The optimal time for depositing funds doesn’t always correlate with standard banking hours. After all, in today’s business environment, transactions can occur around the clock. Fortunately, the days of having to physically visit a bank branch before it closes to make deposits are over.
Comerica business deposit capture extends the window for making deposits beyond traditional banking hours. The image capture solution enables businesses to scan checks at their office location and deposit them by transmitting an image file. Not only does it reduce the need for delivering or mailing paper items, but it also results in faster access to funds.
In addition to improved funds availability, the system provides other advantages as well. “Fraudulent checks are identified sooner when using business deposit capture, which can help reduce fraud losses,” says Angela Putrino, assistant vice president of Comerica Bank.
Safeguarding against check fraud requires diligence and determination. While it isn’t the primary product function, new technologies such as business deposit capture are making the process simpler and more cost-effective by leveraging control and screening options early in the payment process. Features at the customer site work with banks systems to aid in detection and flagging suspect items.
Smart Business spoke with Putrino about business deposit capture, the benefits it provides for businesses and the advances that she envisions in the future.
How does business deposit capture work?
Business deposit capture gives a company the ability to create images of checks received throughout the day and deposit them to the bank electronically. The company uses a rapid image scanner to convert checks from paper to electronic images. The business then sends the deposit to the bank, via the Internet using secure and encrypted software, where it is received and deposited into the appropriate account.
What benefits does the service provide for business customers?
Electronically making deposits allows a company to gain the convenience of an extended deposit window beyond that of traditional banking center hours. Travel time to and from a branch to take paper deposits is eliminated. If a business uses a courier service, that expense can also be eliminated or reduced in frequency.
Additionally, funds availability is improved. No need to hold over checks received late in the day when branches are closed or your courier has already made the pick up at your site. Returned item processing is accelerated due to banks exchanging image files, which is a faster process than moving paper checks around the country.
In summary, a company utilizing business deposit capture will benefit from increased productivity, enhanced deposit information, process control and reduced risk of check loss.
How can business deposit capture improve record-keeping?
The business deposit capture workstation provides online review of deposited check images, account deposit activity and other valuable reports. The information captured at each location can be consolidated by internal company processes or by reporting platforms, such as TMC Web. Additionally, a business can improve customer service by retaining a complete image of the checks for reference.
Additional options will enable export of check images from the local workstation that captured the image to a company archive for wider access. Images can also be burned to a CD for storage and research.
How have technological advances changed the way that businesses handle their banking needs?
Technological advances now allow companies to make deposits without ever visiting a bank. Web banking and business deposit capture create win-win situations for businesses and their banks by helping everyone become more streamlined and efficient.
What future advances do you envision?
Business deposit capture is a product that will be consistently improving in order to exceed customer expectations. Several enhancements are currently in process and will be implemented throughout 2007. For example, in the first quarter of the year, business deposit capture will be enhanced to contain optional data fields that customers can use for input into accounts receivable or other internal systems.
As banks increase their acceptance of image cash letters, customers will see more advantages of using business deposit capture. They can have improved funds availability, longer processing hours, and improved deposit reporting all without leaving their office.
ANGELA PUTRINO is assistant vice president of Comerica Bank. Reach her at (619) 338-1530 or firstname.lastname@example.org.
Gerald Dinkel fights a war on two fronts every day.
He was hired into Cubic Defense Applications in 2000 and moved into the president and CEO position six months later, just as the defense division of Cubic Corp. was finishing an unprofitable year.
While his firm assists combat efforts by providing training systems, integrated services and communications products to U.S. military forces and allied nations, it was losing its own battle with the bottom line.
“The way I would characterize it is that we had multidimensional problems,” says Dinkel. “We had just lost money on a major contract, and once I was here, it became apparent to me that we had poor relationships with our customers. There were lots of historical events that pointed to a lack of focus on our customers, and we had recently lost a number of contracts to the competition.”
Dinkel began his discovery process by spending time with staff, evaluating people and the culture, and looking for the hidden reasons behind the recent lack of growth and loss of contracts. He also gathered information by speaking with the firm’s customers.
Dinkel is an engineer by trade, so after assessing the challenges, he drafted his battle plan in a systematic and organized fashion. Moving Cubic Defense Applications back to financial health would require a cultural shift, a more aggressive posture in developing new technology and better customer relationships.
Developing a passion for customers
One of Dinkel’s early assessments was that the corporate culture didn’t value customers. So in addition to looking at the management structure and leadership team, he immediately launched a parallel mission to change the attitude of employees. “Without customers, we don’t have any business, and we need them more than they need us,” says Dinkel. “Relationships with customers are vital. It may not get you the business if you don’t have the lowest price, but that relationship can break a tie.”
To transfer his vision of improved customer relationships to the staff, Dinkel spent time in one-on-one sessions with managers, expressing his desire for change. He also made examples out of those who didn’t want to follow the new direction. The competition was growing and profitable, and Dinkel began to surmise that his company had stayed with its current technology solutions too long. “In order to be successful, we needed to achieve things that had not been done before,” says Dinkel. “We were going to be creating and delivering services for the first time, and in that process, you can sometimes have difficulty with delivery. If you have a problem and you have the customer working with you, they will help you solve that problem rather than leaving you.”
To navigate change, Dinkel relied heavily on moving people to new roles and on his ability to be a persuasive and effective leader. Most of the staff he started with is still with the organization but in different positions.
As he evaluated people and made his decisions, an openness to change became his litmus test.
“As a CEO, you have to have confidence in your judgment when it comes to people,” says Dinkel. “I looked at people’s attitudes. Some are open to change, and some are just not flexible and don’t want to be bothered with it.”
Because he didn’t know the staff yet, Dinkel sought internal opinions about who would be the best candidate to become project manager over the troublesome contract that had produced a bottom-line loss and an unhappy customer the prior year. Again and again, the same name kept coming up. “I wanted a project manager who understood the technology and could turn the customer situation around by fulfilling the contract through tremendous attention to detail,” says Dinkel.
With that change, he moved a major item off of his to-do list, and the contract has since been profitable.
“There was some pent-up demand among some of the staff to be more entrepreneurial and creative, so I was able to unleash that,” says Dinkel. “I also brought in people that I had known from prior assignments.”
Dinkel acknowledges that incorporating leaders who have prior relationships with the CEO can be a double-edged sword.
“I know that they are perceived by others to be ‘FOGs,’” friends of Gerry, says Dinkel. “They actually have more pressure on them because if they fail, I fail. In the end, I will be judged on whether the people I brought in actually make the organization better.
“Sometimes, you have to change the people in order to change the culture because cultures don’t change overnight, and as the CEO, that culture will outlive you. Before, it had become an intimidating, closed type of culture. Now, we have a fairly open culture.”
Prior to Dinkel’s arrival, Cubic Defense Applications was organized into five operating units, each headed by its own president and CEO. Dinkel says that the groups were working in silos, and many operating functions were redundant.
His vision was for three divisions, organized by function, which allowed for greater sharing of information and focus on the customer. Dinkel eliminated the top positions and took the parts of each unit that were similar, such as engineering, and consolidated them. He says that although there are pluses and minuses to organizing along a matrix structure, in this case, it was the right way to improve performance, creativity and speed to market.
Matrix structures are common in organizations that utilize project management, blending a conventional vertical hierarchy for reporting with a traditional horizontal project management structure that encourages cross-communication and accountability. “I like a matrix structure because it gives you checks and balances and eliminates redundancies, while encouraging peer-to-peer challenges,” says Dinkel. “We had also become very tactical, and my goal was to move us to a more strategic posture. In order to achieve that, we had to break down the silos and the fiefdoms.”
The focus on three functional areas and the elimination of silos drove innovation and increased the volume and pace of new technology developments and releases. That move drove new sales to existing clients and repositioned the company from follower to leader. “Recently, I thought that our business development people were becoming too short-term-oriented,” says Dinkel. “So I moved them into one centralized organization away from the business units. They still have a relationship with the business unit, but they have a separate reporting structure.”
Dinkel says some of his staff laud his ability to anticipate future market demand, likening him to Wayne Gretzky, who described his prowess in hockey by saying, “I skate to where the puck is going to be, not where it has been.”
Dinkel attributes his vision to unleashing internal creativity through management changes, the matrix structure and spending time in front of customers. “The Department of Defense actually publishes forward-looking information which helps to anticipate the new technology needs,” says Dinkel. “I also spend a great deal of time in front of customers. In particular, the international customers value a personal visit from the CEO, and they will share with you where they are headed.”
Annually, he takes his management team off-site to look at long-term strategic planning by reviewing the data in anticipation of emerging customer needs.
The increased rate of new technology releases has positively impacted both the top and bottom lines. In 2006, CDA had revenue of $563 million, an increase of more than $100 million over 2004.
One of Dinkel’s final changes involved moving CDA to become a high-performance organization.
He implemented the principles of Capability Maturity Model Integration (CMMI), a process improvement approach that also plays a role in generating new business. “One of the reasons that it was important for us to become CMMI-certified is because the customers demanded it,” says Dinkel. “There are certain things that you can’t bid unless you have that certification, and as a mid-tier supplier [a defense contractor with revenue up to $1 billion], we needed to demonstrate that we were a high-performance organization.”
Dinkel says that often, CEOs assign process improvement initiatives to staff. In this case, he embedded the responsibility with his line managers, a move that he says placed the accountability for improving productivity and results directly with those most responsible for the outcome.
He named the initiative “competitive superiority” to serve as a constant reminder to the team of the real outcome they hoped to achieve through the process. “I really don’t like the term ‘total quality management’ because I think it became a buzz word overnight, and it really doesn’t describe the outcome that you are trying to achieve,” says Dinkel. “I wanted to put the onus on the functional organizational team to make these improvements. There is a cost associated with always bailing out a project, and I wanted people to see that job security is not achieved by running a continuous series of fire drills. The result has been that projects are running more predictably, there’s been a reduction in cost, and we’ve been more consistent in executing our plans with fewer errors.”
While there has been much improvement at CDA under Dinkel’s leadership, he is still refining the processes and says he needs to stay one step ahead because the business of defense is constantly changing. “I came here because it was a fairly diversified company, and I have no loss of enthusiasm for the opportunity,” says Dinkel. “I’ve had the chance to establish my own management culture and to build a team. I think the success that I’ve had goes back to the people I admire; you build a team and then you say, here’s what we’ve got to do. “In my view, the main ingredients for success were already here; the organization rose to the occasion.”
HOW TO REACH: Cubic Defense Applications, www.cubic.com
I stood before the people of my company in what I knew would be a defining moment.
After a decade of phenomenal success, the market had turned, sharply and unexpectedly. The financial impact was devastating. Difficult decisions that included layoffs, expense reductions and the plotting of a new strategy had to be made. It would be painful, and a fearful uncertainty overshadowed my team.
As I walked to the podium, their faces showed the same concerns that I felt churning inside me. In that moment, I had two choices of what I would say.
One was to be vulnerable, to let them see that I felt the same emotions and the same regret they did over the issues we faced and to then use that connection to take us forward together. The other choice was to act as though I had everything under control, displaying confidence that, in my heart, I did not feel.
Unfortunately, I chose the latter.
The message I gave could best be characterized as a pep rally speech, with lots of bravado that I now know seemed as false to them as it did to me. I concluded by stepping off the stage and shouting, “Let’s make it happen!”
After a brief moment of forced applause, they quietly left the room, having gained no hope or courage from my attempt at a rallying message.
Even today, I cringe at this memory. And yet, this experience taught me one of the greatest lessons in the business of life.
Are you facing a challenge today that has you feeling overwhelmed or frightened, unsure what to do?
Whether you are a leader in business, the coordinator of a community project or a parent, you will inevitably face a moment such as this. And when it happens, you may be tempted to act as though you have it all under control and need little help from anyone else. Take it from me, this is the wrong approach.
It’s easy to believe you should have all the answers for every situation. And when you believe that, you hesitate to ask for help, even when you know you need it. You work to seem confident and assured, when what you should be doing is asking the people around you to join you in finding a solution.
Imagine if I had begun my meeting by acknowledging that I had been affected by the changes, just as they had, and then asked for ideas on how we could get through the crisis together. Would they have thought less of me as a leader, or more?
I think you know the answer. And the same is true in your situation.
When you are willing to let others see that you have the same doubts and fears as they do, it does not make you weak. It makes you human. Courage is not the absence of fear, it is action taken in spite of it.
Your willingness to be vulnerable creates a connection that not only enables others to help you, it makes them want to. The result is unity, in your family or on your team, which strengthens everyone and displays the truest form of courage.
Vulnerability also makes you stronger when you’ve made the wrong decision or said something that you regret. Instead of defending your actions, acknowledge your mistake and what you learned from it.
The people around you always see the truth eventually. They can respect you, in spite of your mistake, if you are simply willing to admit it.
I once worked for a leader who, although respected for his passion, thoroughness and hard work, was widely known for never making two important statements: “I was wrong,” and, “I’m sorry.”
Like everyone, he was sometimes wrong, but staunchly refused to admit it. Because of this, the people on his team became unable to trust him, and eventually, he was removed from his position.
Your vulnerability is what enables you to connect with the people in your life. The more you connect, the more engagement, respect and trust you will experience, and the more of a leader you will become.
JIM HULING is CEO of MATRIX Resources Inc., an IT services company that has achieved industry-leading financial growth while receiving numerous national, regional and local awards for its values-based culture and other work-life balance programs. The company was recently named one of the 25 Best Small Companies to Work for in America for the second year in a row by the Great Place to Work Institute and the Society for Human Resource Management. In 2005, Huling was awarded the Turknett Leadership Character Award for outstanding demonstration of integrity, respect and accountability. Reach him at Jim_Huling@MatrixResources.com.
It costs hundreds of millions of dollars and can take more than a decade for a biotech company to develop a new therapeutic drug. Included in the process are numerous lab and field trials necessary for approval by the Food & Drug Administration (FDA).
Financial performance in the development and clinical trial stages is measured not in returns but in burn rate how long until the company burns through the money in the bank. For most biotechs, a healthy amount of cash would last 24 months.
In light of this, how does a biotech CEO work through the disparity of a long-term facility commitment versus short-term cash constraints?
Basic research institutions like academic institutions, nonprofits and large pharmaceuticals often own their real estate. Venture-capital backed biotech companies take a new idea, refine it, position it, and seek FDA review and approval.
Smart Business spoke with Shaun Burnett of Irving Hughes to learn how to plan for real estate needs while keeping an eagle’s eye on burn rate.
Why should the biotech CEO focus on the real estate?
One of the first challenges that a biotech CEO must address after the company is initially funded is facilities. The facility cost burden is the second-most-expensive fixed expense after payroll.
Parts of the puzzle the CEO must quickly put together include where to house the company, how large the supporting facility should be, how long the facility will accommodate the company’s needs, and technical and cultural considerations. The CEO must be wise and strategic in how to spend cash so that the bulk of the funding goes toward moving the science forward.
What is unique about biotech facilities?
Biotech facilities usually require a significant build-out of raw space or an extensive remodel. They need to configure plumbing to properly dispose of lab waste; to alter power and HVAC systems to allow the unique cooling requirements; and to engineer water, vacuum and gases to accommodate lab work. Some biotech companies do research using laboratory animals, and that requires an entirely different level of discretion, security and infrastructure.
What is the market like for biotech space?
The shift in the biotech business model away from early-stage discovery to outsourcing of R&D, and also to building management teams around promising Phase II clinical products, has ballooned the supply of wet lab space to a historic high. Most biotech companies today just don’t need traditional wet lab space.
More than 1 million square feet of wet lab space is available in Torrey Pines, UTC and Sorrento Mesa. Average time on the market for these properties has increased to 19 months, and many buildings have been on the market for more than three years. Rents that used to range from $3.00 to $3.50 NNN (triple net) per foot have crashed by 25 percent to 30 percent.
What about the market for the biotechs you mention that don’t need wet lab space?
The office market is similarly attractive for life science companies that require an all-office solution. The availability rate in UTC is 18 percent with an average time on the market of 22 months. While asking rents continue to hover in the $3.00 to $3.30 full service gross per-square-foot range, actual negotiated deals are being struck by Irving Hughes at $2.60 per-square-foot range with parking concessions, and great subleases are even less.
Del Mar Heights, which has been a tight market due to the demand by legal and financial service firms, has availability of 15 percent, and rents are flattening. Sorrento Mesa has an availability rate of 26 percent with an average time on the market of 18 months. This year and next will be a great time for life science companies in San Diego.
Do some brokers specialize in biotech properties?
There is a small community of biotech real estate specialists. However, most of them are dual agents, professing to act as the representative for the biotech tenant but at the same time acting as the landlord’s representative or as the actual landlord or silent investor of a proposed property. The worst case for the biotech CEO is when the same broker purports to act as a fiduciary for the tenant while at the same time representing landlords. CEOs have to remember that the brokerage firms that have the landlords’ listings are just outsourced marketing and leasing entities for property owners.
SHAUN BURNETT is a principal and senior vice president at Irving Hughes. Reach him at email@example.com or (619) 238-4393.
According the to the “2006 Industry Report” in the December issue of Training magazine, companies spent approximately 15 percent of their training budgets on e-learning, a two-fold increase over 2005, signifying that online instruction is here to stay as a mainstream delivery vehicle.
The article notes that online programs are used most extensively for mandatory or compliance training, but are increasingly being used for customer service, retail process and soft skills instruction as well.
“Corporations are currently the largest users of online learning programs,” says Cindy Larson, Ed.D., president of Spectrum Pacific Learning Co. in La Jolla, which creates and supports distance and online learning systems. “However, the academic sector is expected to be the largest user within the next five years.”
Smart Business asked Larson what makes for a quality program and how corporations can make the most of their online training dollars.
What are some of the trends for employer-sponsored online learning programs?
Since 2000, the growth of online learning has been tremendous. Enrollment in online programs has more than doubled in the last few years, and this trend is likely to continue. Industry analysts predict that growth will double again in the next two years. This can greatly be attributed to lower costs and better use of technology to create engaging online learning.
How do corporations benefit by offering their employees online learning?
Online learning has the opportunity to engage all learning styles, offers flexibility and provides accessibility. There are three core learning styles: audio, visual and hands-on. Approximately 10 percent of adults are audio learners, 20 percent are visual, and 70 percent are hands-on. In a classroom, you’re typically only fully engaging about 10 percent of your audience the audio learners. Online learning enables us to move beyond those limitations. Additionally, it is flexible and accessible, meaning that employees can take the classes at times that are most convenient to them, and that the employer can change, add to and update the programs in real-time.
Rather than the traditional testing that takes place in a classroom, online courses offer the opportunity to conduct pre-, during, post- and follow-up assessments. Students can always go back to areas they missed or still don’t completely understand. The post- and follow-up assessments enable the employer to quantify and qualify its investment and ensure that the employee has retained the information.
Also, when compared to a classroom, the online learning environment offers more opportunity to engage visual learners. As for the social aspect of the experience, separate ‘communities’ can be set up where learners can chat, engage in live discussions or participate in discussion threads.
How can companies that do not yet have an online learning program get started?
The first step is to undergo an assessment of the company’s training needs to determine whether an online program would be practical. Factors that are considered include the company’s business environment, culture and competitive marketplace. How much training do they need? What type? There is no one-size-fits-all solution. Companies should be judicious when selecting courses that make sense for their particular organization and start out with a pilot program.
How can companies that already offer online courses ensure that their programs are effective?
By conducting an audit. Audits will reveal if the company is on-target with the design, content and delivery of its programs. An audit should ensure that clear learning objectives are established; that benchmarks gauge comprehension; that training aids engage all three learning styles; that information is broken down into small chunks, and that 24/7 technical support is available.
In addition, trainers/facilitators should be accessible via e-mail and/or discussion threads.
How can employees get the most out of their online experience?
It depends on their learning style and place in the organization. For an exempt employee, taking a 45-minute online course on harassment prevention can be a huge time saver. For a nonexempt employee, is it relevant? Staff-level employees want to feel that the training is relevant to their specific job. They want to know ‘what’s in it for me’ if they complete the courses.
Help participants up-front by providing a questionnaire to assess what type of learner they are: visual, audio or hands-on. This can easily help them maneuver through the course. Done well, e-learning can have an incredible impact on learning, corporate culture and the bottom line.
CINDY LARSON, Ed.D., is president of Spectrum Pacific Learning Co. in La Jolla, which is part of the National University System. Reach her at firstname.lastname@example.org or (858) 642-8113.
Over the past several years the practice of using venture debt has increased significantly. For many companies, venture debt is an attractive option because it stretches equity investment dollars. By leveraging equity with debt, a business can increase its valuation levels.
“Since venture debt provides such a natural and complementary fit to equity capital, it’s used more and more, especially in private, venture-backed deals that are particularly sensitive to the need for conservative use of equity capital,” says Killu Sanborn, senior vice president and director of life science venture lending at Comerica Bank.
Smart Business spoke with Sanborn about why venture debt has become so popular, what factors lenders consider when granting venture debt and what terms and structures are most commonly used.
How does venture debt work?
Venture debt providers, such as banks, provide a company with a loan, which the company can use to build its business to the next level. For both private and public equity-backed companies, venture debt provides attractive leverage to the equity capital (and common shareholders such as management and employees) by increasing the return on equity. Using venture debt increases return on equity, because value is created by a combination of both equity and debt capital. Naturally, debt needs to be paid back at some point and the company pays interest to the debt provider, but it is significantly less expensive than equity capital, because it is taking significantly less risk.
Why has it become such an attractive option for companies lately?
Venture debt as a concept has become proven over the recent years as its track record through good and bad times has been established, particularly through the tech boom and bust. Also, in specific capital-intensive sectors such as life sciences, venture debt can provide very meaningful relief from equity dilution and valuation concerns. It may take $100 million or more to develop a drug to the stage where public markets become open to owning the company's stock through an IPO. However, IPO valuations remain very low, in the range of $130 million to $150 million. This provides very poor returns for the equity holders that took a lot of risk when investing their $100 million. Imagine now that you could replace some of that $100 million in equity with debt not only would it be less dilutive to investors and common shareholders, but it would likely also help significantly with valuation issues and ultimately, return on equity.
Why is it important for a company to be prudent about the level of debt that they carry?
There are limits to how much venture debt is a reasonable amount to use as leverage for equity, as too much leverage might expose the company and investors to excessive risk in case the business sours. It is also important to remember that all debt needs to get paid back before equity investors and common shareholders such as management and employees get paid. At the end of the day, venture debt providers are in the business of making loans, getting paid for the loan servicing, and getting some upside in the form of warrants to buy equity at a later date.
What factors do lenders consider when deciding whether to give venture debt to a company?
For private companies, a very important factor for venture debt providers is the quality and makeup of the investors, who are typically VC funds. Deals backed by VC funds (who have experience with using venture debt and are known to protect lenders even if their company does not work out) are likely to attract very strong terms from lenders. Other factors include the strength and track record of management teams; the amount of debt sought versus the amount of other capital in the deal (lenders typically lend less debt than the total equity capital in the deal); uses of capital and quality of the business plan; financial state of the company; and how much capital the company has in hand when seeking debt.
What terms and structures are most commonly used?
Often, venture debt is structured as a growth capital loan with a term loan structure of monthly amortization of principal plus interest over a specific amount of time, such as 36 months. How expensive the debt is varies considerably between providers and depends on the size of the deal as well as the level of risk the debt provider is taking.
The cost of the deal typically includes features such as interest rate, closing fees, warrants and any commitment or non-use fees. Additional deal structures include equipment lines or real estate expansion loans, which make a lot of sense for companies that need to buy equipment or expand real estate. Last but not least, banks that do venture debt loans often provide generous working capital loans to companies with revenues and accounts receivable, even if they are not yet profitable, but show a clear path to profitability.
KILLU SANBORN is senior vice president and director of life science venture lending at Comerica Bank. Reach her at (858) 509-2380 or email@example.com.
If you happen to be wandering the aisles of one of Dixieline Lumber Co.’s 11 home center stores, don’t be surprised if the person who offers to help you is Joe Lawrence, president of the company.
When Lawrence says that he likes to lead by example, he can point to numerous instances of doing just that. That’s because at one time, he’s held most of the positions in the firm since starting as a lumber handler 23 years ago. “I have personally worked a lot of the positions, so I have a great understanding of the business,” says Lawrence. “Our management team has an open-door policy with our people and our customers. We expect each other to be in the field interacting with our people and exchanging ideas and gathering feedback. I see myself as one of the guys.”
His affinity for people makes him a likeable leader, but it’s Lawrence’s skill in managing employees, his hands-on involvement in their growth and development, and his passion for customer service excellence that have been the underlying reasons for his success in helping to guide the organization even before assuming his current role in March 2005.
Lawrence says that much of the credit for his success lies in his management structure, and his style of management transparency and empowerment that has enabled his team to stay focused and productive, and to grow.
Command and control doesn’t live here
Lawrence involves seven of his key executives in a management committee that authors and executes the business plan for the company. He considers one of the additional benefits of the system to be staff development. “I’m not a micromanager,” says Lawrence. “I prefer an open-forum style of management, so we meet as an executive leadership group formally once a month and then individually on an informal basis throughout the work week.”
The agenda typically includes a review of the financial results and projections, as well as preparing the annual presentation of the business plan to the rest of the management team. The most significant outcome from the committee has been much of the strategy for expansion and diversification of the business model, but it’s Lawrence’s leadership that sets the tone.
“The plus of having an open discussion is that we can reach a general consensus,” says Lawrence. “We have a debate if need be, but there are ground rules. The comments have to be professional, not personal, and I don’t allow generalities for comments; they have to be specific.”
Lawrence also acts as referee, and in the case of an impasse, final arbiter.
“I will let the debate go on, because first of all, I want them to own the result, and second, I want them to come to a consensus,” says Lawrence. “I think that some disagreement is healthy. For example, I don’t expect the sales folks and credit [department] to always agree as to what is an appropriate level of risk. The group has to be trusting and a bit thick-skinned at times and sometimes opinions are expressed that may not be consistent with the thoughts or expectations of others.”
With a major corporate goal of expansion of the firm’s footprint outside of San Diego, the committee reviews the demographics of the expansion, identifies the targeted customer base and sets the sales strategy. That formula resulted in success when Dixieline initially broke into the San Bernardino market by expanding into Colton. Later in 2006, Lawrence took advantage of his weekly one-on-one meetings to provide some staff development related to the expansion. “I like to teach my managers that they have to be adaptable,” says Lawrence. “Many people want things in black and white, but that’s not the way things in leadership usually are. I try to get my managers to play out the ‘what ifs’ in advance. As an example, after our Colton expansion, there was a downturn in the local housing market, and the business slowed. “Some members of the committee wanted to diversify the business model. In one-on-one sessions with them, I asked what message that move might send to our customers or competitors. We have since found other business to bolster that location.”
Success through people
Dixieline has more than 1,100 employees, and historically, most of the talent needed for the firm’s expansion has come through internal promotions and a highly structured employee development system. That strategy is still a large part of the culture, and because it is so important to the human capital plan, it is overseen by Lawrence. “I like to be able to dangle the opportunity for upward mobility in front of new hires and, of course, I use myself as an example,” says Lawrence.
All employees have a formal development plan, and the pipeline of internal candidates is reviewed each month at the management committee meetings. Each location has a separate turnover target based on the line of business and each position.
Turnover for the lumber and home center industry for 2005 was 35.7 percent, while Dixieline had a turnover rate of 23.5 percent. For just the retail side of the business, the industry average in 2005 was 57.2 percent, while Dixieline posted 32.3 percent turnover.
The goal is to achieve less than 30 percent turnover in the business centers and to average no more than 30 to 35 percent turnover on the retail side. By doing so, the company keeps a consistent employee base that is more knowledgeable and spends less money on recruiting and development.
Lawrence says a command-and-control environment hampers people’s growth, and continuing to develop good people means letting them learn and think on their own without overseeing their every move. He says his deliberate choice of management style enables internal promotion and the people development system that has gotten Dixieline to its present status. “I believe people want to be involved in building the business and contribute to the overall success,” says Lawrence. “If we are always told what to do, not only will we not grow the business, but we will stagnate the growth of individuals.”
Shopping for attitude
“Today’s builder wants a one-stop shop,” says Lawrence. “That has necessitated the need to make acquisitions outside of our core competency, so now we are looking at and evaluating building materials distributors, and shops that manufacture doors and trim.”
In addition to looking at the numbers, Lawrence visits every prospective acquisition to assess its philosophy on customer service and quality, because it is here where he finds the true fit. “I look for acquisitions where their business has a synergy with our core business and their executives share our core beliefs about customer service,” says Lawrence. “We want to retain many of their people, and I often find that if they don’t have a strong sense of customer service ingrained as a philosophy, it’s hard to teach.”
Success for Dixieline on the consumer side of the business has come through positioning the firm as an alternative to big-box retailers such as Lowe’s and Home Depot, something Lawrence also credits to strong customer service. “Having roots as a family-run company helped to create our culture of customer service,” says Lawrence. “I believe that consumers like to have choices. We have more people out on the floor so we run a more expensive model, but we also run at a higher margin. I believe in the ‘Moments of truth’ philosophy in customer service because every transaction is important to us.”
Lawrence is referring to the popular customer service mantra that espouses that each interaction between a customer and the company’s frontline personnel creates an opportunity for the customer to leave with either a negative or positive perception of the company’s service, based on his or her experience.
To begin the process of dedication to excellence, all new staff members begin customer-service training on their first day of employment, followed by product-knowledge training accomplished through vendor presentations.
The results speak for themselves.
“Since 1980, there have probably been close to 20 big-box locations that have opened in San Diego,” says Lawrence. “In spite of their growth, we’ve been able to more than triple our business during that same time. I think it’s a misnomer that you can’t run at higher cost and be successful just based on the financials. It’s all about the throughput analysis.” On the retail side, Lawrence measures transactions per labor hour, using a different target for each location, as well as staff turnover, because that affects a customer’s experience. And the firm has achieved a reputation as a preferred employer with dedicated employees who have been promoted through the ranks.
While many firms have gotten out of the retail hardware business, Lawrence has jumped in, adding the consumer market to counterbalance homebuilding, as well as adding solutions for the remodeling, custom homebuilding and repair markets. In 2005, the firm had record sales of just over $400 million, led by the home-building segment.
Lawrence was a visionary and an initiator of a diversified business model long before he became president of the organization. Initially, Dixieline was solely dedicated to supplying lumber and materials to builders. As he moved up in the organization, Lawrence watched the economic cycles take a toll on the company, its customers and employees.
In convincing the owners to diversify, Lawrence established himself as a future leader and set the company on a course of economic stability. His takeaway from those experiences includes lessons in persuasion and persistence. “I was persistent about my beliefs,” says Lawrence. “I found others internally who shared my vision, and together, we created a nucleus of the same vision to diversify and grow outside of San Diego and become a regional player in the entire Southwest area.”
Dixieline’s success attracted attention, and the company was bought in 2003 by Lanoga Corp., which was, in turn, bought last year by Pro-Build Holdings Inc., a subsidiary of Fidelity Capital.
The experience of being acquired twice after so many years as a family-owned company has had its advantages and its learning moments. While there is additional support for the vision of becoming a regional player, Lawrence sees the education process as having benefits for both sides. “What I have learned from this is to be open to listening to new ideas and new ways of doing things,” says Lawrence. “However, what we bring is knowledge of the local marketplace and how to be successful here, and that’s a competitive advantage. I think we will thrive by learning from each other. “Day-to-day, we are still a local company, and the burden is on us to grow our strategic plan. I am always an optimist. There is always a way to make something work; you just have to work harder than the next guy.”
HOW TO REACH: Dixieline Lumber Co., www.dixieline.com
But despite our reliance on technology, it’s important that we not lose the basics of our relationship skills. We need to hold ourselves to a higher standard when it comes to dealing with people.
Here are some things we can do today to make sure that the first impression we make is a good one. 1. Send a letter instead of an e-mail after meeting someone new. This may feel like a hassle, but that person will take notice and know that you went the extra mile to make him or her feel important. 2. Be professional. It is very acceptable in today’s society to dress down or settle for basic etiquette. But first impressions are everything, and we should make the other person feel important. You also send a message about who you are with how you dress and behave. Make sure your appearance and actions send the right message. 3. Drive these ideals across your organization, from the top managers to the receptionist. Anyone in your organization who encounters anyone else represents you. As the leader of your company, you are responsible for the first impression being made on your behalf. Make sure it is the one that you want. 4. Reassure your customers. When dealing with new customers, it is important that they feel they made the right decision to do business with you. It is always helpful to send a thank you letter letting them know that you are aware of them and that you appreciate their business, regardless of the size of your company. I am not talking about a form letter that you stamp a signature onto, but a letter they know that you personally wrote and signed.
When you take the time to do the little things to make sure you and others within your company are making a good first impression, people will see you and your business in a better light. Their perception of your professionalism and level of service will increase, helping you gain new customers and keep old ones.
Be vigilant about these things, because you only get one chance to make a first impression. A blown opportunity to impress a potential new customer won’t come again.
FRED KOURY is president and CEO of Smart Business Network Inc. Reach him with your comments at firstname.lastname@example.org or (800) 988-4726.
Deborah J. Martin has a healthy respect for change. In fact, the COO of PRA Destination Management says not being receptive to change is one of the most common mistakes leaders make.
“Do what you’ve always done, and you will get the same results,” Martin says. “You must remain fluid and change with the times in order to survive.”
Martin has spearheaded plenty of change during the 16 years she’s been at PRA, a franchiser of destination management companies with 18 locations nationwide. She oversees four of PRA’s Southern California offices, with 60 full-time and 200 to 250 part-time employees.
Smart Business spoke with Martin about why communication is key during times of change and why you must empower your employees to succeed.
How do you manage change?
Sharing how the change came to be and the desired result is basic. However, it is amazing how often this step is neglected. As a leader, you must break it down clearly and not assume employees understand the rationale for decisions. Communication is the key, and that includes outlining expectations.
During times of change, employees need a more directive approach. It is important to provide compelling reasons for change and involve others in plans and decisions instead of simply dictating them.
What is your leadership style?
I communicate clearly so there is little room for misinterpretation. I do my best to hold employees accountable. To be a successful change agent, you must empower your employees.
I work hard to balance being hands-off, yet accessible. Part of my job is to bring up the generation behind me. If I keep taking back the power from employees, they will never learn.
I was afforded the opportunity to make mistakes and learn from them, and I give that same benefit to staff. Nobody should fear their livelihood will be in jeopardy if they make an honest mistake.
Although there are always some people who want lots of direction, most of our employees are independent, responsible and self-motivated. With this caliber of employee, a micro-management style would be disastrous.
How do you deal with trends in the industry?
First, you have to be aware of the changing tides. I stay immersed in the latest developments in the industry in a number of ways, including attending trade shows.
However, the most effective method I have found is to stay in close contact with our competition. I have built rapport and a collaborative spirit with many of our competitors over the years.
Three years ago, there was a local industry development which would directly impact the destination management business. I knew our voice would be heard louder if we worked in unison with other destination management companies.
The end result of working together was a healthy respect for one another and a unified approach to issues that affect all of us.
What has been your greatest business challenge?
I was born with a hearing problem, and for many years in my professional life, I did not admit it or ask for help. When the director of the company told me he had concerns about whether I could manage the job, it was a turning point for me.
I got a hearing aid, which was hard, since I saw this as a visible sign of weakness. Everyone has an area they need help in one of mine happens to be physical. I had a talk with myself and concluded that I needed to get a grip and ask for help.
My advice to leaders is to admit these shortcomings rather than pretending they are not noticeable. It’s better to get help before your weakness overshadows your strengths.
What advice would you give new CEOs?
Pay your dues. I have noticed there seems to be more of an aversion to this lately from Gen Y hires.
You cannot perceive anything as too lowly or menial. Performing a wide variety of functions in the business gives you knowledge and empathy for staff when you become a CEO. You can’t be afraid to get into the weeds if you want a leadership role in the future.
HOW TO REACH: PRA Destination Management, (619) 234-9440 or www.pra-san.com
In today’s global economy, American companies are afforded tremendous opportunities to diversify business risks and capture additional market share. However, there are corresponding risks to the rewards that are associated with conducting business internationally.
Highly volatile, any given currency fluctuates 1 percent during a 24-hour period, points out Gary Loe, vice president at Comerica Bank. This volatility translates into the need to manage the risk of rising or falling foreign exchange rates.
“Identify your exposure and establish a floor or worst-rate scenario,” advises Loe. “Protect that rate by using one of your foreign exchange hedging vehicles.”
Smart Business spoke with Loe about the basic principles of foreign currency hedging, what the current environment looks like and how to best strike a balance between risk and return.
How does foreign currency hedging work?
A foreign currency exposure is typically created when a company imports, exports or establishes an offshore physical presence. Due to potential valuation change from one currency to another, the result is currency risk. This risk will require active management or risk transfer. Whichever occurs, a currency hedge program should be investigated. Different companies will have a different hedging profile. Hedging is the tool to address currency risk.
What are the different types of foreign currency hedging vehicles?
There are three basic vehicles, although there are variations upon these three.
The first type is a spot transaction, which is the immediate buying or selling of one currency for another. Using the market price today, settlement usually takes place within two business days. A company that only transacts using spot trades is typically accepting the most risk.
The second vehicle is a forward contract. The price is locked in immediately, but settles on a date in the future. Monies do not change hand until that stipulated future date. Theoretically, the forward price can be the same as the spot price; however, the forward price, based on interest rate differentials, is usually either higher (premium) or lower (discount) than the spot price.
Finally, there are option contracts that provide the company the right, but not the obligation, to purchase or sell a specific amount of foreign currency for a specific date in the future. For this right, the purchaser of the option pays a premium which is payable immediately. This cost is determined by many factors including the option strike price, current spot price, forward adjustment (interest rates), market volatility and forward date.
When creating a hedging plan, what strategies should be considered?
First, it is important to note that there is no one best way to create a hedging plan. Each company may determine to use different tools that apply to its individual situation.
However, one consideration that should be taken into account is how much exposure you have. Are you conducting business in U.S. dollar terms or foreign currency terms? Even if conducting in U.S. dollar terms, your company can still be exposed to exchange rate movements if your foreign party is or feels forced to change those terms due to exchange rate movement. Developing a budget or other financial analysis can help identify foreign exchange exposure. Typically, a company will establish a budget or forecast, then choose the vehicles to use and subsequently validate them against the company’s appetite for risk.
What does the current environment for foreign currency hedging look like?
Most industrialized countries have freely open markets in foreign exchange such as the U.S. dollar, euro, British pound, Japanese yen and Canadian dollar among many others. The foreign exchange market is the largest market in the world with more than $1.5 trillion (U.S.) traded daily. This is bigger than all the stock and bond markets in the world put together. Therefore, the market is very liquid.
There are, however, countries where it is very difficult to impossible to physically deliver currency. China is one such place that curbs its money flows. This is due to Chinese central bank restrictions. Regulations in some countries can change constantly so it can be important to stay in touch with your bank’s foreign currency adviser.
How can a business best strike a balance between risk and return when hedging in foreign currencies?
Probably the term with more weight is risk. Your company is probably not in the game of foreign exchange speculating. It is most likely buying or producing a product for sale or providing a service for sale. Therefore, it should concentrate on what it does best.
Most companies would be better served by eliminating as much foreign currency risk as possible. However, some business situations cannot completely eliminate risk. In this situation you can try to set a downside floor with the use of such vehicles as options. Setting a floor with an option or leaving an order to buy or sell on a stop-loss basis can also leave potential upside returns on a hedging strategy.
GARY LOE is vice president at Comerica Bank. Reach him at (800) 318-9062 or email@example.com.