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Sunday, 24 February 2008 19:00

Say it again

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If you plan to stay married, you know that saying ‘I love you’ once does not mean you never have to say it again. The same goes for the business world and the need to constantly reiterate your company’s vision and values to your employees, says Birgit D. Kamps, founder and CEO of HireSynergy.

“It’s a constant conversation,” Kamps says. “Whenever there is a problem or conflict or any decision that needs to be made, I always say, ‘How does that relate to our values?’”

This sharp focus on communication helped the 40-employee company stay intact during its turbulent early years, which included a period of severe hardship followed by rapid growth, during which revenue grew to $10.6 million in 2006, up from $1.4 million in 2003.

Smart Business spoke with Kamps about the importance of staying tuned in to your internal customers — also known as your employees.

Q. What is the key to really listening to your employees?

Someone who is a really a good listener is not making a commentary in their head and strategizing what to say next or pretending to listen when they are really not.

There is a particular sentence I use: ‘Be in their world, not in your world.’ Even though you may have known that person for 10 years and you think you have them pegged, unless you’re that person, you’ll never know where they are coming from 100 percent of the time.

They’ve had different experiences. Even a month ago, they may have had something happen personally that shifted their view on life. It is truly listening as if you have never spoken with that person before and you’ve never known that person before.

Q. How do you track your company’s success in sticking to its core values?

We meet with our team-mates every six months to see how they are doing and performing according to what they thought and what their career plans are.

We’ll also say, ‘Which value do you think the company has upheld the best this year, and which value do you think the company has been worst at?’ We’ll ask what we can do to improve that.

When you are growing really fast, you tend to focus on, ‘Let’s make sure the customer is happy.’ In the meantime, your internal customer, your team, is dying. You haven’t figured out yet how many more do you need to hire or put processes in place to adjust to the fast growth.

How do you expect the customer to get taken care of or expect people to go above and beyond if they are not happy internally?

Don’t wait until you are growing to address quality of life for your internal people. Take care of your internal customer, and your external customer will naturally get taken care of.

Q. How do you ensure new employees will fit with your vision and values?

Know how to sell your company and sell your story. Pick the top two or three reasons why someone should want to come to work for you instead of your competitor. Instead of saying they should be lucky to work for us, we actually positioned ourselves and said, ‘Hey, this is who we are and this is what we can offer.’

At first, we hadn’t defined our culture and our values. We had no process. We assumed everybody was interested in growing and getting better. Then we realized, ‘Oh, no, not everybody is interested in that.’

Once we had documented and expressed our values, then it became much easier to know what questions to ask and how to interview people.

Q. How can the CEO keep things on track?

I had the illusion before that I had to be present in the office, working hard and showing my values for them to do their job. Then I had some health concerns that I had to take care of and I realized, ‘No, that’s not really what it was.’

What was valuable to the team about me is that they knew they could count on me to uphold our values and be a standard for it. Whether you’re in the office 10 hours or two hours, the key is that they know you are committed to the company’s vision and values. The worst thing you could do is to work 15 hours and say, ‘I value integrity,’ and five minutes later, do something that is completely out of integrity and not let anybody tell you you’re out of integrity.

It’s really creating a culture where you, as the CEO, are someone who is safe to speak to when the team notices you are off on an area. They did that with me. I was withholding communication because I was dealing with so much personal stuff.

I was not upholding our values. I was definitely not being open. Practice what you preach in terms of value and vision, not necessarily what you do with your time and how you produce.

HOW TO REACH: HireSynergy, (713) 222-7667 or www.hiresynergy.com

Tuesday, 29 January 2008 19:00

A coaching mentality

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Mary Spangler says leading an administrative team is like coaching a basketball team. An athletic team must include many different types of players because if it had only one type, it wouldn’t win or reach its goals. Spangler says it’s the same in business; you need different types of people with different strengths and weaknesses to be successful, and you need to help them understand their contribution to the team by playing to their strengths and learning how to improve on their weaknesses. As chancellor of Houston Community College — an education system composed of six colleges throughout Houston with a fiscal 2007 budget of $225 million — Spangler has encouraged her 5,391 employees to shine.

Smart Business spoke with Spangler about how to be a cheerleader and coach for your team to help it keep reaching goals.

Develop and encourage teamwork. Work with employees to say, ‘I don’t have all the answers. We’ve got a problem here, we all recognize it as a problem, but I’m not going to tell you what to do. We need to figure this out together; how are we going about doing that?’

Don’t talk about members of the team to other members. When you start talking about one person, then that person says, ‘OK, when I’m not here, is she talking about me?’ Be consistent, fair and open.

In a big organization, it’s hard if you’re deep in it to feel like you are making any kind of difference. Develop a vision and identify key goals. Hold in your head specific things, five or six things that you need to accomplish in order to achieve the goal.

If everybody can grab on to a piece of that, you can move something so that people feel that there’s energy and direction. Focus them on things you have done, not on the things you haven’t. Look at what’s good that is happening.

Communicate often and in different forms. You can’t say anything too many times. People don’t hear it the same way, and once isn’t enough. Use as many modes as you can to communicate that message; keep it focused and ask for feedback. Ask people, ‘Do you understand? Have I made it clear that this is what we’re trying to do? Do you understand what we need to do about it?’

I like to set up forums where I can sit around the table with a dozen people or go into a roomful of people where I can stand and have them ask me questions. They ask you, ‘Why did you do such and such, and are we going to have to do this and that?’ Answering their questions clearly, directly and with confidence communicates to them, ‘OK, this person sort of does understand, has thought about it, maybe does-n’t have all the answers but is enough connected that he or she can come into this environment without feeling nervous or defensive.’

Make good judgments. Watch people make bad judgments. I learned as I was moving up, I watched the person who I reported to and asked myself, ‘Did they handle that well? How would I have handled that? Did they say the right things?’ Look at what happened and ask, ‘Would there have been a better way to handle that?’

The more decisions you make, the better you get at it. When you make a decision, the reason it probably works is that you’ve made a commitment to it. Make a decision based on the consistent principles of fairness, equity and compassion, not making up the rules as you go along but having some guiding principles, applying them and making that decision work is how you learn judgment. It’s a skill to learn through practice.

Keep your promises. It’s critical when developing trust to not tell people more than you can do. Don’t promise what you can’t deliver. Maybe 90 percent of the time you can deliver it, but they’ll only remember the 10 percent that you promised and didn’t deliver. If you can’t promise, then you say, ‘I can’t make a commitment on this. However, I will review it; I will consider it,’ or, ‘I hear what you’re saying; I understand your concerns.’

Model behavior. Don’t expect people to do something that you wouldn’t do yourself. If you want them to be good team members or deliver on their outcomes, you need to demonstrate that yourself.

You can’t expect from them what you don’t do. Those are ways you develop trust, and then they get to know you as a real person and not as a name on their check. It comes from meeting with them in their environment, greeting them and showing them, ‘Hey, I’m a real person.’

Reward those who reach goals. Give feedback. You say, ‘You’re doing a good job, keep it up, don’t give up.’ You have to be a cheerleader and a coach on the sidelines. In a lot of ways, I can’t play the game, but I’ve got to watch all the moving parts and try to maximize that effort.

Not everybody expects an award or a pat on the back, but when there is especially good work done, and it comes to your attention, it should be reinforced. Focus on the positive, and when people feel good, they’re more willing to work hard.

HOW TO REACH: Houston Community College, (713) 718-2000 or www.hccs.edu

Tuesday, 29 January 2008 19:00

Cultural graffiti

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George F. Black has seen a lot and learned a lot in his 11 years as president and CEO at RSA Corp. But when it comes to determining the cultural fit of an executive-level job candidate at the 100-employee company, Black often turns to his wife, Sherry, for advice.

“She has incredible intuition,” Black says. “She knows my company quite well. At times, she says, ‘I still don’t understand what you really do, but I know what kind of people are good for you.’”

While skills are valuable, Black says it’s just as important that a new employee fit in with the other employees and buy in to the company’s vision and values.

By making cultural management a part of his job description, Black has led the IT, strategy and staffing services provider from $6.4 million in revenue in 2003 to $14.5 million in 2006.

Smart Business spoke with Black about how to make your employees feel valued by letting them write on the walls.

Q. How do you get off to a good start with a job interview?

A resume should only answer one question, and that question should be, ‘Do I want to know more?’ The mistake that many of us make is to look at a resume and decide that isn’t the person and not do a thorough job of figuring out who this person is.

Never make a prospective candidate wait. If you can’t and it’s just unavoidable, make sure someone meets the candidate and helps them through the wait time.

Secondly, I always ask the candidate to share with me their most memorable success and their most memorable mistake. A lot of insight can come from those two. Probably as important as anything else is to ask open-ended questions or questions that cannot be answered by yes or no.

Try to relax the person who is interviewing through some open-ended banter at the very beginning. I never interview across my desk. My interviews are always either around a conference table or in a couch and chair setting.

Q. What tools do you use to determine cultural fit?

Get the individual into a social setting. Everybody is on their best behavior through the interview.

If you can get them to relax a little bit, that’s when some of the true story comes through. It doesn’t always work; it’s not 100 percent foolproof. But if you can get that opportunity, at times, you can see if the real person comes through.

Q. How can you ensure a smooth start for a new employee?

One of the industry trainers and gurus I respect is a man by the name of Jack Daly. One of the things he talks about is how crazy we are because we celebrate when an employee resigns. We have a going-away party.

But we don’t do anything like that when a person starts. It’s important to welcome a person on board so the first couple of days are memorable to them in a positive manner.

When someone starts a new job, there is a lot of trepidation. There is a lot of worry as to how I’m going to fit in.

When we have a new employee start, particularly an executive, we have a two-week indoctrination or orientation plan that includes every important touch point within the organization.

We meet in the reception area for a little continental breakfast and introduce the new employee to everybody. We say, ‘We’re glad you’re here.’ You can go as far as having balloons on the back of their chair so when they walk into their office, they have colorful balloons saying, ‘Welcome.’

It really gets them started on the right foot. There is no lack of understanding for what to do the first two weeks. I think that’s a real important step to getting a person launched correctly.

Q. How do you maintain a healthy company culture?

It’s part of our culture to regularly recognize and celebrate. It’s well-known that after a certain level, salary falls way down on the list of motivators for employees. Right up at the top is recognition and the ability to feel like one is making a difference.

You can see the chests swell with pride when they are recognized.

One way for everybody to participate is the use of bulletin boards and write-on walls. There are pictures and success stories and the opportunity for people just walking down the hall, if they have a creative thought on something that is going on in a project, they just write on it.

It has all of the various projects that are going on and the initiatives that are in progress, and people can just come along and write on it. Just say, ‘What about this? Have you thought about this?’ It’s a way for everybody to participate. <<

HOW TO REACH: RSA Corp., (281) 488-7961 or www.rsacorp.com

Wednesday, 26 December 2007 19:00

Preparing for the inevitable

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With recent activity in the private equity arena, business owners have been placing considerable emphasis on structuring their companies to maximize the price of an ultimate sale. However, smart business owners should begin to position themselves before reaching the top of their game so as to structure their companies for sale from an estate-planning perspective. Tax law developments in recent years, including capital gains and dividend rate reductions, make it imperative for business owners to examine current estate planning so as to minimize the tax cost of transferring the business and maximize its value to the retiring owner or the next generation.

Smart Business asked John Brentin, a partner at Porter & Hedges LLP, how business owners can leverage their wealth, retain their monetary gains and prepare their companies for sale.

Why should business owners be concerned early on with transition planning?

It is inevitable that for every business owner, at some point a transition will occur — by sale, incapacity or death. If there is no heir-apparent, it is then necessary to put in place a mechanism to allow the most appropriate person to carry forward the vision of the founder. Likewise, if there is no one of the next generation capable or with a desire to carry forward the business, a lack of early planning can lead to significant tax liability should a transition be forced upon business owners. In those unfortunate circumstances where there is a death of the owner, without advanced planning, the business can be adversely affected, both operationally and from a cash flow perspective.

How can business owners minimize estate and gift taxes?

The current reality is that there is no repeal of the death tax forthcoming. At rates approaching 50 percent and a current exemption of only $2 million, planning is critical. Since the estate and gift tax is applied to the value of assets being transferred, successful planning seeks ways to transfer wealth while minimizing the valuation of retained assets that will be included in the estate. For those business owners who desire to minimize estate taxes there are several available options. Currently, the annual gift tax exclusion amount is $12,000. This means that a husband and wife can now give $24,000 to as many individuals they care to benefit every year. If they transfer interests in the family business, they can leverage the gift using a qualified appraisal of the interest that is appropriately discounted for lack of control and marketability. Another option is to transfer those interests into a trust established for family members to keep the business within the family for succeeding generations. If large transfers are desired, using a grantor trust may allow them to sell up to their entire business interest in exchange for a promissory note without paying any income tax on the sale.

Why are control, timing and form of business so important to transfer planning?

Control of a business has a great deal to do with the concept of valuation. Further, since our entire transfer tax system is based on value, timing also plays an integral role. Finally, not all forms of doing business are created equal. Today’s business owner has a wide array of choices, and some structures are better suited than others to facilitate a transition of ownership.

From a timing perspective, the ideal times to begin a transfer of ownership process are at the initial start-up or during an economic downturn. The value of the company is lower, which is a benefit for valuation purposes in tax planning. Based on the options available to minimize estate taxes during such a period, an owner has the ability to retain control while putting in place a mechanism to facilitate the transfer of the value to the next generation.

Finally, formulating a succession plan often reveals that the original structure of the business entity may no longer be appropriate. Recent amendments to Texas statutes and changes in federal tax law make it easy to convert from one form of business to another. A successful plan will always assess and isolate risks and potential liabilities. If a particular facet of the business operation produces a greater risk, it may be appropriate to form an additional entity to conduct that part of the business operation.

How flexible should you be with your transition plan?

It is wise to plan for all contingencies and allow for flexibility in your transition plan, knowing that every circumstance planned for will not actually happen. Building in flexibility allows those left in charge to react to unforeseen conditions. A transfer plan that reacts to the ebb and flow of the business world can help alleviate the worries and assure the continued success of the enterprise.

JOHN BRENTIN, a partner at Porter & Hedges LLP, is in charge of the firm’s wealth preservation practice. Reach him at (713) 226-6663 or jbrentin@porterhedges.com.

Wednesday, 26 December 2007 19:00

The Warren file

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Born: Lake Charles, La.

Education: Finance degree, Louisiana State University; attended business school at the University of Houston

History: As a founding member of Energy Alloys, Warren has been the company’s president since its inception in 1995.

What is the best business lesson you’ve learned?

Business changes. Right now, we’re in a very robust environment, and 10 years ago, we weren’t. Customers’ needs change. The capabilities of the company change. You have to be flexible and open and have an environment that lets you understand where changes are, what the needs are that are a result of those changes, and understand how to change the organization to meet them.

What traits or skills are essential for a business leader?

You have to have a willingness, or more than that, an appetite for change. If you’re uncomfortable in an environment where things are always changing, where there is a multitude of issues to focus on, it could be really tough. There has to be a strong vision of where the company needs to go, and not only that, but structurally the things that need to be in place to get there. There has to be a consistent values system in place that people can count on, that they can see every day. People are always looking to a leader for that direction and validation, and the security of knowing that the things that were there yesterday are going to be there tomorrow.

What is your definition of success?

For our company, it’s continuing to grow, to be entrepreneurial and to provide solutions for the customer and opportunities for the people who work here. The best way to provide that opportunity for the people that work at Energy Alloys is for us to continue to do those other things and look for new ways to meet those customers’ needs. As long as we continue to provide that opportunity, we’ll have a successful business.

Sunday, 25 November 2007 19:00

Seven steps to litigation alleviation

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Lawsuits can be costly, time-consuming, detrimental to positive public relations and, it seems, inevitable.

Whether a lawsuit is justified or not — and not all lawsuits are — it can tie up a company’s resources that might be better utilized in carrying out the business’s mission. A lawsuit also requires a company to retain attorneys to defend it or to find an alternate way to solve the dispute, such as direct negotiations between the parties or arbitration. The best way for a company to defend itself against lawsuits, then, is to prepare adequately for them.

Smart Business spoke with Jeffrey R. Elkin to learn how a company can prepare for and defend against lawsuits.

What can companies do to prepare for lawsuits?

There are seven basic guidelines that I tell my clients: 1) Follow a simple rule: It is better to do a bad deal with good people than a good deal with bad people. In other words, choose the right business partners. Be careful who you do business with. To the extent possible, companies should do business with people they know and trust. That is one sure way to limit the possibility of being sued. 2) Follow the adage: ‘An ounce of prevention is worth a pound of cure.’ Get legal advice and assistance early instead of waiting for a lawsuit to be filed and then bringing in an attorney. It can be less expensive and usually alleviates the risk of litigation.

Remember, part of a lawyer’s job is to anticipate potential problems and help design ways to avoid those problems. It is much more efficient to do that at the front end of a transaction than wait for a dispute to develop and try to resolve it through litigation. 3) Hire the best people, and work hard to keep them. Often, litigation occurs when companies fail to hire and retain the best employees available. This can be a costly mistake. While it may save money in the short term to hire less-than-stellar employees and hope they work out, it is not always worth taking the risk — especially if the company ends up in court. 4) Make sure that every transaction is properly documented. There is no substitute for a well-written transactional agreement. Such an agreement anticipates the potential issues or problems that the parties may face in the future and establishes, within the document, an agreed way to handle such situations. That is a far more efficient way to handle disputes than through litigation. 5) Address business complaints immediately. Letting a business problem percolate without addressing it usually leads to a lawsuit and increased cost to a company. Try to nip a problem in the bud by dealing with it. Make litigation the last alternative, not the first. 6) Be ready for litigation. Have a document retention policy in place, so that important evidence will be preserved. Train employees in the proper use of e-mails, which are the new ‘smoking guns’ of litigation. 7) Get good legal advice. Do not hire an attorney because he or she tells you what you want to hear. Good advice isn’t always pleasant. What you want is someone with experience who you can count on to be forthright and frank about whatever situation you are dealing with. Mutual trust is essential.

What can an attorney do for a company to help avoid lawsuits?

An attorney can help a company set its house in order before it even opens its doors for business. For example, an attorney can make sure that a business is properly organized and has all the certificates, licenses and other paperwork in place that government or regulatory agencies require. An attorney can also advise on liability insurance and develop training plans to deal with contemporary issues, such as the use and misuse of e-mails.

Why is the use of e-mails becoming more of an issue in business today than it was before?

As previously mentioned, e-mails are the new smoking guns in litigation. Employees are putting comments, observations or thoughts in e-mails that they would not think of including in formal business correspondence — even though e-mails are business correspondence. Electronic information in e-mails is fully discoverable. That means that the opposing party will get a copy of every e-mail. Because employees tend to be more casual, sarcastic, flippant and cynical in e-mails, than they would be in formal business correspondence, e-mails can be very effective evidence. Cases of e-mails coming back to hurt parties when they are preparing a defense are legion because employees are not trained adequately in the purposes of e-mail.

JEFFREY R. ELKIN is a partner in the litigation section with Porter & Hedges LLP. Reach him at (713) 226-6617 or jelkin@porterhedges.com.

Tuesday, 27 November 2007 19:00

Leadership blueprint

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John Johnson is a people person. And that doesn’t just mean he likes to shake hands a lot.

As the CEO of David Weekley Homes, a $1.5 billion multistate homebuilder, Johnson leads with the belief that the company will only go as far as its people will carry it. If the company’s employees aren’t put in the best position to succeed, the company won’t be put in the best position to succeed.

“It’s critical that we find the leaders we need to run the business,” he says. “We develop and grow our own leaders for the most part. Over 80 percent of our leaders have come up through the company rather than from the outside.”

Cultivating leaders that embrace the company’s vision and values is extremely important to long-term success.

With that in mind, Johnson has helped construct programs aimed at identifying and cultivating the best managerial minds in the company. He says the earlier you can find the next generation of star performers, the better your company is going to be in the long run.

As the leader, your job is to make sure the talent pipeline isn’t just full but trained and prepared for the coming challenges that will face your business.

The right match

When forming a company culture, the people you bring in to perpetuate the culture are as important as the culture itself. Without the right people in the right places, particularly in management, the culture will never grow.

“The owner or the CEO creates the culture of a company,” Johnson says. “After that, the management team either reinforces it or destroys it. I believe that leaders must walk the talk, they have to be good role models, they must live it every day, always be diligent and passionate about preserving the culture.”

With that as a guiding principle, Johnson and his staff are meticulous about interviewing potential management candidates, including a series of lengthy interviews, screenings and evaluations.

By the end of the process, Johnson and his staff should have been able to get a real picture of how the candidate thinks and performs in a variety of situations.

“One step in the process is a three-to-five hour interview,” he says. “Usually after three to five hours, people will get tired, and they’ll pretty much tell you how they feel. We invest a lot of time and energy in that since it’s so critical that you hire the right people the first time.”

It’s especially critical in management positions because an employee’s boss is usually the one who sets the tone for the culture.

“To our 1,400-some team members, their boss is the most significant person,” Johnson says. “That’s who they report to and communicate with daily. That person has to be walking the talk, they have to be representing the culture of the company. They are the eyes and ears for me out in the field.”

Johnson says high integrity and a strong will to succeed and well-developed communication skills are three of the most important characteristics any manager should have, and that factors heavily into the interviewing and screening process at David Weekley Homes.

For current employees, even before they develop an interest in pursuing a management-level job, Johnson’s staff is evaluating that person as potential management material.

“We look for folks who exhibit those (management) traits and sometimes give them leadership opportunities while they’re in that job to see if they really want to do it before we put them into a training program,” Johnson says.

Once a managerial candidate has been selected, the next step is to train him or her. To make sure the same values and culture are passed on to the new managers, Johnson has helped set up a mentoring program that allows experienced managers to interact one on one with incoming managers. It’s called a leadership pipeline program, and it exists in each of the 18 cities where David Weekley Homes does business. The program emphasizes training across various disciplines, so the new manager receives lessons not only in the area in which he or she will be working but also in other areas of the company.

“We typically set them up with a mentor to help further their skills,” Johnson says. “Once that is over, we’ll typically take the people we feel have the most potential and put them in cross-training functions. For instance, we might put a builder in the sales office or put a salesperson out building homes, so that gives them a better understanding of our business.”

Johnson says managers need to know as much as possible about the jobs of the people they will be managing, either directly or indirectly. It’s the only way they’ll be able to build any long-term rapport with their subordinates. In a larger company, it is likely impossible to give an incoming manager a slice of every job performed under your company’s umbrella, but the wider the perspective you can give your employees, the better.

“We might not expose them to all areas, but we give them as much exposure as we can because they’re going to be managing all those different functions,” Johnson says. “So you at least have to have some understanding of the skill sets and the challenges that the team members have. We try to make it as well based as possible, so at least they’ll have some understanding of the jobs of the people they’re managing.”

Consistent communication

Having a formalized training process for new managers is important, but it will only work properly if you set the ground rules in the first place.

It goes back to Johnson’s belief that the leader of a company sets the tone for the culture. Your managers can carry the torch, but you have to light it and keep it lit. The way you do that is through good communication.

Johnson places a priority on in-person communication, which requires diligence and a willingness to amass frequent flyer miles if your business has locations in many cities.

“I get out to each of our cities at least once a quarter, visit every one of our divisions every quarter, and when I’m out, I get around to almost all of our sales offices, construction offices and division offices. I spend a lot of time out in the field, face to face with our team members. That is by far the most effective way.”

Johnson is a proponent of face-to-face communication, but he recognizes that it can be a time-consuming method of getting your messages across. If you want to engage your employees in person, there is no magic formula. You must make it a priority, even with all the other tasks, projects and items that beg for your attention on a daily basis.

“Every quarter, my assistant and I set up my travel schedule, and we make it a point to make sure I get around to see every city,” he says. “If we have to give something else up, we give something else up. It’s not difficult to do if you understand and appreciate the importance of doing it.”

Face-to-face communication is important because it gives you a front-row seat as to what is going on in the field. It also allows you to really listen to what your front-line employees and managers are saying.

Johnson says listening is a major key to becoming a good communicator. You develop listening skills through practice and through interacting with your team. After meetings, Johnson asks his managers to grade him and offer advice on his listening and communication skills.

“The only way to determine if you are effectively communicating is to ask questions and listen to the responses,” he says. “A good communicator should properly identify who his audience is and adjust his style to best fit their needs. I usually find that the simpler the communication, the better.

“You should also remember that communication is more than just verbal. You should keep in mind body language when communicating and use all forms of communication.”

Keeping it simple allows your messages to stay consistent. Messages that need to reach a companywide audience can’t get bogged down in jargon or unnecessary wordiness or you run the risk of it getting lost in translation. Johnson uses every opportunity he can get to sand and polish his messages for simplicity’s sake.

“It’s through the training programs and quarterly meetings, so all our management team hears the same messages,” Johnson says. “We pray from the same hymn book, so to speak, and it’s through consistency of training, consistency of measurements and communication. We work very hard at that.”

A leader that delivers messages that are hard to follow or messages that seem ambiguous or noncommittal is a leader that will lose credibility. That is a dangerous area for anyone to tread.

“People can spot a phony from a long way off,” Johnson says. “One of the first things people lose respect for is someone who doesn’t speak the truth. That’s one of the most grievous sins you can make — not walking the talk, not being consistent and being a phony.

“You build credibility by walking the talk over time. I can talk and talk, but until someone sees what this company is about, there are going to be some doubts.”

Motivation matters

Even after you’ve selected, trained and established communication with the future leaders of your company, your job isn’t done. Enabling employees to succeed is a process that requires constant maintenance.

If you have placed authority in someone’s hands, there is a large trust factor involved. You must trust employees to do their jobs on their own unless they prove they can’t.

Johnson says trust is a form of respect a superior shows to his or her subordinates. If you don’t trust the people you have chosen, they won’t feel respected, and your company will suffer the consequences of poor leadership.

“To show respect, there are three ways to do that. One is you show trust to someone. Showing trust to someone is showing you respect them, and part of that trust is the freedom to do their jobs without interference. The second way of showing respect is care. Showing them that you care about them and are going to treat them fairly. The third way is recognition. That’s when you tell them they’re doing a good job, and here, we love to celebrate success.”

At all of the David Weekley Homes offices, there are scoreboards displayed. Employee performance and team performance are measured through many different criteria and the leaders are rewarded.

“Recognizing someone is a reaffirmation for them,” he says. “It shows them that the company or their boss recognizes that they did a great job and really appreciates it. Giving out money or a trip is also nice, but it doesn’t have to be money or a trip or an award. It’s just acknowledging that they did something. It’s something human beings crave — respect and recognition.”

HOW TO REACH: David Weekley Homes, www.dwhomes.com

Tuesday, 25 September 2007 20:00

Douglas J. Erwin

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Douglas J. Erwin is a culture nut. Culture, he says, allows people to work in a fun environment and gives them something to believe in. Erwin has created fun environments wherever he’s worked, from peddling an ice cream cart around the office and serving tasty treats to employees or turning a parking lot into a beach party. It’s hard to create that environment, but Erwin, who became chairman and CEO of The Planet in 2006, has focused on making sure that his 500 employees are excited to come to work each day at the Web and Internet technology hosting company. The business hosts more than 22,000 small and mediumsized businesses and 2.8 million Web sites worldwide, posting $110 million in 2006 revenue. Smart Business spoke with Erwin about how to get employees excited to come to work each morning and how to create a fun-filled environment.

Have fun and work hard. Create a workplace where people want to come to work. People like to work in cool places. You’ve got to have fun at work. If you don’t have fun at work, that’s not going to get transferred to when you deal with customers.

It should be an environment where, you walk in, the people will say, ‘Wow, this is cool.’ It’s creating an environment where it’s fun to work. Just something that would make it different.

If you could take somebody out of a standard job and move them to something else for a couple of days, it gives them a break and gives them a chance to see that maybe their job isn’t that bad after all.

Try to bring more value to a person’s day-to-day job by involving them in other things outside of their realm of job responsibilities. You get buy-in with these people because they had a chance to do something a little different.

Have the patience to make changes. It’s not an easy thing to do, to create culture. What’s worse is to start down that journey and not really want to. People will see through you immediately, and you will lose credibility as a leader. Hire somebody that can do it for you. Find somebody on your management team that has that twist.

You can’t just go in and wave a wand and say, ‘New sheriff in town, here’s the new culture, here’s what we’re going to do.’ It’s an evolution, a journey, a slow process.

The first thing I would ask is, ‘Do you really want to do that?’ If that person doesn’t have that passion to do that, it will fail immediately. Throw in a foosball table, big deal. Throw in a ping pong table, big deal. That’s not what makes it cool.

Just tap somebody on the shoulder when you walk by a cube and ask them what they do and listen to them. If they don’t jump up and start rattling off what the company does and how great it is, you know you’ve missed it.

If people are happy at their job, if they feel like they are more than a cog in a machine, if they’re getting paid fair, if their management treats them fair and if they’re n an environment that’s a cool place, you will have loyalty like you’ve never had before. That’s hard to do, and it takes time to build.

Be a model for employees. People are constantly looking at you. You could be walking down the hall to get a cup of coffee, and people know that you went by. Once you know that you’re in the limelight, you have to be on ‘go’ all the time.

When you talk about culture and successful cultures or not, you take a look at any of the successful companies, it starts right at the top with the leadership. Then it has to go to the next level down because if you have guys in the next level that are not leading and doing the same thing, you lose that whole side of the business.

The team should ask, ‘Are we approachable? Are we involved? Do we go out and talk to people? Are we behind closed doors?’

Let employees know their opinion is valued. You might not follow it, but at least you took the time to ask it.

Look for passion, integrity, trust, ownership and customer focus. You can see passion the moment candidates walk in and shake your hand. You can see it in their eyes, you can see it in their body language.

Start talking, and their eyes are either going to be engaged and locked in on you, or they’re going to be distant.

During an interview, I go to my board and start drawing and explaining. The passionate people will sit there and watch, and before the interview is over, they’ll be at the board drawing what they think, and you just see it in them.

Ask questions about how they manage people. Ask them how they fire people. There’s a right way and a wrong way to fire people, and most people do it the wrong way. The right way is to make sure that you’re helping people and that you’re helping them so much that they get frustrated and say, ‘I can’t take this anymore,’ and leave. A firing is usually a mutual thing if it’s done properly.

Talk to them about their style of management. Start asking them to describe their strengths, and the word trust is going to get used there one way or another. That trust, unfortunately, is going to have to be a gut feel.

Turn back around and ask them a question you asked four interviews ago and see how they answer the question, see if the story changes a little bit.

Look for a person whose capacity is greater than the job they’re going to be asked to do.

When a problem occurs, own it. Don’t pass it to somebody else to fix. You might need somebody else’s talent to help you fix it, but you own it until the customer’s happy.

HOW TO REACH: The Planet, www.theplanet.com or (713) 400-5400

Tuesday, 25 September 2007 20:00

New audit standards

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A hot topic in the accounting world centered on the audit reform standards that the American Institute of Certified Public Accountants (AICPA) issued in March, 2006. The standards (SAS 104 through SAS 111), commonly known as the risk assessment standards (RAS), are effective for this year’s calendar year-end audits. They were designed to improve the audit process, requiring auditors to perform risk assessments for each client, while tailoring audit procedures to address specifically identified risks.

According to Andy Kuntz, a CPA with Briggs & Veselka Co. in Houston, the primary objective of the standards is to improve the auditors’ application of the risk model, through a more in-depth understanding of the entity and its environment, including its internal control and, ultimately, an improved linkage between the risks and the nature, timing and extent of audit procedures.

“The objective was a more rigorous and consistent audit process regardless of the size or type of entity being audited,” says Kuntz. “Many have drawn the parallel between RAS and private companies and SOX [Sarbanes-Oxley Act] and public companies.”

Smart Business spoke with Kuntz about the new standards, what they mean, what challenges they’ll present and how companies can overcome those challenges.

What are some changes companies can expect to see as a result of the new standards?

First, more thorough information must be assembled on the nature of your company and its industry and environment in order to identify risks. Significantly more work will need to be performed on internal controls, as well. In the past, our professional standards permitted us to obtain a basic knowledge of the internal controls, and then assess control risk at the maximum level. Now, we are required to obtain a more thorough understanding of the internal control structure, evaluate if controls are designed appropriately and determine if those controls are implemented. Then we have an option as to whether we want to perform specific tests of internal controls or to perform substantive tests. However, we are required to test controls if substantive procedures alone are not sufficient to reduce risk.

Additional changes that companies will notice in future audits are the types of audit evidence being acquired. Historically, an auditor may have simply asked someone in the accounting department to describe a process or an internal control. The RAS clearly indicate that inquiry alone is no longer sufficient. Auditors will now be asking for you to document your internal controls and other procedural items. Additionally, under the new standards, auditors are required to perform walk-throughs of certain transaction flows and corroborate information learned via inquiry with additional procedures.

Private entities can also anticipate different types of communication during the course of the audit. Engagement letters, which are essentially contracts between auditors and companies, will have revised language. Auditors will also communicate some additional information with respect to known and likely misstatements identified during the course of the audit. Private companies can also anticipate receiving additional comments from auditors with respect to issues or weaknesses in their internal control structures.

The RAS will require more time in preparing for and executing the audit. The audit will likely take longer, which could translate to higher fees, especially if proactive steps are not taken to document internal controls and ensure they have been implemented effectively.

What can a company do to prepare for the changes?

Management needs to understand that auditing private companies is a whole new ballgame now. Companies have to be proactive when it comes to these changes, and that should start with a meeting with your auditor. Other steps may include:

  • Document your existing controls and ensure they are implemented as documented.

  • Consider testing controls, and formally documenting the testing procedures performed, and share this information with your auditor.

  • Evaluate your accounting department to see if the existing infrastructure is sufficient based on the size and complexity of the organization.

  • Look at credit agreements to see what covenants are in place and whether there is a requirement to provide correspondence from your auditor related to internal controls and other matters. Many believe the new standards will result in additional auditor comments and potentially more severe comments which could lead to covenant violations and events of default.

  • Finally, determine if an audit is the most appropriate service. In certain cases where an audit is not needed for an upcoming exit strategy, companies have negotiated to reduce the requirement from a financial statement audit to a financial statement review, which are not currently subject to the RAS.

Your company can save time, money and potentially improve the overall control structure by taking these steps now.

ANDY KUNTZ, CPA, is a principal in the Audit Department at Briggs & Veselka Co. in Houston. Reach him at (713) 667-9147 or akuntz@bvccpa.com.

Sunday, 26 August 2007 20:00

Eyeing the future

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As John Kirksey continues to lay the groundwork for the future of Kirksey Architecture when he is no longer in charge, he realizes the delicacy with which he must take each step in the process.

“A lot of these professional service companies, the original founders control and manage the company way past the point they should,” says Kirksey, founder and president of Kirksey Architecture, a $21 million, 120-employee architectural design firm. “When they finally say it’s time for me to give some leadership to younger people, those people aren’t necessarily young anymore. They’ve never been given leadership, so they don’t know how to deal with it.”

By getting future leaders involved early, it becomes easier to achieve a seamless transition of power.

Smart Business spoke with Kirksey about the best way to develop leaders.

Q: What do you look for in a leader?

We put more of a premium on a spiritual leader than we do on a dollar-driven leader. People that exude self-confidence and a positive attitude and are supportive of other people and respect other people are much more powerful to us than someone who says they can bring in five new clients every month.

You really need to understand the characteristics that you are looking for in an individual that can translate into leadership in your company. Many times, it’s not going to be a Type-A personality. It’s going to be quietly self-confident people who have good primary skills that just need support and motivation and a good example to follow.

Q: How do you find these leaders?

We throw everybody in the pool, and certain people surface as being able to swim a little better than others. We just give them a lot of latitude to prove that.

They are people that take initiative and are proactive and want to be aggressively involved in developing their careers, not waiting for us to give them instruction. We ask a lot of the people that work here. We also expect them to take the lead.

We can tell people to be certain things, but unless they want to be it, it’s never going to happen. Instead of me telling people what they are going to be doing, you’ve got to listen. When people start telling you, ‘Here’s what I think I’d be good at,’ you can then really get behind them because generally, that’s what they will be good at.

Q: How do you gather employee input?

When we establish objectives, there are 11 team leaders. If you just take 120 people, divide it by 11, it’s very close to 10 or 11 people in a small political unit. We ask our team leaders to give us feedback on the pulse of what their team is thinking.

We break it down into units of 10. That gives you a lot better understanding if there are grassroots issues and problems that are happening within a team. An employee is more likely to share with their team leader than stand up in a meeting of 120 people and say, ‘I don’t really agree with this.’

We look at it both in front of our quarterly meetings and behind our quarterly meetings. In front of our quarterly meetings, we try to get our team leaders to bring issues to the table because they have weekly meetings with their team. After the quarterly meetings, we ask our team leaders to bring issues back to the table and respond to what people saw at the quarterly meeting. If anyone has an issue or a problem, we want to know about it.

Q: How do you deal with failure?

You try to get over it quickly. Instead of mourning the loss of that project, you go out, and there are plenty of other projects out there. The key thing for us is to acknowledge it right away and try to work to correct what it might be.

The only time we’ve really had big problems is when we tried to ignore a problem that we were part of versus immediately trying to deal aggressively with any problems we might have encountered.

Q: How do you empower employees?

We have a big commitment to personal respect for everyone and trying to allow people to find their own channel to success. When people have ideas, if we think it’s a good idea, we’ll give them all the running room they need.

Every Tuesday morning, we have a marketing meeting. Anyone in our company is invited to come to our marketing meeting. If people want to show some initiative, they’ll show up. That’s how you start identifying people that really would like to get more involved and take charge of their future and manage a little bit of their career.

HOW TO REACH: Kirksey Architecture, (713) 850-9600 or www.kirksey.com