Los Angeles (1224)

Tuesday, 25 September 2007 20:00

The Nitzkowski file

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Born: Long Beach, Calif.

Education: Bachelor of arts degree, Harvard University; Juris doctor degree, University of California at Los Angeles

First job: First was in my family’s restaurant in Huntington Beach. I started cleaning floors at age 9 and worked almost every other job in the restaurant between then and my graduation from high school.

My first job out of college was for Kraco Enterprises, an after-market automotive electronics and accessory company. I was an import/export specialist, focused mostly on the finance and banking aspects of Kraco’s overseas purchases.

Whom I admire in business: Lloyd Blankfein, the current chairman of Goldman Sachs, and his immediate two predecessors, Hank Paulson and Robert Rubin. They have extraordinary continuity of leadership centered on a global vision, a culture of excellence and client-first business principles. They’ve helped to create the most remarkable global brand that I know.

Sunday, 26 August 2007 20:00

Ken Cole

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At Sizzler USA Inc., Ken Cole is clear about who his team’s most valuable players are — and they don’t have offices at the company’s headquarters. “We call this a home office rather than a corporate office because we believe our money is made out in the field,” Cole says. “We’re the coaches that come up with ideas to help facilitate, but it’s got to be our people that execute.” Sizzler, which opened its first family steakhouse in Culver City in 1958, now includes more than 200 locations across 16 states, Puerto Rico and, come November, Mexico, with estimated annual revenue of $100 million. Cole, who has helped build a culture based on open and honest communication and a healthy work-fun balance, is both an involved leader and one who encourages involvement from his team members. Smart Business spoke with Sizzler’s president and CEO about building trust, reducing turnover and the benefits of spending some time away from his home office.

Communicate to all levels. The most significant challenge a leader faces is clear, concise communication of what the company’s goals and objectives are. When you see companies that are not doing as well as they should be, that’s usually the No. 1 thing that has broken down. There’s a lack of trust, and the reason there’s a lack of trust is because nobody ever hears from or sees the leadership of the company.

The one trait that all successful business leaders have is listening and communicating. I look at best practices a lot and visit different companies in my area of business, and what’s interesting is that the most successful restaurant companies that I visit out there share a common thread that everybody, at all levels, knows what the goals are, and they buy in to it, and they’re excited about it. And that comes from communication.

When you see companies that are in turmoil, usually nobody knows what’s going on. They really don’t know what the end result or the goals of the organization are.

Encourage commitment. Goal-setting starts at our team-building meeting, where we say, ‘Here are the macro goals that we need to achieve this year. How will you and your respective team go about achieving that?’ We spend a lot of time going through that, and it’s their involvement that sets the pace, and that builds their commitment to getting it done.

The old saying is that involvement builds commitment, so ours is not top-down-type management, and it’s not top-down-type goal-setting because they’re in the process, and many of the goals that we have came from them and their team members. By involving them in that process, they feel way more committed to achieving that because it was their idea to do it, and they’re going to work harder and smarter to make sure it happens.

The long-term benefit is twofold. It certainly builds their trust, and it builds their commitment, their loyalty to the brand. They are less apt to look outside for other opportunities because they feel that their opinion matters, they feel that is their goal to achieve, and so they feel committed to that. Once you have trust in an organization and you feel committed to it because you’re involved, it gives you a lot better job satisfaction.

Create a fun culture. We’re very serious about results, but we have a lot of fun. Life’s too short not to have fun. If you’re having fun, you’re going to do a better job, and it reduces turnover. When the phone rings from the headhunters, they’re not necessarily listening because they’re having fun.

A lot of our team members have worked in other places where there is a top-down mentality and you have no flexibility in your schedule, and it is, ‘It’s this way or the highway.’ When they’re working in an environment like this, where they are having fun, where we play pranks on one another, where all of the upper management listens to their team members and involves their team members, it’s a better place to work.

It trickles down to your franchisees, it trickles down to your company managers, it trickles down to the team members in the restaurants servicing the guests, and then, ultimately, we give a better experience to the consumer.

Maintain culture through communication.

Culture is difficult to maintain, and communication is at the top of everything. I have to communicate, on a daily basis, the good, the bad and the ugly.

If you’re not out there, if you’re not visiting with your other team members, with your direct reports, if you’re not visible in the business, the culture breaks down. It starts taking on a life of its own, and you have a fragmented message.

Communication is the most important thing that a leader can do. Everybody wants to be informed and kept informed of all the news. We have an open-door policy, and we communicate the good, the bad and the ugly. We communicate and celebrate if we are meeting and exceeding budget, and we communicate and talk about ways we need to improve the next month if we’re not.

We have several different forums or formats to cascade our information, and even doing all of those, there’s still a lot that doesn’t get cascading as deeply as we would like it, but it’s an ongoing effort, and it’s more difficult than you would think.

Get out of the office. I usually only spend two or three days a week in the office, and I spend the rest of the week splitting my time between visiting company stores and visiting franchisees. It’s a gut check to see if our message is getting to the levels we want it to. When I’m in the restaurants, I’m talking not just to the managers but to the employees. Two weeks ago, we hit four stores, and we met with four or five employees at every restaurant, just to sit down with them and say, ‘Hey guys, what are we doing that’s stupid? If you ran the company, what would you do differently?’

It’s those ongoing types of communications that make them feel important and, believe it or not, they’re not afraid to voice their opinions. Because of that, they feel that I and my direct reports are very approachable, and when they get the message, they believe in it, and they trust in it, and they try to do the right thing.

HOW TO REACH: Sizzler USA Inc., (310) 846-8750 or www.sizzler.com

Sunday, 26 August 2007 20:00

Family business

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The one maxim that holds true for all business owners is that eventually they will be forced to exit their business. For many, the next best thing to perpetual ownership is having a child assume control.

When preparing to transfer a family business, it is critical to expose children to all aspects of a business early on, so they will be aware of the myriad challenges involved.

“Bring the kids into the business as they’re growing up, so it becomes part of them,” says David Rose, executive vice president of Gumbiner Savett Inc. “Let them work evenings, weekends and summers in their teens, so they can get to know the business and learn what the challenges are.”

Smart Business spoke with Rose about the challenges that multigenerational businesses face, the importance of delegation and how to avoid excessive inheritance tax costs.

What is the most common mistake parents make when passing along a business to a younger generation, and how can this mistake be avoided?

One of the most common mistakes parents make is dividing their assets equally among their children. This can be a problem since not all of the children may be involved in the business. The active participants will have different business objectives than the inactive owners. Inactive owners want to receive dividends and cash from the company while active owners want to retain cash and use it to grow the company.

One business owner, whom I served for a number of years, not only founded his own company, but he also invested in real estate. What he did was give the company to his son, who was co-managing it, and gave the real estate to his daughter who was not actively involved with the business. Not only did he take care of each of his kids, but he also put each of them in positions where they were not in conflict. Avoiding this kind of conflict is key to a business remaining a successful, viable entity of its own.

How can a founder’s inability to delegate adversely impact the business?

Founding owners are risk-takers with an entrepreneurial spirit who are willing to put in 80 hours a week to make their business successful. Often, not only do they know every supplier, every employee and every customer, but they also handle marketing and administrative functions. When the business takes off, the founder may become the force that limits the growth of the business because he or she is used to doing everything him- or herself.

Ultimately, the founder has to make the choice to allow other people to assume responsibility and do the best they can, knowing that mistakes will be made. Learning to delegate and trust so the company can continue to grow is one of the most difficult tasks that founders will eventually face.

What inheritance tax considerations should be taken into account with multigenerational businesses?

One way to avoid inheritance tax costs is to gift ownership to the next generation during the organization’s growth years and before mature valuation is achieved. For example, if you have a company currently worth $1 million and you give away a percentage of the company now, there will be far less tax to be paid than if they inherit the business later on when it is worth $10 million. It is important to start the succession phase of the planning early on in your company’s growth pattern.

What advice would you give to a multigenerational business about establishing a philanthropic commitment?

I believe it is very important for people who succeed in their business goals to try and give something back to the community that fostered their success. We don’t have a caste system here, where if you’re born poor, you’re going to die poor. The world we live in, here in America, gives us the opportunity to be successful. At some point, it’s important to say thank you, and there are many ways this can be accomplished. For example, donor-advised funds allow you to place money with a charity and make suggestions on how the money should be used.

Many wealthy families like to start their own foundation with the goal of ultimately having their children run it. Not only does a family foundation serve the community, but it also serves as a money-management tool for the younger generation as they learn how to research and select charities, as well as manage the foundation’s assets.

How important is it to get outside help with succession planning?

It’s very important. A family’s accountant generally knows more about its asset structure than any other outside person. When the accountant teams up with an estate-planning attorney and a life insurance broker, they can work together to help the family define a plan, pick a proper trustee or executor, and work with him or her when the time arrives to make sure everything is done efficiently.

DAVID ROSE is executive vice president of Gumbiner Savett Inc. He has worked with many multigenerational family businesses and has advised them in their transitional phases. Reach him at (310) 828-9798 or drose@gscpa.com.

Thursday, 26 July 2007 20:00

Increased risks

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Businesses in Southern California are at increased risks for disaster. Is your company prepared in the event of a disaster or pandemic? How much are you depending on technology? How much are you depending on your employees? Certainly, your day-to-day operations require the best of both. How are you prepared to operate if employees can’t get to the office or if computers aren’t accessible?

According to Kevin Burton, Disaster Recovery Specialist with Agile360, “Disaster recovery needs, data protection and business continuity plans that include the end user are at an all-time high. There is the increased regulatory pressure. There are employee safety concerns. There is an overall feeling that Disaster Recovery and Business Continuity planning are part of the overall risk-mitigation picture.”

Smart Business talked with Burton for his insights on how these risks can be mitigated.

Why is Southern California different than any other part of the country?

For one thing, the United States Geological Survey (USGS) has predicted that an earthquake of 7.0 or greater magnitude will hit the area within five years. For another, there is a high concentration of technology companies and those that depend on technology centered in this area. But perhaps more alarming is the notion that terrorists are prone to target areas with the largest concentration of people and businesses they can damage. Those are the areas that are going to be hurt the most by terrorists’ actions. The areas that are at higher risk for a terror attack (and according to Homeland Security officials, Southern California is in the top five) need to consider employee responsiveness and inclusion more than others.

Why is more or better technology not the only answer?

Businesses depend on computers and people to run them. What are your plans in the event of a major disaster? Do you have evacuation plans? You are going to need people to continue the business. You are going to need paper backup and human IQ that can move that paper forward. You must have processes in place to recover information and use it to spring forth from adversity with speed and determination. Employee safety is extremely important. Employees are key to a company’s survival; Sept. 11 certainly taught us that.

But why focus on the human side of the equation if computers run today’s businesses?

Chief executive officers and CFOs are saying to the CIOs, ‘Show me the case study to justify the expense of fully duplicating our current data center.’ The CIO and the IT department require input from business unit managers and other stake-holders to prioritize business processes and then the applications that support them.

Using this data, the CIO can then map the technology to the human-driven processes that run the business. The resulting set of ‘tiers’ or levels of criticality can indicate the right-sized solution and appropriately address the risk. The bottom line is that we have to get better at tracking business value against application performance or automation.

How do you differentiate between cost and value when it comes to Disaster Recovery and Business Continuity?

Cost is just that — cost. For example, you go to the store and come home and show your wife a receipt for $900. You’re simply showing her the cost. If you come back from the store and say that you got a new washer and dryer for $900, then you have shown the value of your purchases. If there is not a value, a cost should not be incurred. In short, by aligning processes to applications, you can build a better shopping list for IT when it comes to risk mitigation. In the Risk Business, this is called a Business Impact Analysis. Leading organizations parlay these findings into Application Impact analyses that then lead to appropriate technical solutions that mitigate risk.

What should be the roles of the CEO, CFO and CIO?

They need to communicate with each other and work together to determine everything that is needed and what the long-term effects are. Rank, based on criticality, everything the business does. Mitigate risk and spend money accordingly. In some cases, High-Availability Solutions and advanced technologies such as VMW are perfect solutions — especially for high-value applications. In other cases, old-fashioned tape backup methods will do. Make individual business cases based on business value as opposed to relying on the input of vendors and flashy new technologies to fix the risk problem. Go with trusted advisers who understand your needs, have a fixed view of how your business operates and offer cost-considerate solutions on a case-by-case basis.

How can you save money while lowering the risks?

One example is the opportunity to re-purpose old hardware. Another is to spend less money on the least important things on the criticality list to be more cost effective. By increasing the dialog between the CEO, CFO and CIO and engaging a facilitator who respects your needs as a business and purveyor of technologies, you can be better assured of knowing what steps need to be taken and having the right solutions with the best value to move your company forward no matter what disaster strikes.

KEVIN BURTON is a Disaster Recovery Specialist with Agile360. Reach him at marketing@agile360.com or (949) 253-4106.

Thursday, 26 July 2007 20:00

Going up

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Once upon a time, there was a company that made buggy whips, says Barry Pletch.

With horses and carriages on every street of every city, the buggy-whip maker flourished. The company’s name was everywhere, and the company’s leaders made a lot of money.

But then, along came a new invention: the automobile — a self-propelled contraption that used an internal-combustion engine instead of horses.

With so-called “horseless carriages” beginning to proliferate, the buggy-whip maker soon came to a crossroads, its leaders forced to make a decision, and they couldn’t afford to be wrong.

“They had to either figure out a way to get into the car industry or sit there, hope the car industry failed and continue to make buggy whips,” Pletch says.

A quick glance at your office parking lot on a busy workday should clue you in to the fate of the buggy-whip maker that decided to stand pat and hope the auto industry would fold.

Pletch says stubbornness and stagnation is a recipe for disaster in the world of business. The cautionary tale of the buggy-whip maker that ignored the oncoming tidal wave of the auto industry helps Pletch keep his work force at ThyssenKrupp Elevator, Americas Business Unit — one of the largest manufacturers of elevators and escalators in the world — focused on the future.

“You have to keep ahead of the game,” he says. “You have to be thinking about the ideas of tomorrow, not of yesterday, and even in some cases be willing to terminate what you are doing because it doesn’t fit in to where the market is going.”

It’s no small task for Pletch to keep his business focused on that common goal. As the president and CEO of ThyssenKrupp Elevator, Americas Business Unit, he oversees a work force of nearly 12,000 spread across North and South America, running a business that is a $2.6 billion segment of ThyssenKrupp Elevator AG, which is based in Germany.

Faced with great numbers and great distances, Pletch says communication is one of the essential components of his job. Without effective communication skills, he says he’d never be able to accomplish the Herculean task of taking employees based in Los Angeles, New York, Canada, Brazil and many places in between and getting them to work toward the future of ThyssenKrupp.

Great communication

When communicating with many different employees spread over a large area, Pletch says the first and most important lesson to learn is to keep your message simple and direct.

He centers his messages on three or four specific, company-related goals that stay the same regardless of geography, and then conveys those messages in meetings, e-mails and other forms of communication.

“My belief is that you have to deliver the same message every time,” he says. “You can’t deliver 15 different messages. You have to deliver three or four specific things you are looking for as far as goals, as far as the way we want to do business, integrity within the organization, communicate that consistently and make sure (our managers) communicate that to their people. You can’t send people in 15 different directions.”

Regardless of the size of your company, the need to get in the field and engage your employees in person is constant. Pletch says that even though travel time and other commitments can get in the way, it’s up to you to make the time to get down in the trenches with your foot soldiers.

Engaging employees in person is the only way you can really expect them to buy in to what you are telling them.

“To make (communication) effective, you have to get on the ground, get on the front line, visit construction sites, visit manufacturing plants,” he says. “Don’t just walk through. Speak to the people who are actually doing the work, using their hands, using their ability. Find out what their concerns are. Talk and listen to them.”

Every CEO has 24 hours each day and 365 days each year to work with, so Pletch says there is no real secret to blocking off the time to communicate in person except to prioritize. He says the best time to do that is at the start of the year, when your calendar is clean.

“You have to mark in dates, and those dates then become a priority,” Pletch says. “I think about 20 to 25 percent of my time is spent talking to customers and talking to our front-line people. Management meetings, meetings with board members in Germany, a lot of that can be done by videoconferencing, so we’re not flying overseas for meetings that take four or five hours.”

Pletch says communication is more or less the grunt work of the innovation process. If you aren’t hammering away on the importance of innovation and actively soliciting ideas from your employees, an innovative culture will not take root.

However, if you pour enough of yourself into your communication infrastructure and log the air miles, good things can happen, and the culture will begin to cascade downward.

“It’s regular meetings with the management team, having them assure you that they’re having regular meetings with their team, face to face with every part of the organization,” he says. “I personally get out to branches, but with over 200 branches in North and South America, I don’t get to every branch every year. But I have a plan to get to every branch within three years.”

The ground level

Pletch says there are some things his markets have in common: “They have elevators that go up and down. They have escalators that ascend at 30 degrees.”

Beyond that, he assumes no similarities.

Great ideas can’t truly be great unless they address your customers’ needs. Pletch says you can’t come up with one innovative idea and expect it to be a puzzle-piece fit with customers in every market.

That’s why Pletch wants each one of his branch managers to operate like an individual entrepreneur running his or her own business, generating ideas and, above all, listening to what customers are saying from the ground level.

Pletch calls Jack Welch his “business hero,” and tries to emulate a lot of the principles Welch perfected at General Electric.

“The first thing you do is you give your senior managers and branch managers goals,” Pletch says. “They can be 90-day goals, six-month goals or 12-month goals, but you set them, and get out of the way. Let your managers do their jobs and don’t micromanage.”

Not only does Pletch steer his managers away from cookie-cutter management, he tells them that he expects each branch to be managed uniquely to that market.

“A hospital customer is completely different from an office-building customer,” Pletch says. “A condominium board wants to meet with us at night because no one is available during the day. So if you have a lot of condominiums in a given market, it’s much different.

“It’s much different in Florida than it is in Las Vegas or Minneapolis. You have to recognize that, and let the branch managers decide what is best for those customers locally. We have to let that happen because those of us in upper management can’t be dictating from 5,000 feet how to handle a particular customer.”

Pletch also borrows from the Toyota template of business management, which he says values customer service as much as, or more than, the product that is being sold.

“Toyota has grown to become the leader in the automotive marketplace,” Pletch says. “How did they get there? It’s not because their cars are really that much better than the competition. But a lot of it is in how it’s presented to the customer. I know Toyota owners who rave about how, when they take their car in for an oil change, it comes back washed and with the inside vacuumed.”

Pletch says it’s going the extra mile for customer service that secures repeat customers, and that responsibility lies in the hands of the employees who interact with the customers.

“It’s always best to listen to your customers,” he says. “We are continually challenging our people, telling them that whatever you do today, you must find a way to do it cheaper, faster and better tomorrow. That’s the basis of our organization. Those three things — Is it cheaper? Is it faster? Is it better? — will hopefully give you an advantage over your competitors, if you continue to do it on a daily basis.”

Gathering information

Customer interaction starts at the ground level, but in order for the customers’ ideas to have a lasting impact on your company, there has to be a way for their words to reach the people who blaze your company’s new trails.

Officials at ThyssenKrupp Elevator have regular meetings with customers all over the Western Hemisphere. The company’s sales, research and development, and management wings are involved in meetings with local developers, consultants and architects. The meetings are a forum for ThyssenKrupp’s customers to pool their ideas and concerns, which could be used later in the formation of a new elevator or escalator product.

“Usually, there are 20 to 25 people in those lunch meetings,” Pletch says. “We ask them, ‘What can we do better? What would make your life easier when it comes to elevators and escalators?’ We ask them what the future should bring.

“A lot of creative R&D ideas have come from a customer saying, ‘I want this,’ or, ‘I’ve been getting this for 10 years, and I want something different.’ That’s where we’re getting our ideas, and it’s great feedback.”

Pletch says the meetings are cut at 20 or 25 customer representatives to avoid information overload. You want many different opinions and perspectives from various customers, he says, but you don’t want to have so many voices at one time that some ideas get lost in the shuffle.

“You think of the number, it’s like 20 students in a classroom today, that’s a pretty normal number they can control. That way, everyone’s voice is heard.”

The ideas generated in those meetings are then put through to ThyssenKrupp’s R&D committee, which is a cross-section of Pletch’s work force that reviews and analyzes ideas, then prioritizes them.

Pletch says it’s important to have a system for gathering and considering customers’ ideas because customer needs can change quickly and, in some cases, drastically.

Increased competition in the retail sector has affected a nonretail business like ThyssenKrupp Elevator. The more department stores that open in a given area, the more stores there are competing for the same consumer dollar, which means any store that operates with ThyssenKrupp’s elevators and escalators needs to be assured of reliability, both from the company’s products and its services.

“I’ve had people at high-end department stores who tell me every person who walks through the door after Thanksgiving spends $380,” Pletch says. “If they can’t get up to the second floor where all the jewelry is, they’re going to miss out on a big portion of that $380.

“We need to provide them with an escalator that runs 12 to 15 hours a day, then provide them with the right product and the right maintenance to make sure that happens. In the retail business, time means money, and they have to make sure things are operating properly.”

To Pletch, customer service is a critical part of staying ahead of the curve. You need to produce the products your customers are looking for, but backing up your products with service and attentiveness is a key component in making sure your company doesn’t end up like the buggy-whip maker that was blindsided by the advent of the automobile.

“It’s all about continuous monitoring of your customer base,” Pletch says. “If you don’t, you’re going to end up like some of the large companies today that are falling behind. You have to be in front of your customer. If not, then you’re eventually going to be out of business.”

HOW TO REACH: ThyssenKrupp Elevator, Americas Business Unit, www.thyssenkruppelevator.com

Monday, 25 June 2007 20:00

Environmental protection

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Over the past couple of decades, there has been a surge of environmental liability claims brought against property owners. Fueled in part by environmental statutes and state environmental cleanup laws, the claims are often in the millions of dollars.

The failure to have environmental insurance in place can lead to serious repercussions. “Currently, companies are under even greater scrutiny when it comes to the environment and can be faced with an ever-expanding list of environmental liabilities,” points out Chris Falbo, area vice president, environmental specialist for Arthur J. Gallagher & Co.

Smart Business spoke with Falbo about environmental insurance, the benefits that this type of coverage provides and how to go about selecting a suitable policy.

What is environmental insurance?

Environmental insurance provides an insured protection from remediation (or clean up) of pollution conditions and from bodily injury or property damage that may result from those pollution conditions. Obvious examples include leaks from past unknown underground storage tanks or from past dry cleaner operations that may have affected subsurface soil or groundwater and are required to be cleaned up. Property damage claims may result if sub-surface contamination migrates from an insured property and affects an adjacent third party's property, reducing the value of that property. Indoor air quality, including mold infestation can generate claims for bodily injury. These are some of the more obvious examples that may trigger pollution liability. However, I've also seen coverage for claims for hydraulic oil releases in elevator shafts and for releases from sewage lines that have required clean up — situations that are less obvious to most people.

How can having environmental insurance benefit a company?

Pollution liability coverage benefits a company by reducing its risk to environmental exposures. Prior to the 1970s, most companies could not have anticipated the environmental liabilities that would occur from the results of their operations and previous waste disposal practices. Pollution liability insurance can protect the assets of a company faced with these risks.

What types of environmental insurance policies are available?

Essentially, pollution liability policies break down into two categories: Those that are considered fixed-site policies and those that apply to service providers. Fixed-site policies include pollution legal liability, remediation stop loss, storage tank liability and closure/post closure. These types of policies are designed to address contamination that is located at, or emanating from, a specific property.

The policies that apply to service providers include professional liability and contractor's pollution liability (C.P.L.) types of policies. Professional liability polices typically cover environmental consultants, professionals conducting environmental site assessments or designing remediation systems. Contractor's pollution liability covers both environmental contractors and nonenvironmental contractors — companies with operations ranging from road construction to steel framing.

How should a company go about selecting a policy that is right for its needs?

There are a number of companies currently offering these types of pollution policies. All have strengths, weaknesses and specific appetites for the types of exposures for which they're willing to offer terms. We recommend soliciting competitive bids from all appropriate markets for review. From there, the specific policy forms and terms and conditions for coverage should be analyzed to identify potential gaps that need to be addressed. This is the point where a broker experienced in placing environmental insurance coverage can be crucial. An experienced broker knows where to look for those coverage gaps and the best ways to address them.

How long should the policy term be?

It depends on the exposure to be covered. For professional liability policies and contractor's pollution liability policies, you typically will have a one-year policy term, although on C.P.L. policies, two-year policy terms may be available in some instances. For fixed-site pollution liability policies that would cover a portfolio of properties, policy terms range from one to three years. Most clients opt for a three-year term, which eliminates the need to address renewal of the coverage each year. If a pollution liability policy is designed to address a specific transaction, such as the sale of a property, you would choose a longer policy term, either five or 10 years.

How much does environmental insurance typically cost?

Premiums can range widely, depending on what the exposure is and the type of policy concerned. A minimum premium for a contractor's pollution liability policy is $5,000, and premiums can range from three to more than seven figures for policies covering more complicated land transactions and large portfolios.

CHRIS FALBO is area vice president, environmental specialist for Arthur J. Gallagher & Co. Reach him at Chris_Falbo@AJG.com or (818) 539-1320.

Monday, 25 June 2007 20:00

Clone buster

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There are many important elements that go into building an effective business culture. The key ingredients vary from company to company and industry to industry, but regardless of what your company produces or how it does business, Gerry Rubin says there is one thing that will never go into a great company culture.

“You can’t send an e-mail or write a memo and suggest [the culture] to your associates,” he says. “To suggest in a message how they should behave, that won’t work.”

In short, Rubin says, if you don’t actively engage your employees in person, your culture will dry up.

Employees need more than a written how-to manual on company values, says Rubin, co-founder, president and CEO of Rubin Postaer and Associates — the largest independent West Coast advertising agency, with clients such as Honda, and more than $1 billion in annual billings.

Employees need to see the culture in action, which means they need to see you set the example.

Rubin, who founded RPA with Larry Postaer in 1986, has learned more than a thing or two about building a company culture over the years. With more than 40 years of experience as an executive in the advertising business, he says he has learned how motivated, engaged employees are employees who feel enabled to think outside the box, come up with new ideas and pursue them, and ultimately, help the company grow.

“You need to maintain a commitment that your culture is one where independence thrives,” Rubin says. “You put in place all those disciplines and all those resources that a client needs, and you put them in-house, as opposed to individual smokestacks located in different ZIP codes that are never, in fact, integrated under one roof.”

Surrogates for the culture

Rubin says the key to building a long-standing company culture isn’t to build a work force of people who think alike and act alike. While you probably want all of your employees to embrace the same set of values, Rubin says you need to allow them to do it as individuals.

At RPA, Rubin refers to it as becoming a “surrogate” for the company culture. He wants employees to do more than just follow the culture. He wants them to believe in the culture to the point that it, in a way, takes up residence inside each person.

In order to do that, he says you must allow your employees to consider — and hopefully accept — your company on their terms.

When new employees are hired at RPA, Rubin brings them into his office, unannounced, on the morning of the day they start. They have never met him, and he doesn’t really know who they are. Rubin purposefully makes that the first time he meets new hires because he wants to know what drew the new hires to RPA.

“I bring them into my office, I have my Andy Warhol ‘Hall of Shame’ photos up here, and we have an icebreaker,” he says. “To start off, I ask one question of all of them: ‘How did we come to you, and how did you come to us?’”

Rubin says he wants to get to the heart of why new associates applied at RPA in the first place. The answers tell him what is motivating them to work.

“The answer I’d like to hear them say, and I don’t always hear it, is that they’ve studied our Web site and this is where they want to work. As opposed to, ‘A friend of mine works here and told me there was a job opening.’ Sometimes I regret hiring a person like that. I want to hear that they’ve studied us. When I hear that, it resonates with me

“Then I ask them, ‘What do you like about what you’ve learned?’ Then you really get to the depth of their understanding. ‘Boy, I really liked that Honda ad I saw.’ Now I truly know I have someone who wants to be a part of our culture.”

He distills the initial meeting with newcomers down to one word: passion. If a new employee has taken the time to learn about your company and has become excited by what he or she has learned, chances are you are hiring a motivated, interested employee.

“They want to learn, they want to make discoveries, and they take their own initiative,” he says. “Hence, they’re surrogates, not clones.”

But in order to get that level of involvement and commitment, both you and your employees have to be willing to work at it. In other words, it won’t happen overnight.

Each employee will come to his or her own conclusion about the environment and culture of your company over time. In Rubin’s estimation, it could take years.

“I’d like to think there is a point in time on the calendar where I can say, ‘They’ve captured it,’” he says. “But if you’re looking for a numerical response, I’d say years. You can’t expect for the food to get eaten in a year’s time. You have to dribble it out, little by little.”

No matter how passionately you drive your culture, or how eager the new hires seem at first, Rubin says there are simply going to be a certain percentage that aren’t going to find a home in your company, particularly among young workers. Don’t look upon it as a failure either on your part or theirs. Rather, he says, remember the uncertainty and self-doubt of your own early working days.

“There is a group of what I call searchers at our place, at any place,” he says. “It’s the 25- to 35-year-olds who [are] not certain that this is the industry where they want to work, and if it is, that this is the place to do it. So they transition, which is why it takes them awhile to capture the culture. And I encourage them to leave. Why? Because they’re marking time. They’re standing in place, which isn’t helping them or us. If it comes to that point, they should seek other options.”

Pushing the right buttons

Getting your employees to accept and internalize your culture is one thing. Keeping them in that frame of mind is something entirely different.

Rubin says a company’s culture is not a static thing. It fluctuates based on a number of variables, including internal communication, the financial health of the company and how workers perceive management.

With that in mind, Rubin says you can never take for granted that just because you haven’t made any changes to the culture that it is necessarily staying the same in the eyes of your employees. The work environment of a company is something that needs constant maintenance, and in order to do that, you need to find the right buttons to push among your employees to keep them driving toward the same goals.

Some employees are driven by a job well done. Some are driven by recognition from their superiors. All have something you can latch onto as a manager.

“They’re all different,” Rubin says. “It’s like a manager with 24 baseball players. One he pats on the ass, another he kisses on the cheek. And he can only be effective when he manages the team over time.”

Rubin says he spends most of his days acknowledging and recognizing people because it is so important to the success of his company. He walks the halls, attends meetings and gets to know many of his employees personally. He believes that developing a personal knowledge of your people is the only way to find out what truly motivates them.

“Recently, one of our associates celebrated 20 years here,” he says. “This guy is a diehard UCLA basketball fan, and you can’t get tickets for UCLA around here. But we made sure he had the best two seats we could find, plus a bunch of UCLA stuff, pennants, pins and whatnot. What it says is that we spent the time to get to know that person.”

As an advertising agency, you might expect RPA to have a knack for drawing attention to its associates. RPA recently took some of its creative muscle and flexed it for its own workers in creating an awards program called the League of Extraordinary Associates.

RPA designers concocted a group of comic-book-style super-heroes, each representing an award given to an associate quarterly.

“We have the ‘Bionic Wonder Award,’ the ‘Chameleon Award,’ the ‘Colossus Award,’ the ‘Guardian Award,’ the ‘Secret Agent Award,’” he says. “These are all cartoon characters with a description on a card of what the award means and why that person qualifies. We have a ceremony in our courtyard for the whole agency, and the awards are presented. I’m the presenter, I have my own orange cape with RPA on the back, and we go over the top in making these awards like the Academy Awards.”

He says it’s exciting, kind of humorous and a whole lot of fun. But the underlying message is a serious one: RPA’s leaders appreciate the contributions of their employees and value the company’s culture.

“That person [who receives the award] might have only been here six months, but they’ve done something outstanding.” he says. “Think of the tingles they get. They are really taken by this, and it costs us nothing. We created it in-house. These are the small — but maybe not-so-small — things in terms of how we reward people, but also recognize our culture in the process.”

Clients and customers

If you are asking your employees to take your culture to heart, they must believe you are also taking your culture to heart. That, Rubin says, means that the words and actions that cascade down from upper management must be consistent.

Employees can develop many conclusions about how the company is run by the type of customers and clients you bring in.

Clients who don’t match well with your organizational goals and values will produce projects that don’t allow your team members to do their best work, which in turn affects how they view management and the culture.

“One of the things that will compromise our culture is not just bringing in the wrong people, but bringing in the wrong clients,” he says. “Bad clients are generally followed by bad work. Sometimes that work isn’t due necessarily to any indiscretion on our part, but it’s due to the fact that we have a culture clash.”

Rubin says there is a one word answer, simple in theory but sometimes difficult in practice: Discipline.

As the head of your company, you need to be able to create the discipline to pursue the opportunities that best match your company, but might not necessarily be the most financially lucrative.

Rubin says discipline is rooted in research. The first thing he looks at is the long-term history of a potential client.

“A client that is already established or mature, you just look at the past work,” he says. “That’s the easiest way to make an assessment of what you think your opportunities will be with that client. You want to look for continuity and longevity.”

Rubin says your company and your clients need to have a realistic idea of what one can do for the other. If there are inflated expectations or unrealistic promises from one side or the other, it can sabotage the relationship before it even starts, which in turn can deliver a black mark to your company among your employees.

“We want our associates to go home, share with their loved ones, their friends, their neighbors, the dog — if the dog will listen — that they’re proud of the work they did that day,” he says. “That is a tall order. It’s very daunting and very challenging.

“But I am responsible for creating an environment for good people to do good work. You do that when you have good clients. It really goes hand-in-glove.”

HOW TO REACH: Rubin Postaer and Associates, www.rpa.com

Saturday, 26 May 2007 20:00

Safe, not sorry

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Disasters, both man-made and natural, can occur at any place, any time. If unprepared, a business could be faced with devastating consequences.

John E. Watson, executive director, higher education practice group for Arthur J. Gallagher & Co., says creating a disaster plan is essential to ensuring a company’s well-being in the wake of a catastrophe. “A disaster preparedness plan, or a crisis management plan, is intended to establish policies, procedures and an organizational structure for an effective response to emergencies,” he explains.

Smart Business spoke with Watson about how to craft a disaster preparedness plan, the importance of business interruption insurance and what other types of coverage should be in place.

How should a business go about creating a disaster preparedness plan?

A well-designed plan will describe the roles and responsibilities of each of an organization’s operating units during exigent situations. This includes natural and man-made perils, as well as domestic and overseas situations. A plan should define actions that target a safe, effective and timely response and recovery. The overar-ching focus of the plan should be to protect lives (the primary goal) and other assets of the firm.

What are the potential consequences of not being prepared for a disaster?

The absence of a response plan increases the losses from every angle and extends the length of a business interruption considerably. If employees are well-educated in response scenarios and feel that they are a vital part of saving the business and their livelihoods in the event of a crisis, the responses are much more effective. This can lead to improved shareholder value, community standing, brand image, customer satisfaction and employee confidence.

An example of a success is Wal-Mart; following Hurricane Katrina they were able to bring 70 percent of their stores back into operations within 48 hours. This wasn’t the result of having a crystal ball and being able to anticipate a Category 5 hurricane. It was because they had a well-defined crisis response and recovery plan in place.

Why should a crisis communication plan be implemented?

Employees are critical to the success of a crisis response and business continuity plan. Therefore, having alternatives to the traditional communication methods such as e-mail and other data systems is important, especially if those systems are taken out as a result of a disaster. Without clear direction from senior management and the crisis management team, it is impossible for employees to know exactly what direction they should be taking.

How important is it for companies to back up their computer data frequently?

The more frequent the backups are, the less likely that you’ll be presented with a loss of critical data. Not only should you make frequent backups, but you should also store them appropriately so they do not become damaged during the crisis situation. If a company is located in an earthquake zone in Southern California and they store their backups at a site that happens to be on the same earthquake fault, then they haven’t created the security they need for that data. They need to find a way to locate the backups off the same earthquake fault.

What is business interruption insurance and why is it so important in the event of a disaster?

Business interruption insurance is a time-element coverage that pays for loss of earnings and extra expenses that a business incurs due to a disaster. It is a property insurance form so there must be damage that would be covered under the property insurance policy. An extension to that coverage is off-site time-element coverage. Let’s say a firm relies heavily upon electricity for the operations of their infrastructure and doesn’t have an on-site generator. If their off-site power grid goes down, and stays down for the required length of time for the deductible, then they are eligible to collect from their property insurance the resulting income loss from not being able to provide their services. The extra expense provision would allow them to bring in portable generators or other equipment to help reduce the size of their overall financial loss.

As related to disaster preparedness, what other types of insurance coverage should a company have in place?

To some extent that is dependent on the type of operation. If a firm has overseas operations or has employees traveling extended distances, executive assistance programs can help them be repatriated if they are impacted by a civil disturbance in a foreign country. Similarly, kidnap and ransom coverage can help firms with overseas operations. Obviously, anywhere in Southern California there is the potential need for earthquake coverage or other financial models to prevent a loss from earthquake damage. Flood insurance is also something that should be considered.

JOHN E. WATSON is executive director, Higher Education Practice Group for Arthur J. Gallagher & Co. Reach him at (818) 539-1445 or John_Watson@ajg.com.

Saturday, 26 May 2007 20:00

Extraordinary results

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Andrea Michaels doesn’t mind when people gush over her employees.

After all, as president of Sherman Oaks-based event planning and production firm Extraordinary Events, Michaels wants her staff to hear the praise and feel lucky to work where they do.

“We are very well-respected in our industry, and I want people to have a sense of pride in our company,” Michaels says. “I want them to have the same respect for each other and the company that the outsider does.”

To build that respect, Michaels emphasizes staff empowerment, seeks feedback and works to foster teamwork and collaboration, building a culture that has helped grow EE’s annual revenue to approximately $15 million.

Smart Business spoke with Michaels about why letting others make decisions can be the most important choice a leader makes.

Q: How would you describe your leadership style?

My leadership style is based on empowerment. I really believe in training people to do their jobs and letting them do it, keeping a watchful eye on everything and everybody, and stepping in only when needed.

It’s not that I don’t understand what everybody is doing, and I don’t expect anything of anybody else that I am not willing to do myself.

When I see people about to make a drastic mistake, it’s a matter of asking, ‘What would happen if?’ instead of saying, ‘This is the way we’re going to do it because this is the way I demand it be done.’ People don’t learn if they’re only told what to do.

It’s like kids — we’re all children in one way or another, and we have to be allowed to grow up. That’s a very important part of business. You have to train people to make intelligent decisions.

It’s hard because, like anybody who is in an ownership position, you have control issues. You want it done your way, but sometimes other ways are better, and we can learn from other people, too.

Q: How do you encourage input, and how does it benefit your company?

This is a company like advertising, where you have to come up with the best idea or you don’t get the business. When we need ideas, we shut the doors, we turn off the phones and we do exercises with just, ‘Here’s the scope of the project. Let’s brainstorm.’ That means the accountant. That means everybody, because that’s our audience. They’re all inspired and they are all part of it. Some of the best ideas and some of the most profitable ones we’ve had have come from the administrative staff.

It keeps people inspired and excited, and that’s more important than money, at least that’s what the publications say. It also develops friendships within the company that keep a loyalty factor going that might not happen otherwise.

With this kind of communication, people really get to know each other pretty well. When they do, friendships form. That keeps them interested in staying here.

Q: How else can a leader foster a team approach?

We have a program called ‘Walk a mile in my shoes,’ which means that people who do production who don’t understand the sales process and think that salespeople just go out and eat a lot of lunches, they go out and cold call for a day. They are required to spend one day cold calling and reporting on it and doing everything a salesperson would do.

At the same time, the salesperson then has to take on their job and work on production. Or they might have to spend a day as a receptionist, answering the phones and faxing, mailing and copying.

The point is, everybody here has to respect the position of everybody else by understanding what it is, or we can’t operate as a team.

Q: How does a leader’s responsibility change as his or her company grows?

The only way in which your responsibilities change is that your job becomes to bring up new leaders and not just hire followers. You have to take a look and say, ‘If I’m not here, how does the company function?’ and set a plan in place that takes it beyond you.

In my case, my son is very much part of the company now and has been for the last few years and is being trained really in all elements of the company. He’s a very different person than I am. Whether the company will go on one day as I’ve always known it or not, that will be his choice.

I’m trying to stand back and say, ‘It doesn’t have to be my way.’ That’s hard to do. I see that it is necessary, again, to the sense of empowerment, that if I am ultimately making every decision, it won’t benefit anyone else.

So I know when people come to me now and say, ‘What should we do?’ my response instead of an answer is, ‘What do you think we should do?

HOW TO REACH: Extraordinary Events, (818) 783-6112 or www.extraordinaryevents.net

Wednesday, 25 April 2007 20:00

Robert Hayman

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As the leader of Discus Dental Inc., Robert Hayman’s mantra of “Do the right thing” dictates every action the company takes. Though Hayman, who serves as chairman, president and CEO for the dental supply company, acknowledges that doing the right thing doesn’t always mean doing the easiest thing, he says the long-term benefits are immeasurable. Fostering a culture that emphasizes honesty, integrity and fairness, however, doesn’t mean the company isn’t aggressive, and for that, Hayman makes no apologies. And although the company’s 2006 revenue of more than $150 million is nothing to shake a stick at, Hayman expects Discus to approach the $200 million mark this year. Hayman spoke with Smart Business about questioning experts and staying a step ahead of the competition.

Get to know the people in your company. I walk through our building, I visit every facility we have around the world a number of times throughout the year and I get to know our people as much as I can. It’s not so much to give advice or to preach or anything like that, but just to let them know I’m there. If they have questions or concerns, I’m there to answer them.

It’s funny — People say, ‘You have a lot of people working for you,’ and that’s weird, because I feel more like I have a lot of people I work for. At the end of the day, I’m only going to be effective if they’re all effective. Making them effective and making them do their jobs better is the most important thing that I can do.

At the end of the day, the most important asset a company has is really the people. The people are not machines. They’re human beings. It’s important that they realize the same of you as a leader.

You’re going to make mistakes every once in awhile, because you’re also a human being. Getting that personal element and getting that interaction and having a relationship with people is critical. Otherwise they will just see you as some sort of inanimate object that is sitting there in a corner office and making all of these cold-hearted decisions, and that couldn’t be further from the truth.

Trust your instinct. Common sense is important, and we have learned that a number of times. We have hired a lot of the ‘experts’ out there, and those experts are experts at one thing — and a lot of times, it’s being consultants and billing you. They are great at billing you.

At the end of the day, if something does not make sense, if something does not add up to you and an expert is telling you, ‘You just don’t understand’ — you have to question that. There have been times where we have just blindly followed, and most of the times that I have blindly followed something, especially when I don’t understand why I’m following it, I end up getting burned. It’s always good to question the experts and question what is going on.

Don’t stop at thinking out of the box. The old saying is ‘thinking out of the box,’ which is another way of saying being creative.

If it wasn’t for creativity, we’d be selling commodities. Selling commodities is trench warfare. We much prefer the blitzkrieg. We avoid trench warfare any way we can, and we always like an unfair advantage.

Thinking around the box means you’re not the only one thinking out of the box. A lot of times, your competitors are trying to think out of the box, as well. Thinking around the box means thinking in terms of not only what you can do but also what your competitors are doing. It’s basically a situational analysis of what you’re doing and what the next steps are. What’s around the corner? What’s around the next corner after that?

Nothing ever seems to happen the way you think it will. If you’re in a competitive business like we are, it’s like a game of chess. You’re going to make one move and, trust me, your competitors are going to make another, and they’re not going to do exactly what you think.

It sounds like it’s paralysis by analysis, but it’s not that at all. It’s just a way of thinking to make sure you don’t fall down a slippery slope where either you became the victim of your own strategy or you became the willing victim of your competitor’s strategy, and neither is good.

Don’t count on getting lucky. You need to know where you’re going in order to get there. If you don’t know where you’re going and you just head off in a direction, you might get lucky. But good business leaders don’t grow their businesses by getting lucky.

There’s a component of luck in everything, and there is some truth in the old saying, ‘I’d rather be lucky than good,’ but you really need to know where you’re going. The only way you’re going to really know where you’re going is to have a goal in mind. I’m very goal-oriented, and I love to know where the goal is and push to the finish.

You have to be driven to succeed if you hope to be successful. There are a lot of businesses you really don’t have to be creative in, and it’s really a matter of execution. There are a lot of businesses that aren’t so people-oriented, so the humanistic side of business is not all that important.

There are a lot of different types of businesses, but the one thing you find in every single successful leader is the desire to succeed in any way that’s possible. Sometimes you climb over the fence and sometimes you crawl under it, but at the end of the day, as long as you get on the other side and you haven’t breached anybody’s ethics or done anything wrong, that’s all that counts.

HOW TO REACH: Discus Dental Inc., (310) 845-8600 or www.discusdental.com