transportation logistics is all about time and efficiency,” says Tony Alexander, operations manager, Momentum Transport and Momentum Freight. “Most of a company’s proposition is value and customer service. If you aren’t using software or a third-party logistics service, which for sure is using technology, then you won’t be maximizing your efforts to serve the customer.”
Software programs are available to assist companies from the time an order is placed through the successful delivery of the order. Many executives view their transportation department as a cost center, but through successful management, it can be another way to earn money.
Why logistics software is important
The addition of software to your logistics department will optimize daily and long-term transportation plans and scheduling, carrier selection, route planning, inventory management, and small parcel shipping, which can reduce costs.
While a software investment may cost at least $10,000, improving your shipping processes will allow you to serve more customers and increase profits in the long run.
“Saving money is important, but if you focus on a small savings, you won’t win in the long run,” Alexander says. “If you have software, you can see companies’ on-time record and rates they are offering on a daily basis. Keep in mind, saving $100 for a load with a company with a late reputation may cost you on the back end. All of this can be quantified through software.”
A common transportation management issue has businesses keeping more inventory on hand than necessary. This typically happens when stock is manually cataloged instead of tracked with software. This means more of your money is sitting in warehouses instead of in your pocket.
“If your routes aren’t planned accurately, you’ll be paying for employees’ ill planning and poor use of fuel,” says Jesse Rodriguez, terminal manager, Houston branch, White Star Delivery Inc. “You get what you pay for and if you’re not using technology to help create routes, load trucks and plan through the process, you’ll see customers go slowly but surely elsewhere. Computer applications make [for] easy access to information, and (they make) everything run smoother. When your information is clear, you will maintain customer loyalty.”
Human error is a big part of what can go wrong in logistics. Depending on the volume of orders you are receiving, this can add up. The use of software can eliminate these errors and make your inventory and tracking easier to manage. Software can also determine the best carrier for a particular type of shipment and contractual agreements.
“Efficiency means better customer service,” says Jamison Day, professor, University of Houston, C.T. Bauer College of Business. “Software helps you move through the process better, faster and cheaper. If you don’t have the capabilities to purchase all of the necessary software, but your company relies heavily on shipping, you should consider a third-party logistics firm.”
What you need to know
Before making a software purchase, you need to assess what areas of your process are in greatest need of assistance. While some companies package their software options, others individualize the programs for specific areas of interest, such as shipping and loading.
To figure out where you need help, you will need to perform an audit that tracks products from production to delivery.
Start by making a checklist. Are your shipments on time? Are your trucks traveling with full loads? What are your current fuel expenditures? Are you utilizing the best routes? What rates are you paying carriers? Are you paying your employees overtime? Are your orders accurate? If you don’t know how to obtain this information or you’re finding inconsistencies, software can probably help you reduce errors and delays.
“There are a fair amount of laws that must be obeyed in shipping, as well,” Day says. “Software will keep you abreast of what is necessary when sending out loads. You will, of course, have to keep upgrading your software, but this cost is much lower than fees and penalties that can be accrued when you don’t have paperwork in order. This delay will also make your customers unhappy.”
After you’ve determined the area you need the most help with, choose a software company you feel comfortable working with. Find a company that will be accessible when you need them. If you decide handling everything in-house is too expensive, find a third-party logistics firm that handles the details while you focus on your core competencies.
“Computers tend to find ways that reduce driving time and improve loading of shipments,” Day says. “The technology doesn’t replace the humans; it augments them, making everything more efficient. Depending on the industry, a third-party logistics firm will be a must. Calculate the rate to bring this service in-house compared to that of a logistics firm. Make sure that you find the right company to fit your needs. Don’t partner with the first guy holding a hammer looking for something to hammer even if it’s not the right tool. Look for a tool-independent firm.”
Today’s economic climate may be tough, but by looking for savings in every area of your business including transportation you can find money that can be better used elsewhere in your organization.
“Shipping still happens without software, but the time element and accuracy software can bring to an operation can’t be compared to those companies operating without it,” Alexander says. “Technology is used throughout most companies and stops at the shipping room door. This isn’t an area you want to skimp on. Keep customer service a priority and you’ll be one of the companies that sees it through the downturn.”
A stranger to most of us last year, Bernie Madoff is now a household name and a hot topic of discussion in the financial world.
Unless you’ve been totally tuned out in the past months, you know Bernie Madoff was caught and arrested for running a Ponzi scheme. Another big name in the investment industry, Houston’s own Stanford Financial Group, also made headlines recently for allegedly defrauding investors out of billions of dollars through a Ponzi scheme.
A Ponzi scheme involves paying off investors with funds received from new investors, and con artists get away with it as long as they continue to attract new investors and maintain a client base large enough to support their original investors.
These scandals have increased the anxiety level of investors who’ve already seen their retirement savings dwindle in a very hairy bear market. Investors are increasingly cautious with their money, but that doesn’t mean they should stop investing altogether. There are still honest, reliable money managers in this country, and there are still safe and lucrative investments.
“Money and investments are a top priority for those who want to gather assets and, hopefully, retire while they still have time to enjoy it,” says Ed Gojara, CPA, CFE, an audit senior manager with Briggs & Veselka Co. “Risk and return have an inverse correlation. There are very safe investments, like treasury bills and CDs, with relatively low risk and low rates of return. At the other end of the risk spectrum, investments in penny stocks and start-up companies can yield higher returns but may result in larger losses.”
Gojara believes that now is as good a time as ever to invest, provided you know exactly what you are investing in, and the associated risks. Smart Business spoke with Gojara about making smarter — and safer — investments.
What should you be wary of when investing?
As a business owner, you may be investing for yourself, your company, your employees and numerous others who will look to you for guidance and advice. You want to have confidence that you’re working with trustworthy and reputable money managers and investment advisers.
Rule No. 1, if an investment sounds too good to be true, it probably is. If it’s ‘guaranteed,’ find out exactly how and by whom. Very little in life is guaranteed, so be skeptical. There are no free lunches.
Second, don’t invest if you don’t understand. It’s your money, and you need to understand where it’s going. Some investment funds are called fund of funds. This means they invest in other funds rather than directly in the underlying investments. If they invest in other funds, obtain audit reports for those funds so you can see where your money is truly going.
How do you know your advisers are working for you?
Ask how your advisers are compensated, what kind of fiduciary duties they have and what they are required to disclose to you. While brokers may disclose the fees you pay, they may not tell you that those fees are five times higher than the industry average.
Request and obtain audited financial statements from those with whom you invest and research the audit firm. It doesn’t have to be a national firm with thousands of offices. There are many qualified, good local and regional firms. And you should research the accounting firm’s reputation and resources by visiting the firm’s Web site or the Web site of the American Institute of Certified Public Accountants (AICPA) at www.aicpa.org. The AICPA maintains a database of those firms that have gone through the peer review process — a process designed to enhance the quality of accounting, auditing and attestation services performed by public accounting firms. You can also visit your state’s board of public accountancy (for Texas, the Web site is www.tsbpa.state.tx.us). There, you can search for the firm and individuals from the firm to verify they are registered with the state’s Board of Public Accountancy and discover if there are any disciplinary actions pending or previously taken against them.
Why is checking out the auditing firm so important?
Madoff’s auditor was Friehling and Horowitz, a three-person firm that was auditing billions of dollars. Stanford’s auditor was CAS Hewlett & Co., a tiny accounting firm with an office above a hair salon in London and a second office in Antigua — two rooms containing an old telephone book and a typewriter. If the audit firm and the scope of the work to be done don’t match (or if there aren’t any computers around), that’s a sign that something is wrong. If you can’t trust the auditing firm, how can you trust the businesses they’re auditing?
What other things should investors watch in today’s market?
Fraud is hard to detect on the outside, and usually when you do find it, it’s too late. However, you can take steps to prevent fraud. Always exercise proper due diligence. Monitor your investments before, during and after you contribute to them. As stated earlier, fully understand your investments, your advisers and the companies that audit your advisers. Don’t fall for the latest ‘get-rich-quick’ investment. The best investments are well planned and come to fruition over time. Understand your investment time horizons and the amount of risk you are willing and able to take.
Finally, don’t try to invest alone. Even if you are well versed in financial and business markets, it doesn’t hurt to seek advice from a trusted CPA and/or attorney.
ED GOJARA, CPA, CFE, is an audit senior manager with Briggs & Veselka Co. Reach him at firstname.lastname@example.org or (713) 667-9147.
You’ve come a long way! This is especially true for women who own their own business in the United States. Statistics show that the number of businesses owned by women has risen dramatically over the years as economic resources and education have become more readily available.
According to the National Association for Women Business Owners’ Web site, 10.1 million firms were owned by women (50 percent), they employed 13 million people and generated $1.5 trillion in sales in 2008. Three-quarters of all women-owned businesses were majority-owned (51 percent or higher), totaling 7.2 million firms with 7.3 million employees and $1.1 trillion in sales.
“I’ve been in the banking industry for 20 years, and I’ve been involved with NAWBO for seven, and I’ve seen the effect it has had on women business owners in the Houston area,” says Jo Ann Miller, vice president and senior relationship manager for Wells Fargo Bank in Houston.
Smart Business asked Miller how NAWBO has helped women across the country and if there are more opportunities for women to own their own businesses in today’s market.
What is NAWBO?
NAWBO was formed in 1975 by 12 businesswomen who lived and worked in the Washington, D.C., area. Their ultimate goal was to gather and share information and create an atmosphere of a professional community in an effort to strengthen their entrepreneurial skills. At that time, there wasn’t a group dedicated to helping female business owners. Today, there are branches in many major markets that women can turn to when they need assistance.
What are some of NAWBO’s accomplishments over the last 10 years?
Some of the key factors include the passage of the Women’s Business Ownership Act (HB 5050) during the Reagan administration. On the financial side, in 1996 NAWBO created a partnership with the Small Business Administration to better identify the needs of women entrepreneurs. The SBA helped develop a fact sheet so its staff could better understand the differences between women-owned businesses versus male-owned businesses, such as the limited availability women had to available financing. NAWBO also created strategic alliances with corporate sponsors eager to work with businesses owned by women.
In 2005, immediately following Hurricane Katrina, NAWBO formed a women’s business disaster relief project that had a Web site up and running within 72 hours of the storm. The Web site raised $40,000 over a two-week period in individual contributions, all of which was donated to women business owners who had been affected by the disaster.
Do you need to own a business to receive help from NAWBO?
I am not a female business owner but I work for a corporation that supports them. There are a number of corporate sponsors who offer a great way for women business owners to learn what resources are available to them. Collaboration like that can help cut through the red tape and make the resources available in a more efficient manner.
Is it getting easier for women to own their own businesses?
I would like to think it’s becoming more balanced and the numbers on the NAWBO Web site seem to reflect that fact. Just from working with NAWBO over the last seven years, I have observed the diversity of the businesses that women have created, especially those competing in male-dominated industries. You’re not just seeing your typical administrative professions; women are more involved in commercial areas, such as real estate, trucking, licensing and newspapers. There are so many industries where women didn’t have a voice and now they are competing one-on-one in the field. The strategic alliances women are forming give them access to the capital and education they need.
Financial institutions today see women-owned businesses as a viable unit and one it wants to do business with, so I am reaching out to them and letting them know that as a bank we are serious about doing business with them and want to provide them with the same amount of opportunities as we offer to men.
What is the Trailblazers Award?
In 2002, NAWBO and Wells Fargo established the award to honor and celebrate the nation’s leading women business owners. Each year three women-owned businesses are selected nationwide on the criteria of their business performance, innovation, growth and personal service to the community. Each winner receives a $5,000 cash grant, nationwide recognition and will be honored at the annual NAWBO conference.
JO ANN MILLER is vice president and senior relationship manager for Wells Fargo Bank. Reach her at (281) 644-3714 or email@example.com.
Empowering employees starts with giving them the right tools to succeed, says Stan Bunting.
“Empowerment is always a concept people are readily willing to say, ‘Yeah, that makes sense.’ But you can’t empower someone just by giving them new responsibilities and not spend the time to prepare them,” Bunting says.
As president, CEO and majority owner of McCoy Inc., Bunting says there’s a two-step process to empowering employees. First, you train them. Second, you have to allow them to learn by making mistakes.
Bunting has put those steps in place at McCoy, with many of his 350 employees going through in-house training courses or mentoring programs. Annual performance appraisals allow the office furniture company to put employees with management promise on a career training path, learning finance and leadership skills. Newer employees learn the ropes next to their own mentor.
By both formal and informal training, Bunting essentially grows his own employees at McCoy, which posted 2008 revenue of $121 million.
Smart Business spoke with Bunting about training employees to meet your company’s needs.
Carve out time for training. The person that is being given greater latitude, whether it’s greater latitude in their job function or decision-making or whatever, really should be told that’s what is happening. There is a process, and there should be a certain amount of training and preparation prior to greater empowerment.
There’s formal training, where there are very specific steps involved, and then there is the softer side of training that is more of a mentor relationship between the person who is growing in their job responsibilities and the person who is allowing them to grow.
If you’re going to build curriculum, you have to get experts that understand how to build a curriculum. We used an outside service.
I have taught those classes to begin training in soft skills. We sent six of our leaders here to training. It was a ‘train the trainer’ kind of an approach. Then, we came back, and with a cross-section of the population, we would go through formal training classes.
Most companies are working at a very efficient level, which means your people don’t have a lot of extra time to go to training classes. If all you do is add this on top of everything else that they have to do, it’s going to be very difficult for them to get it done.
You’ve got to give them the time to go to training and apply some of the things that must be applied. You’ve got to block it out for them. You’ve got to take them out of the work pool for a certain amount of time to give them time to go to training. It’s not a nights-and-weekends type thing; it’s not fair.
Mentor your employees. Formal training is not very successful without the mentoring. Many times, formal training only gives us a language, which we’re both working in to be able to discuss these things. A lot of the actual training comes in real-life experiences.
Both parties have to be fully engaged. It cannot be something you’re going to do when there’s time left over, and it can’t be something that you’re going to do just by happenstance. You have to be thoughtful about it, and you have to (plan) it, and you have to make sure you’re really making the investment in time — both parties.
For example, in the sales relationship, we put junior salespeople with senior salespeople, and those people are the mentors for the junior sales rep. They go out on calls with them, they understand how to enter orders, they get involved in pricing.
They do it as peer-to-peer relationship, not as a management-level person to someone else in the organization.
Once you’ve done some mentoring, you give them a chance to go work on their own. You see how they handle their mistakes and answer their own questions. When they’re able to kind of ride that bicycle without the training wheels, then they’re ready. But it’s a judgment call. You have to eventually allow them to take a risk and let them go.
Encourage risk-taking. The second component has more to do with the person that has decided to empower another individual. I think the leader that has decided to empower another employee in his business has to be willing to take a little bit of risk, because if they don’t, it’s really not empowerment, it’s micromanagement.
We talk a lot in training in our management group here about not micromanaging. Set large goals, set large metrics and measure those, but don’t measure the minutiae. There’s a lot more learning that goes on when you allow people to solve problems on their own instead of constantly checking in.
If you’ve done the proper training and the proper preparation, then you’ve got to be willing to let them make mistakes as they try new things. Let them learn, and help them learn from those mistakes.
It’s OK to take risks and make mistakes because that’s how we learn from them. You can say that all day long. You can state it in your values, but you also have to demonstrate that. When someone makes a mistake, you can’t then go in and punish them.
You should go in and work with them, and help them learn why the mistake was made and so on. But it should be done in a very constructive manner, in helping them build and learn, not in a punitive manner.
How to reach: McCoy Inc., (713) 862-4600 or www.mccoyinc.com
The secret behind any successful company is having the right people, says Tom Lipar. As founder and CEO of LGI Development, a land and home sales and developing company, Lipar says that he struggles with hiring and retaining quality employees.
You can implement an extensive interviewing process, which LGI has, but that’s just the start, says Lipar, who has 105 employees. Once you hire the right employees, you need to give them the tools to do their job. To create a healthy, successful work force, you have to give employees the tools to do their jobs, educate them and help them find ways to meet both personal and company goals.
LGI Development, which posted 2007 revenue of $118.3 million, has been successful largely because of its sales training program, which Lipar carried over from a previous job, where he was charged with creating a similar program.
Smart Business spoke with Lipar about ways to help employees maximize their potential and, in return, the potential of your company.
Involve employees in setting goals.
All of our people in our company do goal setting. It’s a true goal-planning process. It starts from the top down; it starts from the business plan. We do that on an annual basis for one-year goals. Then, every month, everybody in the company meets with their directs and goes through monthly business and personal goals so that we’re all on the same page with objectives that the company wants.
The employee doesn’t just write the goals down and bring them to the company. It’s a goal-planning session where the manager sits with the employee and they discuss what’s going on in the company, what the employees need to do to achieve his personal goals as well as the company goals.
When they’re discussed, if the employee sets it too high, then the manager should know enough and say, ‘I think you’re a little bit too aggressive; we need to probably pull it back because one thing we don’t want you to do is seek failure and not reach your goals.’ We try to be realistic.
The principles of goal setting are they have to be realistic. They have to be written, and if you don’t reach them, they should be changed.
It definitely works. No. 1, the people who work for you have to know what the job is. They have to know how to do the job, and they have to know what they can do to achieve results in the job.
You should have a mutual expectation between management and their directs, so the manager knows what’s expected from their employees and the direct knows what to expect from their manager. And they should know what the overall objective of the company is, what their financial goals are, what the production goals are. Then, the employee can determine how he can effect that objective — be effective on that objective — to achieve through his own goals.
They know what the company’s goals are, and they then have the opportunity to say, ‘Well, I’m going to be this part of that company goal; I’m going to do this much to achieve that overall company goal.’ In other words, ‘I’m going to reach my goals, which, in turn, will help the company reach their goals.’
Give employees the right training.
We’re constantly looking internally for people that we can teach our system to so when the opportunity or a project comes up, we have the people to do it.
There’s two parts to training. Education is where you sit somebody down and they read things, they listen to tapes, they listen to lectures, they learn about what the job is and how to do the job. Training for sales-people is 100 days ... 30 days of classroom training, lectures, tapes, myself, the president of the company, different people in different departments.
The second part of training, and the most critical, is when the salesperson goes out to the field. They’re not put right in front of a customer. Their manager does on-the-job training. They show them how to clothe. They show them how to do a presentation. As the salesperson gets better, they’re given more time with the customer.
Promote for the right reasons.
You have to hire the good people, the good employees, but also you’ve got to make sure you have the right people doing the right jobs. I think that’s where a lot of companies fail. They promote people into a job as a reward rather than promoting people that can really do the job.
A good manager has to have certain qualities. The most important one they have to have is the ability to promote, demote or fire people without emotion.
When you promote somebody into a different job or a new job, they have to be qualified for that job. They have to be the right fit for the job, they have to be the right person for the job, otherwise you’re doing both the company and yourself a disservice because if they are not the right person for the job, obviously, they’ll fail.
When you’re promoting somebody to a new job, it’s like hiring a new person. You’ve got to know them, you’ve got to make sure they’re the right personality for the job, you’ve got to make sure they know how to do the job and that they’ll be successful in the job. It’s not just a reward.
HOW TO REACH: LGI Development, (281) 362-8998 or www.lgidevelopment.com
It wasn’t quite the same as your mother putting a special note in your brown-bag lunch for school, but it was close.
In the early days of her company, Cindy Marion couldn’t resist writing personalized notes along with employee paychecks.
“I loved doing that,” says Marion, founder, president and CEO of Marion, Montgomery Inc. “But the eventuality was we got big enough that if I did that consistently two times a month, it would take too much time.”
Marion found other ways to communicate with her employees as the marketing firm continued to grow, reaching 53 employees and $11 million in 2007 revenue and a projected $18 million for 2008.
“I think about it like plates on those poles,” Marion says. “Everybody needs to have their plate spun routinely to make sure they understand and are rewarded for the good things they are doing.”
Smart Business spoke with Marion about how to be a good communicator and why the word “and” is always better than “but.”
Q. Why is communication so important?
If (employees) ask a question, it deserves an answer. If it’s bothering them, it should be bothering me.
As parents or bosses, we sometimes don’t give our associates or kids enough credit. Most people are happy to understand the position you’re in. If you say, ‘We can’t do this, and this is why,’ they say, ‘Oh yeah, I hadn’t thought about it that way.’
They aren’t the ones responsible for implementing a lot of these programs. They just take them at face value until you explain, ‘Well, the reason we’re doing it this way is this.’ The light bulb comes on, and they say, ‘OK, now I get it.’
You can’t tell them to be honest and then make a decision that is contradictory to that. You have to be consistent in your actions with what you’re communicating. You have to tell them often. You can’t send out a once-a-year update and feel like you are communicating with your employees.
Q. What’s the key to having a good dialogue with employees?
You need to send lots and lots of communication and reward good versus punishing bad. We try to catch people in the act of delivering unquestionable value to clients, and then we send out a companywide e-mail routinely. Probably every couple of days, something goes out saying, ‘Hey, so-and-so did this or so-and-so did that.’
A lot of leaders don’t do that out of the risk that it’s unfairly distributed or somebody gets left out by mistake. I routinely tell the employees that I’m going to leave somebody out sometimes and I’m sorry.
If somebody has a feeling that they were on a project and they didn’t get proper credit or didn’t get mentioned or whatever, they can come talk to me, and I’ll try to spin their plate in another way. I think it’s consistently pointing out positive behavior toward the ultimate objective and vision for the company.
Q. How do you make your communication inclusive?
A lot of it is in the words you choose. There’s a few key rules that leaders can use in situations to bring out the brilliance in people. One of those is reducing the size of your ‘but.’
We tend to often say when someone contributes an idea, ‘That is a great idea, but ...’ If we as leaders could change the word ‘but’ to ‘and’ in most of our vocabulary, ‘That’s a great idea, and how would you feel about improving it by this?’ it just changes the whole tone.
There are a lot of words that include, endorse and encourage the contribution of others. Using the word ‘but’ is often not one of those. Replace your ‘but’ with ‘and.’
Going around the table and saying, ‘I’ve invited you to this meeting because I think your skills in this area are so incredible; I wanted to be sure we got the value of your abilities there. And so-and-so, you’re in here because, good grief, the job you did with the Minute Maid event was wonderful. And so-and-so, you’re in here because you’re part of the reason we’re one of the fast-growing companies.’
Endorse everybody so they feel like their contribution really does matter because it does matter. Make sure everyone understands why they are in the meeting. There is some pressure for them to contribute for the very reason you asked them to be there.
Q. What’s the key to giving direction?
What I try to remember is, every time you give an instruction, there ought to be an inclusion that, ‘When you are completed with this project, what we should have is this.’ What do we want to have happen? Then you figure out the best way to do that.
If you don’t paint the picture of what we want to have happen at the end of this assignment, you’re probably not going to get what you want.
I’m amazed at the creativity that people will exercise in finding a solution if they really, clearly understand what you are headed toward.
HOW TO REACH: Marion, Montgomery Inc., (713) 523-7900 or www.mmihouston.com
Ambit Energy Electrical Company
500 McKinney St., Houston, TX 77002
(917) 478-8874, www.ambitusa.biz
Offers energy-saving tips, Conservation company
Associated Testing Labs Inc.
3143 Yellowstone Blvd., Houston, TX 77054
(713) 748-3717, www.associatedtesting.com
Increases awareness of environmental issues, Construction material testing
Citizens League for Environmental Action Now
5120 Woodway Drive, Suite 9004, Houston, Texas 77056
(713) 524-3000, www.cleanhouston.org
Educates the public on sustainable initiatives, Facilitates collaborative action among Houston businesses
Comprehensive Energy Services
333 Clay St.,Houston, TX 77002
Energy provider, Offers conservation tips
Dab Engineering & Testing LLC
8700 Commerce Park Drive, Suite 206, Houston, TX 77036
Serves clients nationally, Engineering services
EA Engineering, Science
6650 W. Sam Houston Parkway N., Suite 420, Houston, TX 77041
(713) 896-4111, www.eaest.com
Environmental compliance management, Natural resources management
Architects & Consultants
5828 Langfield Road, Houston, TX 77092
(713) 528-0000, www.environmentassoc.com
Environmental research and consulting service, Remodeling and new construction
1225 N. Loop West, Suite 620, Houston, TX 77008
(713) 395-1990, www.gulfstatesenergy.com
Electricity and consulting, Develops customized energy plan
20 Greenway Plaza, Suite 600, Houston, TX 77046
(713) 470-0400, www.gexaenergy.com
Helps improve profit through savings, Supplies low-cost energy
Sequent Energy Management
Two Allen Center, 1200 Smith St., Houston, TX 77002
(832) 397-1700, www.sequentenergy.com
Natural gas provider, Optimizes natural gas asset portfolio
As your company is settling in to the new year, you should ask yourself one question: If you measure productivity by the amount of customer-focused work being produced by individuals, does your IT department help accomplish that?
With rapidly evolving technologies and seemingly endless considerations about compatibility and upgrades, the technology-to-productivity curve is low, according to Fred Pratt, CEO of DYONYX.
“Productivity is much more than having sophisticated tools,” Pratt says. “To understand and measure productivity, business must return to the basics. Remember what your company’s goals are and then define how each business unit supports those goals.”
Smart Business spoke with Pratt about productivity, IT’s role in it and how to get all aspects of your business on the same page.
How should a business look at productivity?
Productivity is not just about how much has been manufactured and how much it sold for; it is about each and every component that makes up the process of producing a deliverable for the customer. Productivity is best defined as ROE, return on effort.
Productivity has many small and often unnoticed components that cause a ripple effect up and down the line. Productivity includes how well you recognize what triggers a customer to order, why customers ordered from you instead of the competition, and whether or not they will order from you again. Productivity is about what products are being created to support the customer requirements and whether or not the profit margins are where they need to be to remain competitive. Productivity is also about how all of the costs of doing business can be properly accounted for. Finally, productivity is those intangible elements of being able to determine if you are really providing a value to the customer. This will ultimately determine your corporation’s position in the market.
Does enhanced technology equal enhanced productivity?
Based on raw horsepower, desktop computing should have a higher productivity rate than ever before. Desktop computing capability far exceeds the mainframe capacity in many large companies from just a few years ago. The average desktop user can now produce multimedia presentations for customers, merge several different types of documents into one and access data from all over the world, data they could never access before. So if productivity relates directly to the horsepower available to a user, we should be much more efficient than before.
Are companies more efficient than ever before?
The productivity figures gathered from GNP numbers for the past few years show nearly a flat-line average with some spikes and dips, yet technology has grown at an almost ballistic rate. Is there a separation occurring from technology and productivity? The situation is a paradox: If you do not have time to explore the technology, you cannot fully understand the capabilities of it and increase your productivity. Yet, if users are exploring the technology, then they are not completing their daily job functions and are not as productive.
Since a separation is being created because of technology outrunning users’ ability to utilize it, the separation will widen with the accelerated rate of new technology development. New training techniques are coming into the market that will shorten the productivity curve time; however, technology being available and technology being deployed into practical use are two different things. Often, by the time a business is ready to use a technology, the tools are already outdated.
How can IT help bridge the gap?
IT groups are frustrated and cannot understand the unreasonableness of the users. Users say IT groups do not provide them with what they need to do the job. As a result of not meeting the user groups’ needs, the business units will begin to seek their own solutions. Then business units are buying or designing technology without IT support, which makes for conflict.
If IT could fully understand the problem and develop a solution that includes the business unit, it would get more cooperation from business. This means that IT must close the gap between technology and a user’s production level, which is not easy since you have technical people trying to teach business people how to use the desktop tools. The business unit wants to be able to do its job better; the IT wants to get a technology installed and move on to the next problem.
Technology is often installed by IT because it is the latest revision, not because it solves a business problem. The first objective of IT should be to increase productivity with the tools that exist; just saying that the tools exist without them being used does not help the corporation.
FRED PRATT is the CEO of DYONYX. Reach him at (713) 293-6305 or firstname.lastname@example.org.
The calendar could not have flipped to 2009 fast enough for Art Dauber.
Between the economy going in the tank and the recovery efforts from damage caused by Hurricane Ike, 2008 was not the best of times at American Electric Technologies Inc.
But you wouldn’t have known it by talking to Dauber, the company’s chairman, president and CEO. If he had any anxiety about whether his company would make it, he made sure his 500 employees couldn’t see it.
“You have to take the fear out of the crisis,” Dauber says.
Total sales at the provider of power delivery solutions were $55.7 million for 2007. That was up 22.6 percent over 2006 sales, and he anticipates another increase in 2008 sales.
Smart Business spoke with Dauber about how to get buyin from your employees, in both good times and bad.
Q. How do you earn the employee loyalty that will help you through a crisis?
You don’t have to be the first one to work, but you almost have to be the first one to work. You don’t have to be the last one to leave, but almost the last one to leave.
You can’t have any special things that you get that the other person doesn’t get. The benefits are the same, the cars are the same. There are no big expense accounts.
I go to their meetings and listen to both their business and personal problems. We all meet out in the hall about 11:30, and whoever goes to lunch, from vice president to hourly employee, we all go to lunch together.
On a social basis, it’s almost a flat organizational structure. There isn’t any, ‘You’re the president, I can’t do that.’
Live the life. You can’t have a story that is different from how you live. People will talk to other people. It’s much easier to tell people to be here at 8 in the morning when you show up at 7. It’s much easier to tell people an hour is enough for lunch when you take an hour for lunch.
I wouldn’t even accept a private parking spot. I get the best parking spots every day because I’m in early.
Q. When a crisis hits, how do you keep people calm?
Be fearless. People have to know that you are fully committed. In a military organization, when the captain says, ‘Follow me up the hill,’ you’re not sitting at the bottom of the hill saying, ‘Hey, tell me how things worked out.’
With Ike, I was here before the wind stopped blowing. I may be the leader, but I share the same values as they share, and they know they can count on me.
Be 100 percent truthful. I gave them an overall plan to how we’d respond, how we’d focus on the business and how we may have to change.
If they followed that plan, there weren’t a bunch of things they would have to worry about. You went from a bunch of concerned people before the meeting to people who were smiling when they left the meeting realizing that life would change a little bit, but they would survive.
Q. How does establishing that culture translate to the business?
Set the image of whatever it is you are trying to do. Entrepreneurs have to come up with a philosophy of how they want to be recognized and then operate in that mode.
Some may want to be the most creative engineers. Some may want to be the lowest cost supplier. However they want their company to be perceived, they have to live that, not just say it.
It’s how you make your decisions. We have a sense of fair play in how we conduct our businesses.
I have to make sure employees feel engaged and that there is no job that is more important than another one. I can show how any job we have will impact others if someone stops working it.
Make sure everybody understands that their contribution is important to the organization as a whole and how their contribution fits into the organization.
Q. How do you ensure that employees understand that?
I was a teacher at the University of Pennsylvania. My students had to be on their toes because they knew I was going to turn to somebody and ask a question. If they tuned out, they would be embarrassed. They all know it if they are in one of these meetings.
Let’s say we were talking about the financial crisis. I’ll turn to a guy and say, ‘Why don’t you give your experience about the 1980s?’
When any meeting I have is over, I will go around the table and, one at a time, ... ask for their opinions and ask if there is anything else to add. Make sure everybody has their say and that everybody stays awake.
If you get people focused on the right direction and they really care about what the company is doing, they can generate an enormous amount of positive energy to the success of the business.
HOW TO REACH: American Electric Technologies Inc., (713) 644-8182 or www.aeti.com