The National Association of Realtors and its affiliates offer and grant more than a dozen specialty designations, but two stand out as the most prestigious and highly regarded in the commercial real estate industry.
Society of Industrial and Office Realtors (SIOR) is a leading professional commercial and industrial real estate association. The society represents today's most knowledgeable, experienced and successful commercial real estate brokerage specialists.
The SIOR network includes more than 2,900 members in 480 cities in 20 countries on six continents. The society has certified almost 2,300 of its members with the prestigious SIOR designation. Designees specialize in industrial, office, sales manager, executive manager or advisory services categories.
The society also includes associate members who include corporate executives, developers, educators and others involved in the commercial real estate industry.
Clients represented by an SIOR designee receive an extraordinary level of service. The average SIOR possesses 20 years as a professional, has completed an intensive curriculum of SIOR courses and has demonstrated extensive experience by closing a very high volume of sales and lease transactions.
As evidence of society member experience and expertise, society members reported an average person dollar volume of $25 million in closed transactions. As a group, society members closed more than 68,0000 transactions in 2003, averaging 34 transactions per member. Society members leased or sold an average of 1.2 million square feet of space per member in 2003.
A Certified Commercial Investment Member (CCIM) is a recognized expert in the disciplines of commercial and investment real estate. A CCIM is an invaluable resource to the commercial real estate owner, investor and user, and is among an elite corps of 7,500 professionals across North America who hold the CCIM designation.
Only 6 percent of the estimated 125,000 commercial real estate practitioners nationwide hold the CCIM designation, which not only reflects the caliber of the program, but also shows why it is one of the most coveted and respected designations in the industry.
Conferred by the CCIM Institute, the CCIM designation was established in 1969. Courses leading to the designation are offered throughout the world. CCIM members are in more marketplaces in North America -- 12 CCIM regions representing 1,000 cities -- than all major real estate companies combined.
The CCIM movement began more than 40 years ago with commercial real estate practitioners who wanted to elevate their business practices through education and networking. Then, and now, education and networking remain the cornerstones of the CCIM designation and the reason for its success.
Of the many professional designations conferred to members of the National Association of Realtors, the SIOR and CCIM designations stand out as the most prestigious. Clients who demand the highest level of service choose practitioners who hold the SIOR and CCIM designations.
Thomas W. Frank, SIOR, CCIM, is a co-founder of Summit Realty Group and a 30-year veteran of the real estate industry. He specializes in corporate real estate services, tenant representation and office space advisory services. Frank has been involved in more than 1,000 transactions, handling more than 5 million square feet for tenants and buyers of commercial real estate. He also serves as Summit's Director of Office Services. Reach him at (317) 713-2104 or tfrank@SummitRealtyGroup.com.
Education: JD from Indiana University, 1975; bachelor of science in political science and economics, Indiana University, 1971
Career moves: Worked for the mayor; clerked at law firms while attending law school, then as Gov. Otis Bowen's campaign manager in 1976; practiced law starting in 1977
Boards: Chairman of Indiana Legal Foundation; on the board of directors of BioCrossroads, Indiana Health Information Exchange, Indianapolis Downtown Inc., Indianapolis Chamber of Commerce and Indiana Health Industry Forum
What was your greatest challenge in business and how did you overcome it? I was chairman of the Federal Home Loan Bank board in Washington, D.C., at the peak of the savings and loan crisis in 1989, a year after the S&L bailout legislation was passed, operating in an environment of incredible distrust of regulators. I had to convince the business community and banking system that the regulators could be trusted. It meant a lot of time on the road with business leaders all over the country.
Past or present, whom do you admire most in business and why? Bernard Baruch, a famous investment banker and national leader of some note. He was focused and contributed in public life and business life to the communities that he served. He had a business mind and a social conscience, and I value that.
What is the greatest lesson you've learned in business? Stay in touch with your customers and your colleagues at the same time. This morning, for example, I spent an hour and a half talking only with maintenance workers on every floor of one of our hospitals. Why? Because they know what's going on -- whether it's good or bad, they hear and see everything, and I learn an incredible amount from them.
Delco Remy International Inc., a leading designer, manufacturer and distributor of electrical drivetrain/powertrain and related products, promoted Tania Wingfield to vice president of production control and logistics.
Wingfield will report directly to Delco Remy International OE Division President Rick Stanley. The promotion recognizes her effective leadership of the PC&L team and the critical role it plays in Delco Remy's global future.
Her tenure with Delco Remy began in 1995 and has included assignments as a production planner, materials manager, plant manager and, most recently, as corporate director of production control and logistics.
She graduated from Indiana University of Pennsylvania with a bachelor of science degree in computer science and management information systems and is currently working on her MBA at Butler University.
Wingfield's knowledge of Delco Remy's OE Division product lines and her experience with lean manufacturing and value stream management, as well as her leadership and strategic business skills, will help drive the OE Division's long-term strategic goals.
Delco Remy's products include starter motors, alternators, engines, transmissions, torque converters and fuel systems. The company also provides exchange services for used components, commonly known as cores, for remanufacturers.
KIMBALL INTERNATIONAL INC.
Kimball International Inc. hired Kent Mahlke as vice president, global supply chain management - contract manufacturing, for flexcel, Kimball's contract furniture manufacturing business. Mahlke will provide leadership for global supply chain activities, working with all flexcel facilities and major customer programs around the globe.
Mahlke brings extensive knowledge of global sourcing and purchasing to his new role. His most recent position was vice president of global operations and logistics, retail solutions division for NCR Corp. of Dayton, Ohio. He comes to flexcel with knowledge of the unique procurement and service needs of customers in today's global economy, gained through his more than 17 years working with NCR's global operations, which encompassed production, delivery and service in the United States, Mexico, Europe and Asia.
Mahlke is a graduate of the University of Florida, with a bachelor and master's degrees in business administration
COMMUNITY DEVELOPMENT INC.
Community Development Inc., an Indianapolis builder of communities for buyers 55 years of age and older, hired Barry Renner as director of sales and marketing.
With a 25-year background in construction, Renner managed sales and operations for 17 years as a vice president with Shelby Materials, a ready mix concrete supplier. "Barry's leadership experience and success at Shelby Materials will be a great asset to CDI," says Chad Young, president of CDI. "His experience in sales and his keen insight into marketing will be a perfect fit with the climate of CDI."
Community Development Inc. constructed its first community in 1990 in Franklin and has since developed 17 communities throughout the Indianapolis area. CDI communities are established to ensure that the developments will remain restricted to those ages 55 and older to meet residents' present and future housing needs.
CROWE CHIZEK AND CO. LLC
Top 10 accounting and consulting firm Crowe Chizek and Co. LLC named J. Kevin McGrath managing executive of the firm's Financial Institutions Group.
As managing executive, McGrath will lead the 350 Crowe Chizek FIG personnel who serve more than 1,000 privately held and publicly traded financial institutions and financial services-related entities. Clients range from community banks to some of the nation's largest financial institutions.
"Kevin is a proven leader in our firm and in the financial institutions group," says CEO Mark Hildebrand. "We're pleased to have him directing this nationally recognized practice."
McGrath has been with Crowe Chizek since 1976 and is based in the firm's Indianapolis office. He has more than 25 years of experience working with financial institutions providing accounting, auditing and consulting advice. He is a member of the American Institute of Certified Public Accountants and is a past member of the AICPA's National Committee for Banks and Performance Measurement Committee. McGrath is also a member of the Indiana CPA Society
BOSE MCKINNEY AND EVANS LLP
The Indianapolis-based law firm of Bose McKinney and Evans LLP announced that attorney John Millspaugh was elected to the board of directors of the Venture Club of Indiana.
Venture Club, a catalyst for the creation and growth of entrepreneurial businesses, provides a unique environment in which sources of capital, entrepreneurs and business professionals interact, connect, share information, collaborate and create business opportunities.
Millspaugh chairs the sci-tech section of the firm's business services group. He assists companies, including those in the health and life sciences industries, in the areas of mergers and acquisitions, general business and corporate law, venture capital and entrepreneurial services.
He is a 1996 graduate of the University of Michigan Law School, where he was co-founder and managing editor of the Michigan Law & Policy Review. He holds a bachelor of arts degree, summa cum laude, in economics from Ball State University and is a member of the Indiana State and American Bar associations.
Aplin says he finds the challenges and uncertainty of the business exciting.
"The challenge of exploring new and creative ideas is what attracted me to the company," he says. "I enjoy the variety."
Variety is definitely part of the mix at CID. Since 1981, the company has been considered a leading provider of private equity and debt financing to high-growth companies throughout the Midwest. From offices in Indianapolis, Chicago and Columbus, it actively manages seed, venture and mezzanine capital funds that total nearly $440 million.
CID targets the information technology, life sciences, business services and manufacturing industries, which coincides with the state's and Indianapolis' economic development plans.
But Aplin says CID's interest in the life sciences sector began much earlier than these initiatives.
"We have been spending a lot of time in the life sciences," he says, "especially in the Midwest, and we have been historically successful."
CID works closely with its investment companies, working to build what it calls "solid organizations staffed with talented people." And with Aplin at the helm, CID is well-positioned to accomplish this goal. The former Fuller Brush Co. president and CEO also holds a Ph.D. in business, and was a faculty member of the Graduate School of Business at Indiana University and chairperson of the school's master of business administration program for nine years.
He's not afraid of the inherent risks that come with investing in growing businesses, pointing out that CID has a strong track record.
"I think our rate is a little better than the industry average," Aplin says.
But, he adds, it takes copious amounts of research and intense due diligence before deciding to invest in a business. Aplin says that for every 1,000 business plans CID reviews, it invests in fewer than 10. And CID reviews myriad factors before making that decision, among them the market breadth, quality of the management team and quality of the science.
Smart Business spoke with Aplin about the challenges and risks of private equity investments.
What are the differences between running CID and running the Fuller Brush Co.?
The biggest difference is the nature of the business. We are involved in a variety of companies. We invest in life sciences companies, supporting management buyouts and a lot of other activities.
At Fuller, there was more routine -- problems reoccurred a lot more, there was consistency. Here, we deal with many issues, make complex decisions, and it is challenging. There is a higher degree of uncertainty. Frankly, these are the very things I like about CID.
Way back, I did work with high-growth companies, and that experience has helped here -- like when we help companies with strategy and, more than anything else, management and personnel issues.
What are the pros and cons of focusing on Midwest companies? And are there any plans to expand your reach?
The biggest pro is that we can spend a lot of time with the companies we work with. Being in close proximity, we can work closely with them. If the companies were not close, the nature of the relationship would also be distant -- we could not provide as much support.
The cons are that we have a narrower market when it comes to deals. The Midwest only generates a certain number. And given that, not all of the companies succeed, and we only choose companies with the highest probability of succeeding.
If we opened our geographical boundaries, there would be a higher number of investment opportunities that we'd review. We are not planning in our offices to expand, though.
We have venture partners outside the Midwest that ask us to review companies, and we will review them on a case by case basis and invest in the best companies that we can find.
What are the benefits and inherent negatives of targeting start-up and mid-market companies?
The pros are that we have a great opportunity, getting in on the bottom floor of breakthrough companies and technologies. With a reasonable amount of capital, we can have a major impact on these companies. For example, we had the opportunity to work with a company five years ago that has grown and developed into a leader in cardiac therapeutics called Stereotaxis in St. Louis.
The cons are that these companies are higher-risk investments. There are market risks, and the management teams are just developing in early stage companies, so you are exposed to a higher risk factor.
Are there particular industries you target?
We have been historically successful in the life sciences, and we have invested a fair amount in manufacturing technologies. We also invest in later-stage companies, companies that are in buyout or recapitalization situations. They have a need for capital, which we can provide. More of those companies are involved in manufacturing, and business services are also very attractive industries.
With the slower economy, have you reduced the number of companies you've invested with in the last few years?
No, our investment activity has been very high. Because of the slower economy, companies have needed additional capital to support their growth plans. 2003 was the biggest year for investment that we've experienced.
What are the biggest changes you've seen in private equity investment in the last five years, and how have they affected operations?
With the precipitous drop in public markets, the major impact on us has been on exit opportunities. We normally view investments as five- to seven-year terms. These last few years have not been good for exiting, and it is more work for companies to exit.
But that is changing, and exits are starting to occur now. The economy as a whole is improving, and companies are more aggressive with capital spending. It's not happening overnight, and we'll see more merger and acquisition activity as well.
How often has CID invested in a company which hasn't survived? And how do you minimize the losses?
In the industry as a whole, one-third of the companies don't make it, one-third does OK and one-third does quite well. We do a little better than that historically. In the Midwest, in general, we vary from the national average.
During the dot-com boom, we didn't invest in as many of those companies in the Midwest. When that boom failed, it didn't hurt us as badly. The Midwest exhibits a higher degree of conservatism. What you try to do is, first, invest effectively. It takes a lot of effort and due diligence to review these companies, and determine which as the highest likelihood of success.
We see about 1,000 business plans each year, and we'll invest in less than 10 of them. It takes a tremendous amount of research, identifying the most attractive companies. The key is working very closely with them, helping them weather and deal with their issues. The number of things we look at is enormous, the questions we address remarkably large.
One of the most important questions is, does the company have the potential to capture a significant market? Do its products or services deal with a major issue or problem? The second most important question is the quality of the science.
Does the company have good solid science and technique to back them up? Does it have intellectual property protection for its ideas?
And we also look at the fundamental quality of the management team. Can they deliver on the promises in their business plan? That's a hard question to measure, and why we work closely with the companies we invest in to help them achieve their goals.
Are there certain industries or companies in the portfolio that are outperforming the rest?
I think in every industry sector, there are companies that are doing exceptionally well. For example, in the life sciences sector, out of the seven or eight companies in our portfolio, two or three are doing exceptionally well, two or three are doing OK and the remainder are doing poorly. And it's like that in all our sectors.
What are your biggest operational challenges, and how do you meet them?
The biggest challenge is to simultaneously perform management activities within the firm while managing my own portfolio of companies. It's like managing a law firm, where you have your own clients to serve.
I also serve on several boards and I travel frequently, so handling my management responsibilities here and working as a team operation, just communicating and being in touch, can be a real challenge. Thanks to e-mails, laptops and cell phones, I can keep in constant communication with everyone I need to.
My biggest challenge is probably setting priorities. With the five or six boards I'm on, looking at new deals, getting time, controlling time and keeping my hands-on approach is a challenge. I keep working on it. I work longer hours and make sure that, whenever possible, I focus on the most urgent priorities and get support from others on the investment team.
What areas are you working to improve?
I think that we should constantly be developing and improving our research and due diligence. Because we ask thousands of questions, the one we don't ask may be the most important. I'm constantly asking how can we improve and really understand the company and know what the critical questions are we should be asking.
The second area we can improve on is we could do a better job marketing ourselves. We are very focused on our work, and when we are not researching new companies, we are working on existing ones, not marketing. We need to have new investments, a good flow of new deals.
We do a lot of presentations and network with contacts. We visit those contacts and try to identify other companies in the market that could benefit from capital. We participate in conferences and give a lot of speeches and presentations, and we do a lot of phone calling. How to reach: CID Equity Partners, (317) 269-2350 or www.cidequity.com
Sanner, now president and CEO of Indiana Lubricants Inc., says the stores' 60 employees were more knowledgeable about the business than he was, but he didn't let that intimidate him.
"I'm 6'4" and weigh 230 pounds," Sanner says. "No one would mess with me."
But it was more than Sanner's size that helped him grow those original nine locations to nearly 50 today. It was his belief in franchising and his determination to learn about the business as quickly as possible. The three partners' original plan was to start with one location. But when the opportunity arose to purchase nine stores, the partners didn't hesitate.
"The seller didn't want to wait for bank financing," Sanner says.
So Sanner called Jiffy Lube's corporate office, and within hours, the company sent him $1 million for the transaction via private jet. That, he says, is one of the advantages of franchising.
Sanner and his partners were no strangers to franchising when they partnered with Jiffy Lube. Each had some experience with McDonald's and was successful. But Sanner and his partners wanted to try a franchise that offered more entrepreneurial freedom.
"With McDonald's, you sign a 20-year lease," says Sanner.
He says this doesn't allow the franchisee to own anything or build an asset base. With Jiffy Lube, the franchisee owns the stores, and has more flexibility and a lot of corporate support.
"You don't have to reinvent the wheel," he adds, saying that the mistakes have already been made and corrected. But he cautions that not all franchises are as worthwhile as Jiffy Lube and advises potential franchisees to only go with companies that are operationally strong and have been in business for some time.
Smart Business spoke with Sanner about the benefits, drawbacks and challenges of franchising.
Why did you choose Jiffy Lube as a franchise?
We bought nine locations when I was 25 years old in July 1985. We built three more, which opened in April, May and June of 1986. The original plan we -- my two partners and I -- had started when we went to Jiffy Lube's headquarters in Baltimore (the corporate headquarters is now in Houston) was to find out what territories were available. We planned to eventually have hundreds of locations and take the company public.
We were looking for large territory in Michigan, Indiana and Kentucky. In 1985, I moved to Indiana to find locations. I was to run the first location in that state, find a second and train an assistant. I planned to learn the business from the ground up, and we hoped to expand as fast as we could.
Then we learned about nine 10 Minute Oil Change stores that were available, five in Fort Wayne, the rest in Lafayette, Kokomo and Lexington, Ky., and we felt it was a great opportunity. The owner didn't want to wait for bank financing, so I called Jiffy Lube and explained the situation.
I was told to go to the airport, that they were sending a jet and I would have a check for $1 million in my hands. We consummated the deal in 45 days, got our bank financing and sent back the money to Jiffy Lube. That's one of the reasons we are extremely loyal to Jiffy Lube; they got us into the business.
But it shifted from me managing one location to having nine locations and 60 employees. All of them had been in the business for some time, and I walked in and changed the way they were doing everything. We offered more services and did things differently.
They were all better than me at the mechanics -- I had no mechanical background. They all knew more than me. But my size helped me.
My two partners were older than me and were McDonald's franchisees. In 1983, I made a concerted effort to go after some McDonald's locations. There are a lot of similarities in the two businesses. They basically use the same work force and have the same challenges. It's a joy to take those young kids and move them up, watching them start their lives.
Both businesses offer fast service, a clean store and are service-oriented. Really, they're not that different. The big difference, however, is in building equity. With McDonald's, you're not building an asset base. McDonald's owns the building.
With Jiffy Lube, you own the real estate. And the other thing that is appealing is that you enjoy a real entrepreneurial spirit with Jiffy Lube. With McDonald's, over time, they really lost that entrepreneurial spirit.
In your opinion, what are the pros and cons of franchising versus starting a new company?
There's some safety with a franchising system in place. We know if we follow the plan, we'll be successful. Others have already made mistakes learning the business. And there's a network of franchisees as resources.
At Jiffy Lube, we are a very active group, meet regularly and share information and ideas. Everyone I talk to values the relationship we have with Jiffy Lube International. We work together with International on marketing, training and procedural issues.
I've heard horror stories of good people franchising with a company that only has five locations and in business two years. They couldn't possibly have learned an effective formula. The franchisor has got to be operationally strong and in business for awhile, or it won't have the needed financial or operational strengths.
The con is that, financially, you pay a royalty. We're paying $1 million a year in royalties to have the Jiffy Lube name and services. Sometimes I say to myself, 'Hey, I spent $1 million, do I get that money's worth from them?'
That's a huge amount of money. But we'd never have gotten where we are without them, and that's just 4 percent of sales. Some franchisors get 10 to 12 percent in royalties right off the top, so the Jiffy Lube situation is much better. And franchising can be like having Big Brother watching you.
I've heard that some franchisees have had ideas and didn't get support from the franchisor or even were penalized. For the true entrepreneur, franchising can be restraining, but from my experience, it's been a good thing.
Do you feel you are given enough freedom to effectively operate the business?
One of the things we purposely did was buy a large geographic area so as not to be part of a co-op but call our own shots and be fairly autonomous. There can be conflicts with other franchisees. We're not allowed to be within three miles of each other, and in a lot of markets, there are stores within three-and-a-half miles of each other, and they are competing with each other.
Before Pennzoil -- the parent company of Jiffy Lube -- merged with Quaker State, we were the only franchisor in the state of Indiana. After the merger, several Quaker States opted to operate as Jiffy Lubes, so that is not the case now.
What makes Jiffy Lube different from its competition?
What's made us successful is we've developed a real passion for the business. We take pride in developing our people, and we have a family environment. We work hard to satisfy customers.
I once counted 760 places to get an oil change in the Indianapolis market. Most of those places charge far less money. No one can do it faster or use better products. We have to be better, quicker and take care of the little things, like vacuuming the interior and washing the windows. That has been the key to our success for 19 years.
Has the negative Primetime episode, which aired Feb. 19, impacted your business? Have customers voiced concerns?
You know you've become a strong brand when the national media are out to make an example of you with hidden cameras. The show was about a Jiffy Lube location in North Carolina. They [Primetime's staff] went to quite a few locations. They didn't report how many were doing it right.
One guy sold a fuel filter but never actually replaced the filter on the car. Our annual award banquet took place two days after the show aired, and we watched it before the banquet. We were appalled. We are putting procedures in place to make sure it can't happen at our stores.
But across the country, sales went up; it didn't have a big impact. What we're going to approve in Indiana is we will take some black plastic trays and everything we take off the car will be placed on the tray and shown to the customer.
What are the biggest challenges of managing so many locations?
We have good people. We have a director for every seven locations and a vice president of operations. I believe in regular meetings. And I e-mail all the time. If anything, I'm guilty of overcommunicating.
The frustrating thing for me is that when we had 20 stores, I knew every manager, his wife and kids, and most of the technicians. I can't be in all the stores anymore, so that is not the case now.
Communication is the key. We try to keep it fun and keep everyone pumped up. We take a lot of pride in our people.
It's not easy to get a job here. We're tough -- we have high standards. We drug-test everybody. The message is, you need to be serious when you work here. We want you to come here serious about building a career.
What areas/processes are you working to improve?
We have instituted a change in procedures designed to give us better definition of duty and more focus on our guests. Prior to the change, our technicians interacted with the guests. Now, some employees work strictly on the car, others spend more time with each guest.
The guests have a better understanding of our services and feel they are taken better care of. This change increased labor costs because we had to hire additional staff but speeds up the service and gives our guests better experiences. We started this new procedure in all 49 locations.
This will take us to the next level if we can speed up service. Nineteen years ago, if we had three cars in the bays and six cars outside waiting, when the 10th car pulled up, we'd run outside and let him know he had an hour-and-a-half wait. The guest was OK with that then because the alternative was to drop it off at a dealer for a day.
Now, if there isn't an open bay within five to seven minutes, the guest doesn't wait. We created our own monster. How to reach: Indiana Lubricants Inc., (260) 483-8518 or www.jiflube.com
If you answered no to either question, you are not alone. Most companies handle the issues of retention and mentoring by not doing anything until someone leaves.
Here are some reasons to seriously consider a formal mentoring program that targets the retention of your best employees.
* 75 percent of executives state that mentoring played a key role in their career success, according to the Association for Training and Development.
* 71 percent of Fortune 500 and private companies use mentoring in their organizations, according to AIRS Diversity Recruiting Summits 2004.
* 95 percent of mentoring participants reported that their mentoring experience motivated them to do their very best, according to The War for Talent, by McKinsey consultants Ed Michaels, Helen Handfield-Jones, and Beth Axelrod, Harvard Business School Press, 2001.
* Mentoring is the third most powerful relationship for influencing human behavior, after the family and couple relationships, if it is working, according to Richard E. Caruso, Ph.D.
While all of these items should be compelling, let's dig in a little deeper on the last two - that mentoring motivates and influences.
One of the biggest reasons employees leave a company, behind the obvious large raise someone may offer them to go elsewhere, is that they get bored and don't feel challenged in their job. Many times, this is because companies do nothing to encourage their employees to try to do something outside of their daily routine.
A working, strategic, easy-to-use mentoring program can be incredibly valuable in keeping the best employees motivated. If someone is having a bad day or just trying to get by until their next vacation, a good mentor can give that person a new perspective to keep him or her motivated.
From a recruiting and retention perspective, an online mentoring program can build a great bridge during the on-boarding process, in which new hires are assigned a mentor in their department to help them get acquainted with the company and meet people. That tie alone could keep a great candidate from continuing to look for an even better job before they start with you.
At any level in an employee's career, a mentor can use his or her influence to make sure the employee sticks around through the tough times rather than jumping ship. No HR department has enough employees to ensure it is monitoring the ups and downs of all employees, but a good mentoring program can do just that. If someone has a good mentor and is part of a great mentoring program, the odds are much greater that they may not want to give that up just for a few more dollars somewhere else.
Look for an easy-to-use mentoring program - not one that requires everyone to meet face-to-face each week or month, but possibly something online where the mentor and the person being mentored don't even have to be in the same office to have a beneficial relationship (this works great for the college recruiting program). Also, remember that the mentoring programs that fail are those that try to decide, "Who needs mentoring?" not "What can our business benefit from with a mentoring program?" If you start within the context of what you want your company to gain from a mentoring program, then work backward, you will get more executive and employee support.
Jeff Dahltorp is director of marketing and business development for TruStar Solutions, the leader in creating exceptional hiring strategies. He is a regular contributor to human resource industry publications such as HR.com and Electronic Recruiting Exchange and Online Recruiting Magazine. He has spoken at industry specific trade shows such as IMRA, CUPA, NRA, NACE and IHRIM on the topic of Internet recruiting practices. He has a bachelor's and master.s degree from Purdue University. Reach him at email@example.com or (317) 813-0340.
Part of that ability includes offering attractive health care benefits. But health care costs are on the rise. In 2003, the nation's health care costs reached $1.7 trillion, more than 14 percent of GDP. And, with an average 15 percent annual increase in health insurance costs, most benefit consultants predict that health insurance costs will double within the next five years; some say within the next three years. So how long can your organization sustain these kinds of increases?
Chronic conditions -- which create a greater demand for health care services -- play a key role in rising costs.
* Approximately 125 million Americans have chronic conditions; almost half of these have two or more. More than 64 million Americans have one or more forms of cardiovascular disease -- including high blood pressure -- that cost our nation $298 billion in direct and indirect costs each year.
* 18 million Americans -- 5 million of them undiagnosed -- have diabetes, at an annual cost of $132 billion.
* The Centers for Disease Control and Prevention (CDC) finds that treatment for obesity-related illnesses is a major driver of surging U.S. health care costs, carrying a $93 billion annual tab, $12 billion of which is charged to employers.
* According to the CDC, obesity-related health conditions, such as diabetes and heart disease, are gaining on smoking complications as the costliest preventable illnesses in the nation. Chronic diseases cause approximately 70 percent of all deaths in the United States each year, and a large portion of these diseases-- including lung cancer, diabetes, heart disease and stroke -- are considered preventable.
Double-digit increases in health insurance costs, combined with a troubled economy, are challenging financial and benefits managers to be more creative in designing their health plans. Most employers believe that changing plan design by increasing co-pays and deductibles and reducing benefits is not the only answer for controlling costs in the future.
Many are turning to health risk intervention programs as a way to proactively manage health care costs while improving the health of their employees.
Once considered a "warm and fuzzy" benefit, health improvement programs are now considered the last resort for stabilizing health insurance costs.
Today, more employers recognize that employees themselves represent a huge opportunity to reduce health care costs. They offer wellness or health management programs that encourage employees to lead healthier lifestyles, and disease management programs that target employees with conditions that can be improved with self-care efforts.
These programs, in which employees work one-on-one with a personal health coach, help create a structured process within which an individual can make a lifestyle change.
The health educator or personal health coach assists the participant in developing a plan of action to work on behavioral changes, which include short- and long-term goals. The coach provides focused, personalized coaching over the phone based on the participant's personal needs and stage of change.
Most people really do want to change a bad health habit. Unfortunately, many have other life issues, such as financial concerns or problems with their children or relationships that prevent them from focusing on their health.
The coach can help remove some of these barriers to change by bringing the service directly to the participant. The goal isn't to provide participants with a quick fix; instead, the coach gives them the tools and education they need to understand their problems and continue a healthier lifestyle.
The return on investment for health improvement programs can be high; however, not all the return can be measured in dollars. Other benefits include reduced absenteeism, increased productivity and increased employee satisfaction.
Health improvement programs will continue to offer employers highly effective tools to stabilize health insurance costs and to protect their most valuable asset: their employees. Organizations that create an environment that supports their employees in living healthy lifestyles can make a difference.
Sally L. Stephens, RN, is president of Spectrum Health Systems. Stephens and her husband founded Spectrum Health Systems, an independent health management company, in 1997 to provide Fortune 100 quality health risk management programs to middle market employers. Reach her at (317) 573-7600 or firstname.lastname@example.org.
Born: Evansville, Ind., Dec. 4, 1945
Education: Bachelor of arts in chemistry, Indiana University; MBA Indiana University; four honorary doctorate degrees
First job: Test chemist at the Linkbelt Facility, Indianapolis
Career moves: A sales position with Procter and Gamble in Cincinnati and a promotion to account manager; market planning at Eli Lilly Co.; assistant to the president, Cummins Engine Co., Columbus, Ind.; president, Specialty Chemicals, Indianapolis.
What has been your biggest challenge in business?
The greatest challenge I had in the beginning and even now is attracting, retaining and motivating good employees. Many business owners would talk about access to capital or getting sales opportunities. While these are sometimes a challenge, they don't consistently impact [the company] like the people challenges.
Past or present, whom do you admire most in business and why?
I have several people that I have admired from the business world; Madame CJ Walker's super success as a black female entrepreneur in the early 1900s. I have watched John Johnson of Ebony Magazine as he created and developed a business empire that includes publishing, cosmetics and media interests. He now has very successfully transitioned this thriving empire when he turned over the CEO reins to his daughter.
I have the utmost respect for Robert Johnson of BET because he found a niche within entertainment which ultimately would allow him to become the first African-American billionaire.
What is the greatest lesson you've learned in business?
The greatest lessons in business that I have learned are to always treat people the way you would want to be treated, and that success is measured in more ways than how much money you have.
This provision is in stark contrast to the previous law, which strictly limited the amount of depreciation allowed for luxury/passenger automobiles. So it almost seems too good to be true. Is it?
Here are several questions to ask before heading to the dealership.
Is your incentive to purchase a new 6,000-pound automobile just to take advantage of the tax break?
If it is, then what you are really doing is spending $50,000 (the approximate cost of a 6,000-pound vehicle) in order to save $20,000 in taxes, assuming that you are currently in the top tax bracket (35 percent plus 5 percent for state and local tax). If your adjusted gross income puts you in the 28 percent tax bracket, your tax savings would be $16,500.
That means that if you own a good, dependable car and really do not need a new one, you may unnecessarily spend $30,000.
Can you cash flow the monthly payments?
Just because you purchased a $50,000 SUV and you are going to be able to depreciate the entire cost of the vehicle in the first year of use doesn't mean you are automatically going to be able to fit the car's monthly payments into your business's budget.
First and foremost, make sure that you can afford the monthly payments.
What percentage of the time do you use your automobile strictly for business?
Often forgotten is the fact that the IRS will only allow business owners to deduct the costs of their automobiles to the extent that they use their automobiles for business. If you used a $50,000 SUV only 65 percent of the time for business use, you could only deduct $32,500 ($50,000 times 65 percent) of the cost of the vehicle.
That would equate to a tax savings of $13,000 for individuals in the top tax bracket. Again, you are spending $50,000 to receive tax savings of $13,000.
Do you need a 6,000-pound vehicle?
If you could be just as happy in a lighter, less expensive automobile, you might be surprised in the difference on savings ... even with the 6,000-pound tax break. Compare the savings if you use the vehicle for business only 65 percent of the time to a $30,000 passenger car, which would save you approximately $6,000 in taxes over a three-year period from depreciation alone. That's a net out-of-pocket cost of $24,000.
However, it is important to compare the potential gain or loss that you may incur when you sell the car. The SUV, which is fully depreciated, has no basis. That means that any amount of proceeds received from the sale would be taxable.
Assuming that the passenger car is sold after three years of service, it would potentially have a tax basis of approximately $9,000, which could be used to offset taxable income. This could potentially further reduce the net out-of-pocket cost of the $30,000 automobile to approximately $21,000 ($16,000 less than the $50,000 SUV).
It is rarely a good idea to spend money for the sole purpose of obtaining a tax break. CPAs cannot emphasize enough that each transaction should be reviewed based on your business's individual situation. In the case of the 6,000-pound vehicle deduction, if you can answer the above questions with regard to your individual status, you should have enough information to make an informed decision.
John McClary, CPA is a senior accountant in the healthcare and tax division of Heaton & Eadie. Reach him at (317) 581-9100, ext. 144, or email@example.com.
"We had a lot of retail experience with Foot Locker," says Campbell, executive vice president and general merchandise manager of the nearly 3,000-employee company. "We noticed a lot of people came in and asked for hats. But we never envisioned what we have now."
What Campbell and Molander, executive vice president of real estate, have is a 468-store chain that has achieved an amazing 1,312 percent growth rate over the past five years. They have been so successful that on Feb. 5, Hat World announced it had signed a definitive agreement for Genesco Inc., a marketer of branded footwear and accessories based in Nashville, to acquire Hat World for $165 million.
It's a far cry from the company's humble beginnings nine years ago, when the two recognized that carrying a small selection of hats was not profitable for specialty sporting goods stores such as Foot Locker.
That Christmas season, they took a chance. They rented floor space at a local mall and stocked it with hats. When the mall's management heard they had sold more than 6,000 hats in six weeks, it offered them permanent retail space.
Within a year, Campbell and Molander had launched five Hat World stores.
"All of them were within a three-hour drive of us," says Campbell.
The pair kept costs in check by managing the stores from Campbell's home, where his garage became the company warehouse. And he delivered the inventory himself.
"The managers would meet me halfway (between the stores and my house), and I'd buy them McDonald's," he says.
Looking back, Campbell admits their "fly by the seat of their pants" style was a little too casual. "We didn't think of the dangers," he says. "We didn't have time. We should've been more selective where we located, but we just kept opening stores. Many things could've happened, but didn't. It's a small miracle that we pulled it off. What we did right was surround ourselves with good people."
One of those was Bob Dennis -- who, along with Campbell and Molander, will stay on following the sale to Genesco. He joined Hat World after it acquired its financially troubled competitor LIDS Corp. in the spring of 2001. At the time of the acquisition, LIDS had 266 stores -- Hat World had 157 -- and had just filed for Chapter 11 bankruptcy protection to reorganize. Campbell admits the purchase was risky.
"It was the scariest decision I ever made," he says. "I knew I was putting the company on the line. We were either going to make it happen or go down in flames."
More important, with the acquisition and the corporate expansion that accompanied it -- the size of Hat World more than doubled with that one transaction -- Campbell and Molander knew it was imperative to bring someone in to strategically lead the larger organization. "We knew we needed someone that had a different skill set than we had," Campbell says. "Bob (Dennis) had a great background and was a fit for our culture. Bob is Wall Street savvy -- he's dealt with boards and investors."
Dennis arrived with restraint, Campbell says, refusing to step in on Day One and begin spouting orders. "He didn't come in with an iron fist," Campbell says. "He listened. We made the right decision. Thank God we made the right decision."
The hire allowed Campbell and Molander to manage Hat World's day-to-day operations, while Dennis focuses on developing and implementing long- and short-term corporate strategy.
Inside Bob Dennis's world
When Dennis, a Harvard Business School grad, stepped in as Hat World's chairman and CEO, his first order of business was to integrate the stores and employees of LIDS into the Hat World family.
Dennis brought with him a strong leadership background, including stints with Asbury Automotive, a $4.5 billion retail auto group that he helped build, and McKinsey and Co., an international consulting firm. This experience helped him through the process of merging two companies, and by January 2003, the integration was complete.
They cut the fat from the LIDS organization, closing 100 unprofitable stores, and developed a more organized plan for growth than Campbell and Molander had previously been able to envision.
In November 2002, Hat World acquired Hat Zone Inc., and last February, it acquired Cap Factory Inc.
"We have a very ambitious plan for growth," Dennis says. "(It) calls for adding 50 stores a year in the next five years."
To do this, they've identified more than 400 potential locations.
"A lot of the growth is in nontraditional spaces," Dennis says. "We are targeting airports, which are underpenetrated, college campuses and tourist destinations."
Tourist destinations are a relatively new -- and successful -- market for Hat World. The company's five locations in Hawaii are doing well, says Dennis, and "the tourist angle is one we really want to develop."
This expansion is the result of in-depth market research, which identified who Hat World's best prospective customers are and where they're located.
"Most are between 15 and 25 years of age," Dennis says. "Another big segment of our business is the dedicated sports fans. Their ages vary widely."
But even with the targeted marking, the company's aggressive growth plan is tempered with caution.
"What we don't want to do is lose our discipline," Dennis says. "We have a very disciplined approach, and we watch trends carefully -- what's working and what isn't. When a store isn't working, we get out."
Because Hat World's fortunes are dependent on its locations, store placement within malls, airports or shopping centers is crucial.
"We know that when we get our desired location, we are successful," Dennis says. "All stores opened in the last 18 months under our location guidelines outperformed our expectations."
And because the company does not invest heavily in advertising and marketing, its desired locations -- close to heavy customer traffic and usually close to food and beverage outlets -- carry even more weight in the company's formula for success.
"The most highly trafficked areas of a mall or airport are off the food court or anywhere there is food and drink, with the emphasis on drink," says Dennis.
Buying into the dream
Hat World's next goal is to build an international brand; it established the first of five locations in South Korea in September, and has a licensing agreement to open at least 75 more in the next five years.
"We chose Korea because it is a country that embraces U.S. fashions and has a good economy," Dennis says. "We've been approached to do other Asian locations, but we are keeping them on hold. We're using Korea as a test lab to see how it (international expansion) works."
In the meantime, Dennis, Campbell and Molander are working to further define the corporate culture. And a big part of that are the people who work at Hat World.
"At the end of the day, it's the people working here that have made the difference," says Campbell.
In the beginning, he and Molander were able to hire high-quality people, even though they couldn't pay them much. "We sold them on a dream," Campbell says.
That dream has come true, even more so than the sales pitch offered. But the company's leaders still remember where they began, how far they've come and the importance of maintaining a sense of humor.
"Every time we start getting too serious, I say, 'Hey, we sell hats,'" Campbell says. "Let's keep it simple. Let's keep it fun."
And don't look for other sporting goods or accessories to show up in the stores any time soon. "Never say never," Dennis says. "But we're sticking to the name. Headwear is our category, and we will maintain that focus." HOW TO REACH: Hat World Inc., (888) 564-HATS or www.hatworld.com