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Tuesday, 26 August 2008 20:00

Economic outlook

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Hampered by a steady rise in energy prices, a downturn in the housing market and woes in the credit market, the U.S. economy has been sluggish throughout the first half of 2008. The good news, however, is that despite this confluence of negative economic indicators, the economy has shown growth.

“The U.S. economy has been remarkably resilient,” says Dana Johnson, Comerica Bank’s chief economist. “It has grown nearly 1.5 percent at an annual rate over the first half of the year, despite a rise in energy prices, a fall in housing prices and a consistently disturbed credit market.”

Smart Business spoke with Johnson about his economic outlook for the coming months.

What is your economic forecast for the remainder of 2008 and moving into 2009?

The second half of 2008 is going to look a lot like the first half where growth averaged about 1 percent on an annual rate. As we move into 2009, I see the economy accelerating gradually. Six months from now I think the problems with the credit market will be less intense and the credit crunch will be less evident. I also think by the time we reach the end of the year we will have seen a partial reversal in the runup of energy prices — particularly crude oil and gasoline.

We’re beginning to see more evidence that the plunge in building activity is beginning to slow and perhaps the bottoming-out process is underway. The drag from home building is going to become smaller as we move through the second half of the year into 2009. Finally, I think we’re going to continue getting good support to the economy from a narrowing of our trade deficit in real terms. The weakness in the dollar has been underway for about six years and decent growth abroad helps the trade deficit continue to be a source of support for the U.S. economy.

Do you anticipate continued turmoil in the financial and housing markets?

In the near term I certainly do. There are still tremendous concerns about the size of the losses that may result from further defaults, and there is no sign yet of a peak in default rates in mortgages. Until we see clearer evidence that the home price declines are beginning to subside, there is going to be a lot of concern about the condition of financial institutions that, in one way or another, are exposed to the housing market.

California has relied heavily on the subprime mortgage market. What impact will this have on housing prices in the state going forward?

House prices have already declined quite sharply, particularly since last fall, when the credit crunch cut off the flow of new jumbo and subprime mortgages. The decline in home prices has been sharper in California than in most other parts of the country. Over the next year, California home prices are probably going to under-perform against the national average by 10 percent. We are seeing a much more rapid adjustment in home prices in California in this episode than we did in the first half of the ’90s. In the past, adjustments have taken quite awhile, but this one is progressing quite quickly.

Do you expect oil prices to continue rising?

I have given up believing that I can forecast the near-term movements. I do believe that we have been in an overshoot episode. I also believe that any retracement in energy prices is likely to be quite modest compared to the run-up we've experienced over the past six years.

How will this impact the economy as a whole?

The spike in energy prices has created tremendous hardships for any heavy user of petroleum-based products. Overall, the energy price increases have created a drag equal to about $100 billion this year as compared to last year. This figure matches the order of magnitude of tax rebates that people have received. Without the tax rebates there would have been a much more visible impact of the run-up of energy prices on the economy.

One of the bright spots in the current U.S. economy is exporting. Do you expect this trend to continue?

Yes, I do. The dollar has been going sideways since March. It’s beginning to stabilize and when the Fed starts tightening, which I expect to happen sometime next year, I wouldn’t be surprised if the dollar begins to firm a bit. The dollar is very low compared to what it was a year ago, or six years ago, and is creating a good, competitive position for anybody producing goods and services in the U.S. and trying to sell them abroad. Growth abroad has slowed, but not as sharply as it has in the U.S. The combination of growing incomes abroad and the low value of the dollar signals that we will continue to see good growth in our exports in the coming six to 12 months.

DANA JOHNSON is chief economist for Comerica Bank. Reach him at (214) 462-6839 or djohnson@comerica.com.

Saturday, 26 July 2008 20:00

Global impact

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All businesses will be affected by AB 32, known as the California Global Warming Solutions Act of 2006, especially with rising electricity and fuel prices. The only unknown is the extent of the fiscal impact and whether efficiencies will offset the increased costs. AB 32 is considered to be the most aggressive mandatory global warming program in the world, so the earlier CEOs develop an understanding of it, the better off they will be.

It is possible to forecast AB 32’s final emission-cutting strategy by reviewing the 2007 ARB (Air Resources Board) draft recommendations, according to John J. Lormon, partner and chair of the Environmental, Land Use and Governmental Affairs Practice Group with Procopio, Cory, Hargreaves & Savitch LLP.

“California intends to publish its final scoping plan to reduce greenhouse gas emissions (GGE) through regulations, market mechanisms and other actions by Jan. 1, 2009,” Lormon says. “CEOs should pay attention because the first draft of the scoping plan was released in June 2008, and the final strategy will be adopted by the end of 2010. The law includes fines up to $1 million for corporations and criminal sanctions of up to one year in jail for individual offenders.”

Smart Business spoke with Lormon about the likely final regulations under AB 32 and what CEOs should do to prepare.

What areas are targeted by AB 32?

AB 32 targets a return to 1990 emissions levels by 2020 (as much as a 30 percent reduction from what the 2020 emissions would otherwise be). There are many AB 32 effects, including the following: increases in electricity, fuel, construction and manufacturing cost; land use and forestry conservation impacts; and consumer lifestyle changes.

What were the early recommendations, and how will they impact energy and fuel?

Electrical utilities must triple their investment in renewable energy sources, and automobile manufacturers will have to produce more efficient light duty vehicles (if the U.S. EPA grants California a waiver), which may cost more to buy but should cost less to operate. Buildings, both new and retrofitted, will have to be more energy efficient, so property and leasehold acquisitions must consider these requirements and costs.

Regulations similar to those required for vehicle smog checks will apply to mobile air conditioning units and make it illegal to self-repair a motor vehicle air conditioning unit. Tire pressure monitoring system will be installed in all vehicles sold in California to increase mileage and reduce emissions.

What recommendations apply to manufacturers?

Appliance manufacturers will be impacted by regulations both directly and through their supply chains. Reduction of ozone-depleting substances used in consumer products will require reformulation of everything from cleaning products to paint and other coating materials; perfluorocarbons emissions in semiconductor manufacturing will be reduced or phased out. Regulation of the cement industry will impact all aspects of the building industry and its customers.

Are there any other recommendations that will impact businesses?

The Governor's Office of Planning and Research (OPR) issued a new technical advisory on the California Environmental Quality Act (CEQA) and Climate Change. All projects subject to CEQA review must consider significant effects caused by GGE. California's clean car standards, goods movement measures, low-carbon fuel requirements and movement of water (which uses 20 percent of the electricity in the state) will all be subject to GGE regulation and price increases.

What should CEOs do to prepare?

Educate yourself. The effects of AB 32 will be significant and broad. AB 32 will change permit and recordkeeping requirements and purchasing decisions and practices; corporate disclosure requirements will be expanded to include GGE; due diligence in mergers and acquisitions will change, as will budget and financial planning. Risk analysis for D&O and CGL insurance should be reviewed for appropriate coverage. CEOs should set up AB 32 news alerts to track new developments and attend science, law and policy workshops to stay informed. The EPA Climate Change Business Guide can be found at: www.epa.gov/partners.

Document baseline emissions. On Jan. 1, 2008, certain large California emission sources were required to report their 1990 baseline emissions. Early action to reduce emissions is great, but to get credit for early action, inventory and document your company’s emission baseline before making improvements or purchasing new equipment.

Take advantage of emerging opportunities. AB 32 will use market-based mechanisms like a cap-and-trade program, where companies can sell emission credits at a market price. So if your company converts its vehicles to natural gas, for instance, you’ll have available credits you can use or sell. Also, new regulation frequently opens the door for new products, services and investments, but CEOs need to be educated to spot these new opportunities.

JOHN J. LORMON is a partner and chair of the Environmental, Land Use and Governmental Affairs Practice Group at Procopio, Cory, Hargreaves & Savitch LLP. Reach him at jjl@procopio.com or (619) 515-3217.


Wednesday, 25 June 2008 20:00

Solid contracts

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Executives are frequently diligent and detailed negotiators when consummating a real estate purchase contract or long-term lease. But even the most thorough owners and tenants do not pay enough attention during the next phase, when construction or tenant improvement contracts need review and approval. Many of these contracts begin as boilerplate documents created by construction-related associations and, unless they are meticulously reviewed and modified, owners may forfeit savings opportunities, sustain cost overruns and assume financial liability for the contractor’s debts.

“Almost invariably, the contract presented to the owner by the contractor is missing fundamental provisions required by law or good construction practices to protect the owner against preventable risks,” says Katherine M. Knudsen, a construction litigation attorney with Procopio, Cory, Hargreaves & Savitch LLP. “If the contract does not provide adequate protection, the owner’s financial liability can quickly grow to hundreds of thousands of dollars due to delays, the contractor’s failure to pay its subcontractors or other situations. To avoid or limit financial loss or liability, owners should address and allocate these risks in the contract.”

Smart Business spoke with Knudsen about how to avoid the hidden pitfalls in construction agreements.

What is the first step in negotiating a construction agreement?

Before contract negotiations begin, owners should check with the California Contractors State License Board to verify the contractor’s history and to make certain the contractor has an active license. Also, an owner should verify that the contractor has adequate insurance coverage, including comprehensive general liability and workers’ compensation, preferably from an A-rated carrier, and verify the contractor’s ability to obtain payment and performance bonds. Further, the owner should check references and investigate the contractor’s qualifications and experience. Next, have a construction attorney review the contract to protect the owner’s interests and to make certain the scope of work, the compensation and the schedule for performance are all spelled out in detail. It is imperative that the contract include a construction schedule identifying completion dates for each phase of the project so the contractor is held to a timeline.

What else should be included in a contract?

Contractors should be required to provide a schedule of values or a budget for the project to help ensure that the contractor stays within the contract price and to guard against overpayment. Further, the contract should provide that the owner may withhold 5 to 10 percent from each progress payment until the work is fully completed and inspected and the time for subcontractors and suppliers to record mechanics’ liens has expired. The contract should also have a clause providing the owner the right to receive timely audits, a full accounting for the project and documentation of expenses if the contractor is being paid based on the cost of the work.

Are indemnification clauses and lien waivers important?

Owners should make certain the contract contains an indemnification clause stating that if the contractor fails to pay its subcontractors or suppliers, fails to keep the property free from liens, or causes injury or damage to persons or property, then the contractor shall indemnify the owner for all claims, lawsuits, losses, attorneys’ fees and costs. In addition, the contract should also contain language requiring the contractor and its sub-contractors and suppliers to execute conditional and unconditional lien waivers and releases before receiving progress payments and final payment, making it less likely that any mechanic’s liens or stop notices will be filed against the property.

How can construction delays be prevented?

The owner may consider including a ‘no damages for delay’ clause to help safeguard against a delay claim the contractor may assert if the project is not completed within the agreed-upon completion time. On the flip side, the owner may want to consider the inclusion of a liquidated damages clause entitling the recovery or withholding of a set amount for each day the project completion is delayed beyond the date set forth in the contract due to the contractor’s fault.

What bonds should be required?

The general contractor should be required to carry payment and/or performance bonds on the project, although the premium for such bonding is customarily borne by the owner. Even with a competent, adequately capitalized contractor and a well-drafted contract, unforeseeable difficulties may arise on a project. Payment and performance bonds offer additional protection to the owner. Generally, a performance bond ensures that the construction of the project will be completed if the contractor is unable to do so and a payment bond ensures that the subcon-tractors and suppliers will be paid if the contractor fails to pay them.

These recommendations are just a fraction of what owners should include in construction contracts. The main thing to remember is that ‘contract due diligence’ should not end when the lease or purchase agreement is signed.

KATHERINE M. KNUDSEN is a construction litigation attorney with Procopio, Cory, Hargreaves & Savitch LLP. Reach her at (619) 515-3206 or kmk@procopio.com.

Wednesday, 25 June 2008 20:00

Motivational momentum

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The euphoria and promise of a new employee’s first few weeks can be difficult to maintain. Recent studies have shown that, over time, nearly 70 percent of employees become disengaged with their organizations.

These numbers suggest a gap in leadership’s ability to build on the initial energy of a new hire. Workers always hit the ground running, but without a mix of motivation, inspiration and a clear vision of the big picture, they soon run out of steam. So how do the best leaders maintain motivational momentum?

“Every day, our employees leave us clues or triggers about what motivates them,” says Mark Paskowitz, senior consulting partner, The Ken Blanchard Companies® in Escon-dido. “We need to be aware of what they are.”

Smart Business recently spoke with Paskowitz about the perils of a one-size-fits-all motivational strategy and why the best leaders know how their followers are feeling when they come to work on Monday morning.

How can a motivational strategy backfire?

I remember early in my career as a new supervisor wanting to acknowledge one of my peak performers for a job well done. Since I was extroverted in my personality and communication style, I assumed that my employee would like to be acknowledged in front of 50 of her peers. Immediately after the public celebration, she pulled me aside and said, ‘Never do that again.’ She was an introvert and didn’t like public celebrations. As a new supervisor, it was an early wake-up call, which taught me one size doesn’t fit all. What motivates one person may not motivate another.

What practical tools and insights can managers apply immediately?

It starts when employees first join your organization. How do you maintain their initial excitement about joining the company? Their immediate manager can make all the difference in the world. I remember, before payroll automation, a manager who would leave positive comments regarding my performance attached to my paychecks. It was a small and simple thing, and yet, it was very powerful. People want four to five positive strokes to one redirect/reprimand. Redirection should be focused around keeping the energy positive and delivered while not punishing someone who is still learning. You learn a lot about organizational culture and leadership when people make mistakes. It is human nature to largely focus on people making mistakes instead of when they do a great job. Praise is one of the most underutilized skills that managers can always do more of.

What are some different forms of motivation?

Intrinsic motivation focuses on activities an employee enjoys doing that bring them meaning, fulfillment and enjoyment. The key is being able to tie the intrinsic needs of the person with critical performance indicators. Can this worker find fulfillment with what he or she is doing while providing value and high performance for the organization? The critical question to ask as leaders is how do our employees feel when they come to work on Monday morning?

Extrinsic motivation focuses on external rewards or outcomes an employee receives for doing a job well. Whether it’s a promotion or earning a well-deserved raise, the key is to build the person’s confidence and competence so he or she performs well on a day-to-day basis. The focus should remain on what we can do to help our employees achieve success.

What motivational methods are best from an organizational perspective?

One of the big motivational factors for organizations is having individuals understand how what they do is tied to something bigger or how what they do ties to the business strategy and organizational purpose. You must ask yourself, ‘Do people rally around the vision of our organization?’

Another best practice is to tie great performance into the performance management process. A lot of people fear the end of the year review because they aren’t sure what is coming. By having frequent and quality conversations, we ensure that employees are aware of what is going on. That way we celebrate having employees at the end of the year earning an A. The key is to develop a systematic process instead of an annual event.

How can leaders define a process for motivational strategies moving forward?

In partnering and coaching our employees, we must take the time to intimately get to know them — letting them know we care and continuously inquiring about their interests and well-being. The old saying, ‘People want to know you care before they care how much you know’ is so true. You should develop a series of courageous and compelling questions to help discern your workers’ motivations. Some questions to ask include: What brings them energy and fulfillment? What do they strive for in a great working relationship? How do they learn successfully on the job? Where do they see themselves going in the future? How can we best support them? These are a sampling of the questions we need to ask over time to maintain motivational momentum.

MARK PASKOWITZ is a senior consulting partner at The Ken Blanchard Companies. Reach him through The Ken Blanchard Companies Web site at www.kenblanchard.com/paskowitz.

Wednesday, 25 June 2008 20:00

Solutions that pay off

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New payment solutions are enabling companies to trim costs while improving efficiencies. Designed as an alternative to checks and petty cash, the commercial card is a payment solution that streamlines the payment process for all types of business expenses. Workplace card solutions are stored value (similar to prepaid) cards that can be used to pay employees or customers on an ongoing or temporary basis.

Companies that utilize such offerings can improve their control and reporting of expenses while taking advantage of the flexibility that the cards provide.

“During uncertain economic times, work-place and commercial card solutions give companies the ultimate in flexibility,” says Paul Lewis, vice president of Treasury Management at Comerica Bank. “You can extend payment terms if you need to, or if you’re cash rich, you can take advantage of discounts by paying early.”

Smart Business spoke with Lewis about some of the advantages of workplace and commercial card solutions.

What is the commercial card?

The commerical card is used by business customers to pay for a variety of goods and services. The most common categories are business travel, maintenance, repair and operation (MRO) expenses, low-value procurement expenses, and vehicle expenses. One way to configure a commercial card offering is that on one card a company can customize the permissions or controls according to its various employees’ job responsibilities. For example, the card could be controlled for just travel expenses, just purchasing expenses, just vehicle expenses or any combination of those categories.

How does this payment solution help streamline business expenses?

The two big features on a commercial card program are the control — you can customize it to fit the specific needs of an employee or department — and the reporting, as you get a tremendous amount of data on the back end. In addition to managing expenses, customers can use this data to track supplier expense and negotiate better payment terms and better discounts. For example, you can use the data associated with a travel card program to aggregate your company’s expenditures at a specific hotel chain and then try to negotiate better rates based on your volume.

For virtually all transactions, the commercial card allows you to extend payment terms, which can increase cash flow. Based on the settlement you have with your bank, you can enjoy terms up to 30 to 45 days. Also, you can enjoy discounts from your suppliers associated with faster payments because they receive their money within two days after the transaction is approved.

What type of online management and reporting tools are available?

In terms of reporting, there is a product called Smart Data, which allows a company to manage all of its card transactions and associate a transaction down to a specific merchant. It also automates the posting and the reconciliation of those transactions directly into a general ledger system. A program administrator, which is the individual at a company that is responsible for managing the company’s card program, can use an online account maintenance (OLAM) solution. OLAM allows the program administrator to provision cards, approve authorizations and essentially manage all of the transactions that cardholders perform. Card-holders themselves can use an online statement to review pending and posted transactions. All of these are online Web-based tools.

What are some of the challenges associated with payroll exceptions?

Challenges of payroll exceptions include disbursing the first pay to a new hire or the last pay to an employee who is leaving, disbursing pay when a check is lost or was not issued and disbursing pay or per diems between normal payroll cycles.

How can workplace card solutions address these issues?

Using a payroll exception card helps businesses comply with local laws and union issues. For example, with production shoots, which are so prevalent in the entertainment industry here in California, production companies have to follow very specific rules in relation to payroll. Of course, it’s not just the entertainment industry; the rules are in place to protect the rank and file across all sectors. If you are an hourly employee, on your last day, your employer has to provide your compensation before you leave. Sometimes, cutting a check and finding somebody to sign it can be difficult. By replacing the traditional paper process with a workplace card, a company can alleviate a lot of concerns.

What types of companies stand to benefit the most from these card solutions?

Any company that spends money on anything can benefit. Whether a company is paying suppliers, paying employees, paying contractors or paying customers, there is a card solution that meets its needs. Each card solution offers the benefits of ease of use, greater access to data and improved processing efficiencies. There really isn’t a company out there that can’t benefit. We work with entities of all sizes, in all business segments, with all types of expenditure requirements.

PAUL LEWIS is vice president of Treasury Management at Comerica Bank. Reach him at pglewis@comerica.com.

Monday, 26 May 2008 20:00

The corporate quest

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Not only does Bryan Min believe in motivating his employees, he sings the praises of doing so. Literally.

Min, founder, president and CEO of Epsilon Systems Solutions Inc., makes it a tradition to inspire his employees with a quixotic rendition of “The Impossible Dream” during the company’s annual holiday party.

In addition to drawing on his military background as a nuclear submarine officer and his accomplishments as an Ironman triathlete and marathoner, Min also finds motivation on the silver screen, and you’re more likely to hear him quoting “Braveheart” or “Jerry Maguire” to his employees than paraphrasing Jack Welch.

His motivational techniques have spurred Epsilon Systems to growth, from seven employees in 1998 to more than 600 last year at 22 locations worldwide. The professional and technical services company works with the U.S. departments of Defense, Energy, the Interior and Homeland Security as well as other industry clients. And last year, the company hit nearly $100 million in revenue.

Smart Business spoke with Min on how he finds the right employees and inspires them to succeed.

Look everywhere for potential employees. Every time I go out, if I enjoy interfacing with an individual — a waiter or waitress who impressed me because of their attention to detail — I get their name, give them my card and say, ‘If you ever need a job, give me a call.’ I’m continually networking in that way.

You’ve probably heard the saying, ‘Line up the cash when you don’t need it because when you need it, it will not be there.’ You’re always looking for opportunities to maintain a people bank, where you could draw from these folks if there is a need that comes up.

That’s something that I promote throughout the company with the key employees: Continue to interview and look down the line, and don’t worry about whether we need to have that person or not. If that’s a good person, then we’ll see what we can actually build.

Identify an interviewee’s character. I look at the way job candidates have built their career, the way they live outside of work, their relationship within their family. Those are all indicators of a person’s character, integrity and how they live their life.

I try to focus in on that. Is this a person I could give my checkbook to and know that it will come back exactly the way I would care for it?

I’ve let senior executives go because after working with them for several months, I decide that I made a mistake in the initial assessment. I’m pretty quick about making that move; I don’t prolong the relationship if I know the individual isn’t going to cut it any longer.

If I work to move on somebody before six months, they haven’t had a chance to change in the company in a permanent way.

Give your managers latitude. You have to be able to trust your subordinates and build them up to the point where they’re actually taking over. When you don’t know the person yet and don’t know how they will carry on in making certain decisions, it’s hard — but once that trust is built, I find it to be easy.

When I take a person in to run the race with me, I spend time with them to understand their character, understand what drives them, understand that they can emulate my desires on how we ought to treat our people.

As far as the technical skills go, I don’t want everybody to replicate me, but they need to complement my skill set or else we’re not going to have a well-rounded company. All my managers’ skill sets are unique and maybe even better than me in certain areas.

Value your employees’ opinions. We started an employee advisory council in our company last year. They’re the representatives for other employees to feed back into the council, whether it’s on policy or different health plans. If there are issues tied to employees, we want to know about it right away.

The council was our way of trying to be able to maintain the level of feedback and communication with all the employees. It came about directly as a result of the growth and trying to maintain the closeness.

It really is a great way for employees to provide feedback about what’s happening on the front lines. They’re able to feed it back through their representative and get the attention that it needs right away. It allows the employees to feel that ownership. They’ll understand that we’re listening to them. It makes everyone feel heard and feel special.

Get psyched like an Ironman. There is a physical element to being an endurance athlete, but it is a mental game and so is running a business. Those that have a long-term perspective on things are usually more successful in the long run.

The values that we all appreciate as human beings — perseverance and persistence — are things that are played out in a marathon or Ironman, running a business, living a life, or having a successful marriage.

There’s a quote I made up when I used to do the Ironman and would wake up at 3:30 to swim two miles before coming to work: The struggles of today are the blessings of tomorrow if we persevere.

I had to think about that a lot, and then I would think, ‘Oh my gosh, now I have to go and get the employees encouraged and motivated so they can conquer the world.’ It’s a daunting task if you let it be.

HOW TO REACH: Epsilon Systems Solutions Inc., (619) 702-1700 or www.epsilonsystems.com

Monday, 26 May 2008 20:00

A passion to succeed

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Ash Robinson is passionate about helping people develop along a career path.

And to share that passion and motivate employees at JW Tumbles, a $9.1 million national chain of children’s fitness and learning centers, she rewards them with “Tumbles Dollars,” which they can spend on a team or another employee doing a great job — “sort of a pay-it-forward kind of thing.” Robinson, owner, president and CEO of JW Tumbles, says this creates a team environment among her employees — 18 in her office and 270 at franchises nationwide.

“It’s a great reward to see people grow and move up,” she says.

Smart Business spoke with Robinson about how to find the right employees, motivate them and become engaged with them.

Q. How do you find the right people for your team?

Our culture is well defined, and either people are passionate about those things or they’re not. It’s almost a self-filtering process because people who aren’t [passionate] usually aren’t interested in us.

Situational-based questions are a great way to find out how a person reacts and handles themselves. Spend a lot less time talking about the job and more talking about them.

Q. How do you ensure employees are in the right positions?

It’s constant feedback and being engaged with their work. If they’re not in the right position, re-evaluate.

Handle it sooner than later, and bring it back to the job description and whether or not they’re successful. If you have another position they’d be great at, move them to that spot. If they’re not right for your company, amicably part ways and allow them to be successful somewhere else.

Q. How do you become engaged with employees and stay open to feedback?

Set up a system to formalize the feedback process. You can never have enough feedback with your employees, whether it’s criticism or praise.

Create a schedule. Go to employees’ workspaces once a week to ask how they are doing, what they’re working on and what you can help with.

When an employee hits a home run, let everyone know. When they make a mistake, correct it as soon as possible and make sure they have an active role in the solution.

Utilize all communication tools, from e-mail, project management software, phone and face to face. Add more face time whenever possible.

Q. How does an open environment benefit the company?

It’s efficient, in that problems are flushed out quickly. It’s a great place to work if you feel like your boss appreciates what you’re doing and knows what you’re contributing. People know what others are doing and are respecting each other’s contributions.

There are drawbacks. When employees embrace the open-door mentality to the extreme, you may be interrupted more often than necessary. I’ve empowered my employees in specific areas, built their confidence, put trust in their decision-making and designated certain times as ‘do not disturb’ blocks.

This inspires employees to focus on their individual progress.

Q. How do you motivate and empower employees?

It’s giving employees confidence and trust. If I have confidence in them, they have confidence in themselves. Give them ownership for projects and acknowledge when they are successful.

Give them the opportunity to make mistakes. You don’t want people making $100,000 mistakes but easy ones because that facilitates the learning process. When they mess up, say, ‘Here’s what happened, this is where you went wrong, but that doesn’t change anything about what a great job you have and all you have learned.’ It’s having them know that you trust them and their decision-making ability and allowing them to make smaller decisions.

Get comfortable in the areas in which mistakes make less of an impact on the company’s overall objective. If you outline the goals and expectations of a particular position, you reduce the severity of any potential mistake.

Motivating and rewarding is about recognition and making sure that you’re communicating and acknowledging it.

It takes your company to the next level, and you get better results. It makes life easier because you can do a lot more than you could by yourself or with the wrong people.

Q. How do you implement an employee reward system?

Start one at a time. Don’t overwhelm because you don’t want to come off as cheesy. If you go in and say, ‘I hired a consultant or I read an article on how to motivate employees,’ it comes off as insincere.

... Be real. If you are sincere and care about your employees, they buy in to it. It’s hard because you have so much to do. Put things on your calendar and find something good an employee did, so you don’t get too busy and forget about them. If you put it into a system, it makes it easier.

HOW TO REACH: JW Tumbles, (858) 794-0484 or www.jwtumbles.com

Friday, 25 April 2008 20:00

Watchful leadership

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When you become the leader of an organization, you gain a whole lot more than a prestigious title.

You also put yourself squarely under the microscope of all the people who work for you, says Dana Gibson, president of National University. If you’re having a bad day, you need to think twice before you pound your fist into the wall or let out a hearty scream because people will be watching.

Fortunately, the same people tend to notice when you do something positive. With the goal of fostering a healthy culture, Gibson says she tries to let her passion for her job shine through in her personality and in the way she conducts business at California’s second-largest private, nonprofit school.

By being both a good listener and a collaborative leader, Gibson seeks to demonstrate through her actions that she wants everyone to be part of the school’s success.

Smart Business spoke with Gibson about learning how to interact with people by watching how they interact with others.

See your people. Even if you’re a company in one location, it’s getting out to different departments. If you have more than one location, go to the different locations so that you get kind of a feel. It’s not just listening to people but seeing some of the informal things, as well, that you learn by being out.

See how folks interact with some of their supervisors. Let’s say an individual and you go out, and you’re visiting with another manager in their office; you can see how they interact with their support staff.

You learn a lot about people when you see those interactions. It helps you understand how you need to interact with them, and it lets you see how they interact with other people.

That usually shows a comfort level that they have. If they are more structured on how they communicate or if they are more informal, that helps you to know how to communicate with that person.

Talk to your people. When they do a good job, say, ‘That was a really great effort.’ It’s being sincere when you do that. Give them the ability to make mistakes. If they acknowledge they have made a mistake and they need to correct it and they’ve learned from it, that’s also beneficial to the organization.

None of us want to make mistakes as an organization, but human nature is we are all going to make them. It’s acknowledging that that’s going to happen and letting people realize that they need to come forward and correct them and move on.

It’s a positive when they are doing things well and giving them kudos and being sincere. On the other side, when you have some issues, it’s discussing that through and using it as a learning experience.

Guide, but don’t lecture. It’s very important for people to figure out how to accomplish what they need to do. It’s the leader’s job to make suggestions because many times, that helps them focus where they need to be spending their time and effort.

There’s a way you can do that and not micromanage everything they are doing. It’s more making suggestions along the way as you see things and yet, at the same time, letting them move forward.

I’m not a micromanager, but I also like to know what’s going on and to make suggestions. Try not to give them specific details.

It’s more giving them guidance instead of details. Like instead of giving them a list of here’s the five steps to do this, it’s suggesting you need to make sure that you communicate with the right parties while you are doing this because there is a lot of vested interest in it.

By doing that, you hope they come up with a plan that makes sure they are communicating with all the people they need to.

Keep the focus on the team. Emphasize that everybody can say their piece, and we all listen. We might decide on a path that not everybody agrees with 100 percent. It’s setting that up and being very open and blunt about it when you have the discussion.

Here’s the controversial thing, and we have to make some decisions on it. We’re not all going to agree 100 percent, but once we make the decision here, we’re all 100 percent supportive of it.

Be responsive. It’s the 80-20 rule. Eighty percent of the things take 20 percent of the time. It’s really trying to figure out what are those 20 percent that need to take more time. Most of the people that have worked for me have always said they found that I was very accessible, and it was because I would respond quickly to most of their items.

If nine out of 10 items get a really quick response, but that one that you need to work on takes longer, they don’t really notice it because you have gotten back to them so quickly on most of the things.

Some people set aside a specific time of day. I’ve never found that works well for me because there are too many pulls on your time. If I’ve got an hour to go through all these communications, it’s trying to get through a vast majority of them in 20 or 30 minutes and then spending time on the other ones.

You can be a captive of your calendar sometimes. Not everything is as structured as you’d sometimes like it to be. Don’t let that rattle you. You can get back on track.

HOW TO REACH: National University, (800) 628-8648 or www.nu.edu

Friday, 25 April 2008 20:00

All in the family

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Craig Weatherwax was the class clown in high school, and he continues to use his sense of humor to create a fun family atmosphere at Oceanside Photo and Telescope Inc.

“I do a lot of hands-on, on-the-floor experience with my employees,” says the owner, president and CEO of the $17 million, 22-employee retail camera, telescope, binocular and microscope company. “We try to keep it on a first-name, friendly basis. There’s a lot of kidding and joking that goes on. It makes it fun to go to work.”

Smart Business spoke with Weatherwax about how to create a feeling of family among your employees.

Q. How do you create a fun team environment?

Lead from the top. We try to evaluate everybody as a group, reinforce how departments are doing as a whole and make employees understand that we’re all in this together.

It’s the, ‘This is a marathon, not a sprint’ concept. You can’t get hung up on the bad days, but understand that in the long run, it’s all going to work out.

If your employees see that you take a personal interest in the growth of the business and that you like it and like being with them, that’s something you can’t instill in somebody; it has to come from the heart.

Q. How do you model that culture?

It’s not contrived; it comes naturally. You can tell if people are happy with what they’re doing, and it’s important that people are happy at work. I try to express that and let them make fun of me because you’ve got to give as well as take.

You can’t belittle employees or think less of them. They’re human beings, they have feelings, and you have to be aware of that. A happy employee is a good employee.

Q. What are the benefits of a fun work environment?

Everybody pulls for everybody else. You have your sibling rivalries a little bit like you do in a family, but it’s all done in fun. The family relationship allows people to help others with product knowledge or with how to handle a certain situation as opposed to being competitive and cutthroat.

Q. What are the keys to being a hands-on leader?

A lot of what you do as a leader is to set the tone for the workday. If you’re having a bad day, you maintain that within yourself and exude a feeling of confidence and patience. You can make a good day better or a bad day worse just by how you handle situations and problems.

Q. How do you get better at being confident and patient?

Look at the big picture. Some people get hung up on the specifics of a particular event and fail to look at the big picture. It comes with time.

If you take a step back and focus on the business as a whole as opposed to the specific incident that’s happening, it makes it much simpler to try to have that patience and exude that confidence.

Q. How do you balance being a hands-on leader and knowing when and how to delegate?

Experience. Evaluate each individual situation. Surrounding yourself with good people is important; there’s no substitute for a good staff. Sometimes, you rely on them more than you ever know.

Don’t lose sight of the big picture, and never put yourself too far above the rest of the people because you’re all working toward the same end goal. A lot of people think that you can go into business,

create a business model, and that’s as far as it goes, but being able to be there on a day-to-day basis allows you to make the kind of changes that you need. You can’t sit in a big office and expect things to work smoothly.

Communication is the most important thing you can do to be able to understand and listen to your employees and the people in the chain of command. Listening is an under-rated talent. A lot of people forget that the people down below have a better understanding of what makes your business grow and be successful.

You have to have an open mind to be able to understand and listen to what they have to say. Having preconceived ideas might hinder your ability to listen effectively. If you listen to them with an open mind, it makes a huge difference.

Q. What are the benefits of listening to employees and having open communication?

It helps you understand the building blocks of the business and allows you the ability to change. Many businesses get static in their growth potential because they don’t listen. The employees then, because they’re working with the customer on a day-to-day basis, have a better understanding of what the customer wants, and what the customer wants is going to make your company grow and change in today’s environment of constant change.

HOW TO REACH: Oceanside Photo and Telescope Inc., (800) 483-6287 or www.optcorp.com

Wednesday, 26 March 2008 20:00

Leading the way

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Tom Sudberry didn’t sit down and put a lot of thought into what type of leader he wanted to be at Sudberry Properties Inc. Instead, he just looked at his personality and the way he liked to be treated and decided that would be the best way to lead a group of people toward making the real estate development and asset management firm a success. With a strong dose of enthusiasm and passion, Sudberry — founder and chairman of Sudberry Properties — has developed nearly 6 million square feet of property with a market value totaling more than $800 million.

Smart Business spoke with Sudberry about how to manage your enthusiasm and how to guide your employees without looking over their shoulders.

Put your enthusiasm to good use. A leader needs to have enthusiasm and passion for what you are doing. It’s critically important. Without that, you can’t maintain the energy level you need to run a successful company.

Enthusiasm and passion leads to a sense of vision and optimism. Enthusiasm is contagious. I love being around enthusiastic people because that energy level rubs off on everybody. But you can be very enthusiastic and never accomplish anything.

You have to match your enthusiasm with a sense of vision and strategic thinking, or you’re never going to get anywhere.

Keep employees in the loop. Share what’s happening in the company. We share our vision every month. We talk about the projects we’re working on. If everybody in the company knows where we’re going, we’ll get there.

If we don’t share the vision and the goals, it’s hard to keep everybody moving in the same direction.

Celebrate and support each other. We get into celebrating birthdays and anniversaries and accomplishments and sharing the small victories that people have so people can feel good about each other and what we are doing. We really hold each other up.

Make employees feel comfortable. My style is to treat people as I’d like them to treat me. That engenders a sense of cooperation and a synergism in the company. People feel comfortable in this atmosphere that their decisions aren’t being second-guessed.

They have the opportunity to grow and make decisions and make mistakes. We all make mistakes. When you make a mistake in our company, we have a tendency to say, ‘OK, we all make mistakes. But we’re trying to make the right decisions.’

They feel empowered because we don’t second-guess our decisions. We aren’t constantly looking over their shoulders. We don’t lose our temper and get angry when things aren’t perfect. They feel safe working here.

Not that we don’t ask for and need accountability and the best effort from everybody, but we recognize that none of us are perfect, and occasionally, we’re going to make mistakes. When we do, we’re not going to get crucified for the mistake. We’re going to learn from it and be a better businessperson as a result of learning from those mistakes.

Stay the course through tough times. It’s really through the down times when a company’s reputation is made. How do you treat your employees, your partners, lenders and your merchants when times are bad? Do you treat them honorably or not?

Anybody can do the right thing when times are good. The companies that do the right things in the tough times, those companies are the ones that get through it with their reputation intact.

Accept new ideas. I’m certainly going to listen to anybody that works here for good ideas that they have. Many times, they can point you in a direction that you should be going in. Their ideas are listened to, and they are respected.

We never say things like, ‘That was a dumb idea or a stupid decision.’ We listen to different opinions with an open mind and with respect.

But in the end, the CEO and the chairman need to make the decision as to what they think is the best interest of the company.

Take the time to get to know your employees. When I come in the office in the morning, I always take the long way around to my office so I can get through to the rest of the offices and say hello to people.

I like to see how they are doing, I’ll stop and ask about a family member or what they did last weekend. It’s really important to me that people enjoy working here and they, in general, have a smile on their face.

I think the leader of a company is always a role model. Whether you want to be or not, you are a role model.

Help employees find new challenges, even if it’s not with you. I want you to be happy in your job. But when you reach the point where you feel like you are ready for more of a challenge and more responsibility and you do not feel there is an opportunity to do that in this company, then let me know.

Don’t just quit and go someplace else. Let me know you would like to take on more responsibility, and if I don’t have a spot for you in this company, I’ll help you find a spot at another company.

HOW TO REACH: Sudberry Properties Inc., (858) 546-3000 or www.sudprop.com