Northern California (1069)

Monday, 26 January 2009 19:00

The Varel file

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Born: St. Rose, Ill., a farming community of 240 people

Education: I don’t have the Harvard MBA. They tried to kick me out of high school, but I stayed just so I could get my diploma. I didn’t make it to college. I took a couple of classes at night, but I was going through the wrong course at the time. I was a product of the ’60s — you can read into that what you want.

What’s the best lesson that you’ve learned?

Never quit. You never know what’s right around the corner. When we were doing Meris Laboratories (a predecessor company Varel founded in the health care industry), I had a small amount of savings, and I had just bought a new house and Mercedes. I was sitting on top of the world. I hired five people — we were going to go syndicate Meris Laboratories ... Everyone said this is going to be simple ... and this is going to be a no-brainer. Well, six months later, we hadn’t sold one share in a minimum operation of 120 shares that were necessary. My five guys quit. My partner quit. My savings were gone. I had to sell my house. I was living off my credit cards. But I knew it was still a very viable idea. The last six months of 1983, I single-handedly put 129 doctors together to form the first phase of the Meris Laboratories. If I hadn’t of done that, I would have taken a completely different road. That was the money that allowed me to buy a vacation home on the North Shore of Oahu, which eventually became our home. That gave me the nest egg to be able to do the next business syndication. I could have quit when everyone else quit, when 5,000 doctors said no to every one of my employees and partners. I just said, ‘There’s no alternative. We have to get it done,’ and I did it myself.

As a child, what did you want to be when you grew up?

I was going to be a movie star when I was kid, but I just went too far. I hit the surf instead. I was certain that was going to be my destiny in my life. Then I realized I wasn’t that good looking. So I didn’t even try. I wanted to be Jimmy Stewart when I grew up. I still do.

Monday, 26 January 2009 19:00

FMLA overhauled

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The Family and Medical Leave Act (FMLA) was amended in 2008, with new regulations taking effect on January 16, 2009. Congress amended the FMLA via the National Defense Authorization Act (NDAA) to create two new types of job-protected leave for eligible employees of covered employers.

The NDAA added “caregiver leave,” effective January 28, 2008, which allows employees to care for family members injured while on active duty in the U.S. military. On January 16, 2009, “exigent circumstances leave” took effect, which allows family members to provide assistance to U.S. military personnel under other urgent circumstances, unrelated to an injury.

Also, the Wage and Hour Division of the Department of Labor (DOL) had been developing revised FMLA regulations for years, in response to court decisions and feedback from employers. Rather than roll out two sets of new regulations, DOL addressed all of these changes in a single, new regulation.

“Now more than ever, employers must understand the FMLA, inside and out,” says Audrey E. Mross, a shareholder at Munck Carter, LLP.

Smart Business spoke with Mross about the FMLA changes and how employers can stay on top of them.

Did the definitions of ‘covered employer’ and ‘eligible employee’ remain the same?

Yes and no. The FMLA still applies to employers with 50 or more employees in the U.S., despite repeated attempts to lower that threshold to 25 employees. If your company is close to 50 employees, if you’ve merged with another entity or if you rely heavily on temporary help, it’s best to talk to a FMLA specialist to determine if you are a covered employer. As for eligible employees, the rules remain the same when applied to either family leave (time off for birth, adoption or foster placement of child with the employee) or medical leave (serious health condition of the employee or the employee’s spouse, parent or child), but they are different for the two types of leave added by the NDAA. Employees eligible to take caregiver leave are the injured service member’s spouse, parent, child or relative who is ‘next of kin.’ In the case of exigent circumstances leave, it is the service member’s spouse, parent or child who can take leave; however, this type of leave does not apply to service members who are in the regular armed forces. It’s limited to those who are in the National Guard or the Reserves.

Did the amount of FMLA leave change?

Again, yes and no. Eligible employees can still take family or medical leave for up to 12 weeks in a 12-month period (the 12-month period should be predetermined by the employer). Caregiver leave is up to 26 weeks in a single 12-month period, so that 12-month period will not necessarily coincide with the one designated by the employer for family and medical leave usage. Exigent circumstances leave is limited to 12 weeks and can be tied to the same 12-month period an employer designates for family and medical leave usage. The amounts of leave under the old FMLA and the new NDAA are coextensive so, for example, an employee who takes leave for a newborn and another leave for exigent circumstances is capped at 12 weeks, rather than being able to take 24 weeks. An employee who takes leave for her own serious health condition and another leave for caregiver leave is capped at 26 weeks, rather than being able to take 38 weeks.

What other changes require an employer’s immediate attention?

If you have an employee who goes on leave for a qualifying reason but has not worked for you for at least 12 months when the leave commenced, you can now designate the leave as FMLA (going forward only) as of the 12-month mark. The 12 months of employment does not need to be consecutive, so you can count prior time worked in a rehire situation, but you don’t have to count employment that occurred before a break in service that lasted seven years or longer.

The employer may charge an employee with more FMLA time than is actually needed, when the nature of the job means the employee cannot arrive to work late. For example, if an employee needs only four hours for a doctor’s appointment, but she’s a flight attendant and the appointment causes her to miss a scheduled departure, she can be charged with FMLA for the entire shift missed and not just the four hours needed for the appointment.

Employers now can deny or prorate perfect attendance and/or production bonuses based on absence and/or lowered production caused by a leave taken through FMLA, so long as similar leaves of absence are treated in the same manner.

Also, FMLA claims can be settled or released without DOL or court approval, so long as they are not prospective in nature. And, employers now have five days (up from two) to designate a leave as FMLA-qualifying.

AUDREY MROSS is a shareholder at Munck Carter, LLP, leading the labor and employment group. Reach her at (972) 628-3661 or

Friday, 26 December 2008 19:00

Youth movement

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Mike Rippey admits that he would love to be lazy.

“My selfish objective is to do as little work as possible,” he jokes.

Of course, Rippey hasn’t given anyone the opportunity to call him lazy. The CEO and majority owner of auto-parts distributor Radiator Express Warehouse — which does business as 1-800-Radiator — has twice grown companies to land spots on the Inc. 5000, including when his current company jumped from $60 million in revenue in 2004 to revenue of $116 million in 2007.

And Rippey is getting closer to his goal. 1-800-Radiator can credit its boom to expanding via franchising starting in 2004, and Rippey happily concedes that it was his employees who designed the necessary technology infrastructure.

He’s not exactly putting his feet up on the desk, but Rippey has become comfortable growing his company with a young and purposefully less experienced team that adapts to the incoming technology of the field.

Smart Business spoke with Rippey about why you have to trust your best people and why someone with lots of experience knows too much about the ’80s to find technology-driven solutions.

Forget experience, hire young to fit today’s technology boom. Try to hire young people. I had another company back in the ’80s that was a fairly fast-growing company, as well. We went from zero people to 500 people and zero dollars to $50 million in sales in just about five years — and with that company, as we grew, the main thing we looked for was experience in the industry.

Today, when I go try to find someone, I don’t go for experience at all; I go for youth because young people understand the current technology much better than anyone who’s got a lot of experience does. They look at solutions from an IT standpoint, and that has helped us really leverage it more, and today, we’ve got almost three times as many young guys and girls that really get the IT side of stuff as we did when we first started growing. And this is in a world where today’s kids know how to do the parental locks for televisions at home better than the parents do.

I’ve had a lot of older people who come in who have a lot of motivation and drive, but today, they just don’t have the technology, and the solutions that they come up with are solutions that apply 10 or 15 years ago. They don’t think about going on Google and finding an answer that way. Or they don’t know things.

For example, most of the people here know how to write SQL (structured query language), which is a computer code associated with most Microsoft products. And these guys that have been around corporate life for 10, 15, 20 years don’t even know what SQL is.

Hire the friends of your young employees. It’s been word-of-mouth and friends basically who have formed the nucleus here. We’ve found some people the traditional way, but mostly, it’s about knowing people who are already here.

Friends of friends are usually similar to the friends that are here. They happen to be the right type of person to begin with — otherwise, they wouldn’t have been friends with the successful people here.

And the people inside who chose the friend to come in here, chose that friend because they matched what we have here. They didn’t choose the friend that’s sort of lying on the couch all day long. So that recruiting process was a big part of it, and once you have them in, if you have the right kind of person, you don’t have to do much with them to get them to adapt — they are already the right kind to begin with and have the natural personality and skill set to fit with what we have here.

And if there is anything I’ve found over the past 35 to 40 years of business, it’s that it’s a hell of a lot easier to find somebody good than to get somebody who isn’t good and teach them how to be good. The second is virtually impossible.

Once you’ve got a good team, put them in control. Once you’ve got a good enough crew working with you, which took us about six or seven years to build, the most important thing is you’ve got to give them tremendous responsibility and you’ve got to let them do their stuff with a minimal amount of interference. I’ve always been a little bit more on the loose side as far as structure.

I just can’t imagine doing it another way because then you’re just micromanaging 18 hours a day, literally, and there’s no way you can be good enough to cover all the bases with that kind of an approach. So you have to be very encouraging, upbeat; you have to really forgive mistakes easily.

Obviously, if a guy makes a lot of mistakes, he’s by definition not a good person to begin with. But if a person’s good, he’s going to make mistakes, and you just can’t come down on that in any kind of a big way. You just have to sigh and say, ‘Great, not a problem, let’s try not to make the same mistake twice.’

But if a person by definition is good, that person will not make the same mistake twice. You have to allow that. So the more I can have good people doing all the work, the more it accomplishes my personal goal — which is to have everything work out great with me literally doing nothing.

HOW TO REACH: Radiator Express Warehouse, (866) 780-9392 or

Friday, 26 December 2008 19:00

Growth phase

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When Kevin Kennedy was asked to take the reins as president and CEO of JDS Uniphase Corp. in September 2003, the technology company was quickly drowning after finishing fiscal 2003 with $676 million in net revenue and a net loss of $934 million.

“This was a company that was an iconic boom in the telecom upswing and was equally iconic on the downswing,” Kennedy says. “I say that, in a sense, that by 2003, it had lost 88 percent of its revenues and about 98 percent of its market cap.”

On top of financial issues, the company was completely disjointed in terms of its leadership.

“This was a confederation of probably 18 to 20 acquisitions,” he says. “There were two chairmen. ... There had been about three or four CEOs in a four- to six-year period and maybe three or four COOs in that same period, and many of them were still here, so the leadership clarity was not strong. People were trying to figure out who do they listen to. Was it the current CEO or the last guy or the next guy?”

On top of these issues, the cultures had never fully integrated during all of those acquisitions.

“It was somewhat of a septic culture,” Kennedy says. “People had to be laid off. ... It was not a pleasant situation.”

With the perfect storm for failure already striking, Kennedy knew that turning the company around wouldn’t be a leisurely cruise, so he had a frank talk with the board about what he believed to be the main problems facing the company before agreeing to take the position.

“If they didn’t think that was the case, I was probably the wrong person to be applying for the job,” Kennedy says. “Either I was convincing or they were hard up, but we ended up moving forward together.”

Create a strategy

The first thing Kennedy did when he came in was figure out what specifically had to happen to turn JDSU around.

“Have a point of view of what problem you’re solving,” Kennedy says. “Second, listen to a bunch of people and be able to represent back to them what they had just told you, but in an integrated fashion — almost like a consultant would do. ... Then, thirdly, make some decisions.”

Over the first 90 days he met with the company’s top 20 people and went to all of JDSU’s major sites to talk to others.

“I was in listening mode for 90 days,” Kennedy says. “I made a spreadsheet of every conversation and had the same conversation with everyone. At the end of it, I could share with them what I thought, share with them what they had told me, and people could see where there was alignment and where there wasn’t, and then we charted a new course.”

He used a standard set of questions that included what they thought the problems were, what the answers were, what priorities they hoped he would embrace, their greatest concerns, what had changed in the last 90 days, why the company hadn’t been able to turn itself around and what assumptions were based on hope versus fact.

“You begin to find out where the soft spots in the assumptions are,” Kennedy says. “Then, as you have those conversations, sometimes you allow yourself the ability to go and add to your questions.”

As he added questions, he would then circle back to the people he already spoke with so they too could answer those new questions, and he would have uniform information from everyone.

“Getting people to admit what reality looks like and to let go of the past and to move to the future is a hard part,” he says. “All the homework upfront and being specific about what problems exist and quantifying it and having listened to everybody and being able to show the employees an amalgamated summary of what everyone told you was a crucial piece of the equation.”

After those 90 days, he held town-hall meetings and sent shock waves throughout the organization when he walked in with a spreadsheet of people’s responses and was able to provide solutions based on what they had told him.

“They were used to people telling them what the answers were,” he says. “The only currency you have after a company loses its business model and you have to lay off employees is authenticity. Telling the story that makes them feel good today, of course, tomorrow would make them feel bad.”

Kennedy focused on just a few key items and says that’s critical to do when leading a turnaround.

“Being able to articulate what’s different and so there are not more than four differences is crucial,” he says. “Having a 20-point strategy would have been too much.”

One of the new focal points was diversification. The company had been known for its optical components business. In 2000, that accounted for 95 percent of its business, and eight customers accounted for 60 to 70 percent of that. It was too concentrated, so he needed to diversify.

“We agreed to a model that said that we wanted to grow as a company 10 percent a year or better, and we wanted to have an EBITDA divided by revenue ratio greater than 14 percent,” he says.

Going forward, any JDSU business had to meet that criteria, and only four did. The rest would have to go, which led to the second part of the strategy — shutting down operations. He sold all but eight of the company’s 44 facilities to contract manufacturers, and this allowed him to also release about 40 percent of his employees. The process took about a year.

“There was no quick fix, so you begin to lower their expectations on how long it will take,” Kennedy says. “Obviously, most people hope for a two-quarter fix — the silver bullet.”

Get the right people

While a plan is good, Kennedy also had to create the right mix of people to carry out those changes.

“A lot of times people are in positions where the last people standing were the most loyal, but none of that means they were the most skilled to execute the strategy,” he says. “Be deliberate about bringing new people in.”

Tailor your hires to the specific skills you need.

“Making sure they were the right people is crucial,” Kennedy says. “If workers see you’re bringing in new talent, it suggests to them that you’re committed to and passionate about the business. If the new talent is very good, they’re probably disproportionately improving things, and employees see that, and they say, ‘OK, this is a good thing for the company.’”

First, he decided who would stay and who would go. Part of that was fixing the convoluted management structure, so he eliminated one of the chair positions, the chief operating officer and nearly 100 vice presidents.

“Obviously, if you’re going to be laying employees off, the last thing they want to see is a bloated number of big titles, so we collapsed the leadership thing down,” he says.

In determining who stays, look at who can best get you through the current turmoil.

“When you’re just trying to initiate or mobilize the turnaround, you’re looking for people who have just taken the next step and can basically take the tactics that have been laid out and execute,” Kennedy says.

Beyond that, look for realists. “You find out which people are able to look at the business with realism and which ones aren’t, and which ones have made the right decisions so far and which ones haven’t,” he says.

He says to also look for trust and respect. “You look for people who have a connection with their people and are viewed to be authentic and are collaborating across the company for the good of the company,” he says.

If people aren’t realists and authentic, then you should replace them. When hiring in a turnaround situation, it’s important to ask the right questions. Kennedy always asks candidates to talk about a time in their personal or professional experience where they came to the edge of their self-confidence for a long period of time — months versus hours — and how did they overcome that to become confident, happy and successful.

“There’s no right answer to it, but if someone gives you a good answer, they’re usually baring their soul and are authentic and trustworthy,” he says. “Second, if they’ve never hit a rough patch, a turnaround is a tough place for them to go because you do have a lot of setbacks, and you have to be prepared to doubt yourself and then figure out how to get yourself back on track.”

As Kennedy worked through the turnaround, he continually moved people in and out. In fact, in his first three years, he replaced about 70 percent of the leadership.

“You actually change your requirements as you move from the ground zero of the turnaround to a growth stage,” he says.

As you stabilize, you may need new people. “Truth be told, there’s a lot of people that fall out at that stage,” he says. “The emotion that people go through is they say, ‘Boy, I just did a lot. ... It really feels good to achieve this milestone. What do you mean there’s more to do?’ When people say that, they’re not trying to be the competitive best in the industry. They’re just satisfied with where they’ve gotten.”

If you’re not sure if someone can get you to the next phase, test him or her.

“Those that pass through that gate, they are the ones that you can engage from a competitor point of view,” he says. “‘Do you realize that competitor X, Y and Z are still beating us?’ If they get jazzed about that angle, it’s easy to keep them moving forward.”

Once JDSU stabilized, Kennedy then had to think about growing — and once again, he needed different people.

“You begin to look for people who have been in two jobs bigger or more complex than you’re bringing them in now, so that as your business continues to grow, they know what good looks like two years from now,” he says.

Again, if you’re not sure if someone is cut out for it, look for the warning signs.

“There are two telltale signs,” he says. “You look for those people to develop what good looks like two years out. If they can’t tell you, that’s usually a telltale sign that they’ll fall off the rhythm of the company. The second is if you see them execute on one or two things but drop the ball on the third or fourth thing, [then] that usually is a sign they won’t scale.”

By making sure he had the right people at each stage of the turnaround, Kennedy has been able to strengthen the company. With a strong identity, he has built upon that foundation by leading 12 mergers and acquisitions since taking over, and the financial results are improving. JDSU has more than doubled its net revenue from fiscal 2003, hitting $1.53 billion in fiscal 2008. But it’s not just the top line that’s improving. That fiscal 2003 $933.8 million net loss is down to just a $21.7 million loss last year.

Kennedy, who recently resigned as president and CEO but remains as vice chairman of the company, says that the past five years may have been trying, but they were also worthwhile.

“When people realize there’s change, they tend to have fear, so you have to have passion and conviction for the process you’re using to move things along,” he says. “... You have to be resilient because things won’t always go the way you’re hoping they will — even if you have a plan.”

HOW TO REACH: JDS Uniphase Corp., (408) 546-5000 or

Tuesday, 25 November 2008 19:00

Quality control

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Tom Moore may not be the mother of invention at his company, but he is the father of quality.

Moore, CEO of Cord Blood Registry, founded the company with his daughter in 1995 with the idea of creating a company that collects and stores the stem-cell-rich blood from a newborn’s umbilical cord. That concept put them on the map, and there was one business lesson Moore immediately applied at CBR: Quality comes first in everything.

“If you don’t have quality, you end up being a commodity; you can’t differentiate,” Moore says. “I learned a long time ago that a very high-quality company is less expensive than a company that continues to make mistakes.”

So as CBR has grown to more than $100 million in annual revenue, Moore has built the company’s employee base carefully, getting to 300 employees one quality person at a time.

Smart Business spoke with Moore about how to hold people accountable for quality and why building a business is like opening a paint tin.

Don’t add people until you’re good and ready. I’ve always likened starting a business to taking the top off a paint tin. To take that top off, you can kind of wrench it off in one fell swoop, and you end up with paint all over the place, or you go around that tin lid two or three times with incremental movement.

You need to add people, but if you try to do it in one fell swoop, you’ll end up failing and creating a problem that you’ll then have to clean up. So our progress is incremental, and as you do that, you are developing people who understand the business inside of the business.

So you really have to want to add a slot, you have to justify it. As you add people, if you add them too fast, it’s back to the paint tin analogy; you can lose process because you have new people reporting to new people reporting to new people, and all of the sudden, you’ve lost culture. So that’s something you always have to keep a vigilant eye on, and the best way to manage that is head-count control.

As we look at adding new positions, we say, ‘Why are we really doing this, what value is that going to add, and is it really required?’ because if you’re just bringing in another body, so to speak, it doesn’t really add value, it adds more complexity. Whenever you bring in a lot of people all at the same time, you risk losing your culture, losing your processes and losing what you’re all about.

And it’s not that those people don’t try to do the best job possible, they do, but they’re all from different backgrounds and companies, so they make up their own processes.

Hire someone who is passionate about quality. I think what the prime characteristic or thing that I look for is, can the guy taste it, does he have the desire to really contribute? So it’s not, does he have the desire to earn money? Obviously, everybody needs a paycheck, but it’s more than that. He has to have the desire and the fire in his belly to do great things — and whether that’s a person who is on our processing floor or that’s an executive, it doesn’t make any difference.

You have to get in their head and find out what it’s all about for them. If somebody is coming in the door and they’re looking to make millions, that’s the wrong predicate because going after the money is not where to build something.

There are not set questions (to ask). It’s really like, ‘What motivates you, what turns you on, where do you want to go, what do you want to do?’

I was talking to one of the people who came to work for us here, and he said, ‘You know, I walked into the building and talked to a few people, and I want to work for this company.’

And he’s done a phenomenal job; he just wanted to work for CBR.

Create a process for quality accountability. We push empowerment down to lower levels of the company and make sure our people are empowered but also that they’re accountable and responsible.

Our customers give us a report card — we get about 100 report cards a day from our clients, and they fill them out online, and they tell us what they think of our service. We have what we call ‘in the reds,’ and an ‘in the red’ is somebody who is not satisfied. And if there is a ‘not satisfied,’ I get a copy of it, my COO gets a copy, the department manager does as well as the person who handled that call.

And that department manager has to contact that client within 48 hours and report back and find out what we could have done to make that interaction outstanding. Everybody knows what ‘in the red’ is, but an ‘in the red’ is an opportunity for us to improve.

It’s not a scolding at all. In fact, we ... take the whole customer improvement process as an opportunity for us to never have that happen again. And if that never happens again, you never have to fix it again, and that says you have a lower cost of product because you start to run it very efficiently.

What your quality process helps you do is become the leader in the market — and that’s why I said quality is cheap, because you have lower cost.

HOW TO REACH: Cord Blood Registry, (888) 932-6568 or

Tuesday, 25 November 2008 19:00

Equity volatility

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In recent months, the equity market has experienced extraordinary volatility. A steady dose of gloomy economic indicators, combined with outright fear, have led many investors to flee the stock market in favor of treasury securities and cash.

The best strategy investors can deploy during uncertain financial times is to remain patient, stick to long-term objectives and mitigate risk through diversification.

“Long-term investors should focus on maintaining a broadly diversified portfolio that reflects their specific investment goals, risk tolerance and investment time horizon,” says Richard Cunningham, managing director of investment consulting services for Comerica Bank.

Smart Business spoke with Cunningham about the current state of the equity market, the effects of the credit crunch and how to best strike a balance between risk and return.

What are some of the primary factors behind the equity market’s recent volatility?

From a fundamental perspective, the recent dislocation in global equity markets can be attributed to the increasing recognition that the major developed economies are contracting and the fact that financial sector crisis will lead to a massive deleveraging process. Both factors will ultimately create a negative feedback loop for the growth in corporate profits, which is the primary driver of equity prices. A key concern for investors is that the enormous debt levels in the U.S. will continue to suppress economic growth for some time. In particular, with consumers seeing a significant decline in the wealth due to falling home prices and stock prices, there is the potential for a significant retrenchment in consumer spending, which represents 70 percent of GDP. Credit expansion has been a primary driver of economic growth this decade, pushing private sector debt to record levels. Credit as a percentage of GDP in the U.S. is currently about 180 percent. In 2000, that number stood at 120 percent. Even a mean reversion would have a significant impact on credit, debt and spending.

In terms of what’s driving the recent day-today volatility, both the hedge fund sector and mutual fund complex are experiencing significant redemptions. For example, hedge funds, which control about $1.8 trillion in assets, have experienced close to $200 billion in redemptions in the past month alone. Some experts think that by the end of this year we could see one-half trillion dollars in redemptions across the hedge fund complex.

What specific moves led to this crisis?

The financial crisis was created by a perfect storm of mutually reinforcing trends and policy mistakes that have been in place for several years. The epicenter of the credit crisis was the bursting of the housing bubble, which led to the collapse of Bear Stearns last March and subsequently resulted in solvency risks across the entire financial sector. In July, we saw the ‘nationalization’ of the two GSEs Fannie Mae and Freddie Mac. However, the catalyst for the recent turmoil in the financial markets was the decision by the regulators to allow Lehman Bros. to fail, which served to expose the systemic risk across the global financial sector.

From a macro perspective, the Federal Reserve’s monetary policies have been a contributor to multiple asset bubbles in the U.S. We saw a technology bubble in the late 1990s, a housing bubble that collapsed in 2005 and 2006, a bubble in commodities in 2008, and a super-debt cycle over the past 20 years that has created significant leverage.

Another contributing factor is that many financial institutions, both in the U.S. and overseas, made the decision to leverage up their balance sheets supported by real estate assets and securitized mortgage portfolios. This was very profitable when home prices were rising, but when the subprime market collapsed, financial institutions suffered massive losses.

How do you anticipate the bailout plan will affect the market?

Short-term, the $700 billion bailout plan — combined with the related guarantees of deposits and money markets — was a necessary step to address the immediate solvency concerns and bring confidence and stability into the credit markets. The capital markets were essentially closed to the financial sector. Long-term, whether the funds will be sufficient to address the capital impairment of the financial sector will depend upon the economic outlook and asset prices. To the extent credit markets begin to function normally, that will be a net positive for equity markets.

In the current environment, how should investors go about striking a balance between risk and return?

A successful long-term investment plan should be based upon a disciplined strategic (and tactical) asset allocation plan, including diversification across multiple asset classes, high-quality investments and tax efficiency. Typically, we recommend stocks for long-term growth, bonds for income and capital preservation, and alternative investments for an absolute return strategy. Also, adequate cash balances should be maintained. Right now, as of late October, we believe that the risk/reward profile for U.S. equity markets is more attractive than it has been for several years. However, at the end of the day, each investor needs to consider his or her overall strategy and goals.

RICHARD CUNNINGHAM is managing director of investment consulting services for Comerica Bank. Reach him at (415) 477-3234 or

Sunday, 26 October 2008 20:00

Organic growth

Written by

Dave Lanstein occasionally needs to be reminded

that while the organic food industry is growing fast,

it’s not quite mainstream yet.

And foods like quinoa, a grain

sold by the company, can

seem foreign to some, says the

founder, president and CEO of

Multiple Organics, a supplier

of organic ingredients.

“You can start to feel like the

whole world ought to eat

quinoa,” says Lanstein, whose

company posted fiscal 2006-2007 revenue of $13.7 million.

“Some people just don’t like

the way it tastes; some people

can’t afford it. So the whole

world shouldn’t eat quinoa.”

Smart Business spoke with

Lanstein about how to get

your employees to better

understand your product and

why it might help your company to take everyone on a

trip to Brazil.

Q. How do you communicate

your vision?

Make the path that you’re

headed toward and on very

clear to folks, so that if they

feel that you are a leader

indeed and that you can handle the uncertain future, then

they know where they’re heading with you and they’re willing to follow the lead.

We have a very open weekly

meeting where we touch on

the metrics of the business,

and we make sure that folks

know what those are, where

we’re going and where their

place in where we’re going fits

and why it’s important.

That way, people feel good

about what they’re doing, and

they can explain what it is

they do to their family and for long periods of time.

We also have two off-site

retreats that are very open

forums so that management

will talk through where we’ve

been, where we’re heading,

where things have gone right,

where things have gone

wrong. Then, we open the

floor for questions so we can

see where people are confused and make sure that people understand where they’re

heading and in what capacity

they need to be fully functioning in their positions.

So there is a lot of communication, a lot of, ‘If you believe

in this path, let’s make sure it’s

clearly lit; there aren’t

any street lamps out.’

Q. How do you get

your employees on board

and working toward the


It’s a small company,

so there is good old-fashioned involvement.

Take people down to

the grocery store one

group at a time and say,

‘This product that you

love and eat in your

house is actually made

with the ingredients that

we sell to this company

and turned into this

awesome organic product that you eat and

believe in.’

You get people involved in

that. Take them; get them to

visually see it. We try to take

every single employee on a

trip at least once per year. We

have a budget that says, ‘OK,

we know this doesn’t have

anything to do with your section of the company, but come

see a processing facility in the

California Valley with us. Or

come to the microbiological

lab and learn about how they

do all the testing for different

ways to see if the food is safe,

or come with us to Brazil to

see the sugarcane farm.

That’s deep involvement.

Some companies won’t [put] a

budget together for that,

because they’ll say, ‘OK, you’re

purchasing; that’s what you

do. That’s not what these other

people do. They’re processing

orders, so they don’t get to go.’

But when you get to see the

full picture, it gets exciting.

Q. How else do you get

your employees to see the big


If you imagine yourself processing orders, you see the

names of the clients and the

product. It moves through on

the computer, and it’s on your

desk, then you’ve confirmed it

and you do it, then it’s off

your desk. Then your warehouse releases it, and they

pick it up. That’s your world.

That’s your world, except if

you can relate that world to a

tangible perspective, then you

can gain an appreciation for

the fact that your job is really


So you get to go to the

warehouse and watch what

happens when the truck driver shows up without a purchase order number and

doesn’t even know what

they’re supposed to be picking up, to see how frustrating

that is for the warehouse if all

the paperwork involved isn’t


Q. How does that help your


You just have a much deeper appreciation for what it is

that you’re doing. Plus, it

stops being hacking something into a computer, and it

starts to become, ‘This is the

stuff that Javier and Marta

and the other families I met

grow. They go through this

whole process of cleaning it

up, then it gets tested at the

microbiology lab, and it’s

finally here, and you can be

proud of it. And I’m the one

who gets it out to the customer and keeps them happy.’

That’s a very different perspective than, ‘I got hired to

do the job — if you took the

emotion out of it — of a


HOW TO REACH: Multiple Organics, (415) 482-9800 or

Sunday, 26 October 2008 20:00

Checks and balances

Written by

The ability to prevent check fraud is critical for businesses of all sizes and across all sectors. After all, checks are still the predominant method of payment for goods in the United States. Fortunately, new technologies are making the process of safeguarding against check fraud simpler and more cost-efficient.

“There are billions of checks written in the United States every year with over 30 billion projected in 2008,” says Regina Calhoun, manager of national check sales for Comerica Merchant Services. “Protection against check fraud and its associated losses becomes paramount to a business’s financial vitality.”

Smart Business spoke with Calhoun about how checking solutions have advanced, the advantages of accepting checks and what kind of fraud protection and security measures are available.

How have checking solutions advanced in recent years?

Checks are converted electronically now at the point of sale. Checks are taken for COD (cash on delivery) for catalog merchants or any type of mail order merchant. Anybody that is shipping goods and products can take checks via the Internet. Also, the consumer can mail a check into the merchant and have the funds guaranteed.

Advanced checking solutions available through banks make the process of check acceptance simple. Merchants just need to check their customers’ IDs and get a phone number that they write on the check. The merchants can then convert the check, deposit the check into their bank, or use back office conversion, which is ideal for merchants who have locations throughout the country and want their accounting centralized. Back office conversion allows each individual branch to scan their checks through a machine so they don’t have to physically take them to the bank every night.

How does the cost of check acceptance compare to credit card acceptance?

There is an incredible difference. All of the regulations pertaining to credit cards are consumer driven. Most of the issuing banks allow a consumer to dispute a charge for up to 180 days. Check guarantees, which include stop payment coverage, eliminate the risk of charge-backs for businesses. Let’s say I write a check to a merchant and then become unhappy with that merchant. Even if I put a stop payment on the check, the merchant will still be covered on those funds.

How do delayed payment programs work?

A delayed payment program allows merchants the ability to provide customers with a flexible payment option that helps increase the probability of closing a sale. This service allows the customer to delay check settlement for up to 30 days while the merchant receives full funding within 48 hours. Furniture companies, auto dealerships and those in the medical field often take advantage of delayed payment programs because they get their money upfront. Everyone is happy because the customers gets their product and the merchant is funded within 48 hours.

What kinds of fraud protection and security measures are available with checks?

Checks operate off of databases with assigned risks and parameters. It’s like when you use a credit card to make a very large purchase that falls outside of your normal spending parameters; your credit card company will be on the phone with you. In the checking world the merchant receives a response called ‘call center.’ The merchant calls its bank who speaks with the writer of the check to confirm his or her identity and make sure the transaction is not fraudulent.

When accepting a check you want to make sure it is not a check printed off of someone’s computer. There is a specific type of magnetic ink on legitimate checks. One of the easiest things to do is to rub your fingers along the MICR line that contains the routing and account numbers. If the ink rubs, it is a fraudulent check.

How should a company go about selecting a financial institution that will meet its check processing needs?

Research, research, research. There are several Web sites out there, including the Better Business Bureau’s, that have extremely good information. After you’ve conducted your initial research, put together the criteria you’re looking for, go out for bids and have people come in and present their products. Ultimately, it’s important to pick a financial institution that will be the best fit for your business.

REGINA CALHOUN is manager of national check sales for Comerica Merchant Services. Reach her at (713) 898-1584 or

Thursday, 25 September 2008 20:00

At your service

Written by

The U.S. Commercial Service is designed to help small and medium-size businesses expand into international sales. With trade specialists in more than 100 American cities, the primary thrust of the U.S. Commercial Service is to equip businesses with the knowledge and tools necessary to navigate the foreign market.

Over the past several years, a confluence of factors — including free trade agreements, technological advancements, and U.S. government programs and partnerships — have converged to simplify the export process.

According to B. Peter Knudson, senior vice president and regional manager, international trade finance at Comerica Bank, now is the ideal time for businesses to engage in exporting.

“One of the few bright spots in the U.S. economy today is the export market,” he says. “Because of the weakness of the dollar and the weakness of the U.S. market, exports have been increasing and have created a lot of new opportunities for U.S. companies, particularly small- to mediumsize enterprises.”

Smart Business spoke with Knudson about the U.S. Commercial Service, the services it provides and how a company can secure export financing.

What is the U.S. Commercial Service?

The U.S. Commercial Service is the trade promotion arm of the U.S. Department of Commerce. Its primary purpose is to help create economic opportunity for American workers and businesses. The U.S. Commercial Service does this through promoting trade and investment with the objective of promoting prosperity and a better world throughout. The U.S. Commercial Service provides the opportunity for companies — particularly small-to medium-size ones — to utilize the resources of the U.S. government.

What type of assistance does the U.S. Commercial Service provide to exporters?

The U.S. Commercial Service has trade specialists in 107 U.S. cities and more than 80 countries who will work with companies directly to either help them begin to export or to increase sales internationally. Services include market research, trade events, introductions to qualified buyers and distributors, education, and counseling and advocacy throughout the export process.

How does the U.S. Commercial Service partner with corporate organizations to build awareness of exporting opportunities?

The Department of Commerce selects certain companies to help promote their activities through a ‘forced multiplier effect.’ Basically, it joins forces to leverage both the private company that is its partner and the government resources that the Department of Commerce has. It looks to partner with private-sector companies that it considers best in class. Some of its partners include UPS, FedEx, eBay, the law firm Baker & McKenzie and, most recently, Comerica Bank.

How are corporate partners selected?

Corporate partners are selected on a number of criteria, including being considered as best in class, having a recognizable name, being regionally or globally strong, and having a stake and being involved with international trade and business. Also, they must possess a significant customer base that is either currently seeking to expand its international business or seeking to enter the international business field.

How can a company secure export financing?

A company must first have a relationship with a commercial bank, and it must have the ability to qualify for credit under normal credit terms. An important component for companies that are looking to expand into exporting is what we term trade cycle financing. This method of financing allows banks to help companies finance the sale of their products from the initial order through to the collection of the accounts receivable. There are many ways in which they do this, including working with the Export-Import Bank of the United States and obtaining export credit insurance from private companies. Banks also provide normal working capital as well as assistance in helping hedge the foreign currency risk that might be involved with international business.

How should a company proceed if it is interested in working with a partner of the U.S. Commercial Service?

Through their partnership with the U.S. Department of Commerce, there are corporate organizations that can be of assistance, including Comerica Bank. They can introduce a potential exporter to one of the trade finance specialists of the Department of Commerce and help them identify markets, identify distributors and provide financing so they can be successful in their business expansion.

B. PETER KNUDSON is senior vice president and regional manager, international trade finance at Comerica Bank. Reach him at (310) 297-2849 or

Tuesday, 26 August 2008 20:00

Complete overhaul

Written by

During Greg Ballard’s second month as president and CEO of Glu Mobile Inc., a third of the company’s employees boycotted the company Christmas party.

At his first board meeting, Ballard told the company’s board of directors that Glu’s corporate culture was the worst he had ever experienced.

“It was filled with deception; it was filled with fear and intimidation,” Ballard says. “People would not talk to anybody without the door of their office closed. You would see them furtively checking to make sure nobody saw who they were talking with when they closed their door.”

Five years after Ballard’s cultural overhaul, the mobile games publisher has grown to 2007 revenue of $66.8 million, up from $1.8 million in 2003.

Smart Business spoke with Ballard about how to reinvent a culture and why it’s sometimes best to just shut up.

Q. How did you turn around the company’s culture?

The biggest thing I did was get 10 people out of the company. There was a schism between one group and the other — there was no way the two sides were ever going to work together effectively again.

So I took a position; I took a side. I said, ‘We’re going to keep these people, and these people are going to go.’

There was one day when there were 35 people, and the next day there were 25 people. It’s a little like playing poker. When you look at your hand and you realize you don’t have anything, you put four out of your five cards on the table and you draw again.

We’ve got a great hand now. The first couple hires I made after that were people I had known from past jobs. We built a great team out of an auspicious beginning.

Q. How did you decide which side to take?

One of the most important things for a new CEO to do when they come in is to make sure you don’t come to conclusions too fast. There’s a lot you still can learn once you’re inside the company.

So I didn’t do anything for the first two months, other than make sure that I wasn’t breaking anything.

A couple people threatened to resign if I made them report to certain people, and I didn’t. Not because I knew that was the right answer, but because I didn’t want anybody to leave until I figured out who I wanted to have stay.

So I took a couple months to find out who was right, who was wrong — what was broke and what was working. Other CEOs ... one guy told me he would have done all of it on the first day. Maybe he would have, and maybe he would have gotten it right. But because I took more time, I felt that I had a much better handle on what needed to happen once I made my decision.

Q. How did you decide what to change?

One of the most important things for a CEO — probably throughout their entire tenure with a company but certainly at the beginning — is to shut up for a while. There’s a tendency for CEOs to want to have a viewpoint and always want to talk and express that viewpoint and articulate a vision and be a leader. Sometimes, being a leader can stop you from listening.

It’s real important when a CEO comes into a company to talk to as many people in the organization as you can — all the way down to the lowest person on the totem pole. Ask questions, but don’t feel obligated to articulate your own view of how things are going faster than you can.

A lot of folks want to come in and take charge, show their stuff, and really impress everyone with their vision and energy and operating skills. The fastest and surest way to make mistakes is to stop listening. So I listen. I walk around and talk to people. I take them out to lunch.

I try to put the informational pieces together to create the puzzle in my mind of how it all fits together. It’s an important time for CEOs to listen and to be thinking but not necessarily to feel compelled to take fast action.

Q. How did you get everyone on board with the vision?

Part of it was talking and listening and discussing it with people. The vision that emerges is not me going off into the desert and coming back with tablets and a view of the world. The vision that emerges from that process is a vision that is organic — from the business itself and the people in the business.

Any time we have been successful in articulating a vision for the company and moving forward, I don’t know that I’ve ever been solely responsible for that vision or that I had somehow seen something that other people didn’t see.

What I think I’m very good at is condensing information that other people have, weaving it into a story and seeing what the milestones along that path have to be to get there. <<

HOW TO REACH: Glu Mobile Inc., (650) 532-2400 or