Choosing the right bank is critical in today’s gloomy economic climate. As credit markets tighten, it is more important than ever to have a banking partner who can provide the financial resources necessary to grow your business.
Finding a new financial institution is not a task that should be taken lightly, however. It is important to be thorough during the vetting process.
“Get three reference names of a bank’s current clients and call them to see how the bank has been acting in these uncertain times,” advises Joseph Yurosek, senior vice president and regional group manager at Comerica Bank. “Also, get references on the individual at the bank that you would be working with. These are the times that you want to work with someone who has been with the bank for years.”
Smart Business spoke with Yurosek about selecting a bank in uncertain times, how to make a seamless transition from one financial institution to another and the importance of communication.
How should a business go about selecting a bank in uncertain times?
Business owners should make sure that they are keeping up with current events. They should spend time checking, probing and asking questions so they can be prepared for issues that could possibly impact their business. The days of ‘only relationships matter’ or ‘only pricing matters’ is changing dramatically. In today’s environment, knowing that your bank will be financially stable for the next two to five years is extremely important. We service the middle-market, and prospective clients of ours should be doing all of the due diligence that they might not have done in the past, even a year ago. Find out what the bank’s business is, what its capital position is, what its approval process is and get names for references.
Why is it so important to look for a bank that has a history of supporting its customers through various business cycles?
You want to make sure that the way the bank acts in good times is not dissimilar to how they will act when the economic outlook is not clear. You should look for consistency with people, bank decisions and, ultimately, a history of support, which would allow you to navigate through your own tougher times.
Once a selection has been made, what steps can a business take to maximize the relationship with its bank?
Companies should be following up with everything that was discussed during the courting or selection process. We make sure that we maximize our relationship with the borrower when we complete the courting stage and clients should do the same thing. Clients should make sure that the bank is following up on all of its promises, products and service levels that it indicated it could provide. Also, new clients should take advantage of meeting the bank’s senior executives. If I’m a client today, I want to know who I’m dealing with — in a business unit, in a credit function, on a product function — so I can gain all of the advantages that I need from the financial institution.
How can a company most effectively transition from one financial institution to another?
It is important to have someone who is paying attention to all of the details. The last thing you want to do — and I hear this from CEOs and comptrollers all the time — is go into a transition not having thought everything through. This includes the timing where you start depositing checks into your new account, the day you start writing checks against your existing account, the day you start sending wires out on your new bank account and the day you go into your branch to make your first deposit. You should spend time with the bank’s transition team and go through all of the logistics in order to ensure a smooth transition.
How important a role does communication play in sustaining a positive working relationship?
Communication plays a huge role. Any successful client-bank relationship is based on a partnership. The way to get the most from your financial partner is to communicate your outlook, your needs and the performance of your business — good, bad or other. Sometimes customers don’t feel like they should be communicating everything with us; they want to absorb it first. If they provide information to us early on, however, we can help them out earlier by providing suggestions and ideas in an advisory role. Customers should take advantage of the fact that banks have multiple clients, maybe in different industries, maybe with different organizational structures, but who might have faced similar issues. Banks can use the history they have to advise customers in meeting their needs. If the bank doesn’t know what’s going on, it’s tougher for it to deliver that service.
JOSEPH YUROSEK is senior vice president and regional group manager at Comerica Bank. Reach him at (714) 435-3998 or email@example.com.
Jim Warmington Jr. represents the fourth generation of his family to lead The Warmington Group, whose homebuilding division, Warmington Homes, made a name for itself building classic estate homes for Bing Crosby, Henry Fonda and other legends of the silver screen.
But while Warmington carries on the legacy, the $560 million company itself hasn’t always had such consistency. During the housing boom from 1998 to 2002, Warmington nearly doubled the number of homes it was building in California and Nevada. While the company was enjoying the unprecedented growth, little problems kept creeping up. When Warmington asked the leaders of each of his six divisions to send him the documents they used to make contracts with homebuyers, it became clear that something had to be done.
“We had these six stacks, and every one of them was different,” he says. “Not only were they different, some of the documents were from the 1980s, some were brand-new and recent. Some had been copied so many times that they had that fuzzy, ‘I’ve been copied 20 times’ look to them.”
Warmington showed the whole mess to his in-house risk management counsel, whose professional opinion was, “I can’t even believe we’re having people sign this.”
As Warmington saw it, the sad state of the contracts was just the most egregious example of an ongoing problem. As the company grew, each division had gone off on its own tangent. The informal culture of high ethics and integrity that worked so well when the company was smaller needed an adjustment to work at its new size.
“Everyone thought they were doing the right thing,” Warmington says. “But in reality, we had grown so fast, we had lost control of some of these important things, like the documents.”
At the height of the boom, Warmington set out to fix the developing disconnect between the company’s offices. He wanted to set a cohesive, overarching mission statement of sorts, which once agreed upon, it would get the formal corporate stamp of approval.
Bring everyone together
Just because different offices were doing things differently didn’t mean they were all doing a bad job. In fact, when Warmington was thinking about how to get everyone on the same page, employees in Warmington’s Northern California office were working on a best practices program, and one of the Southern California offices was working on a similar project.
Developing a best practices program was a great idea. The problem was that the offices weren’t working together. Despite having the best of intentions, they were working in silos, without considering that they were part of a larger company. This was the mentality that had caused the company to drift apart as it grew.
Warmington noticed similarities in the two offices’ programs but noticed a few differences, as well. The Northern California office had taken to calling its program “The Warmington Way.”
“They came up with the name,” Warmington says. “People would ask them, ‘Why do you do it this way?’ and they’d say, ‘It’s just the Warmington Way. That’s how we do it.’”
The name stuck. Warmington decided that the leaders of each of the company’s divisions should get together to create one all-encompassing best practices and more program that would be used by the entire company. The Warmington Way became shorthand for how the company does business — an umbrella that covers its mission, vision, values and culture.
The first step was setting up a meeting with all of his department heads. After a day of conversation, Warmington typed up a summary of the meeting and e-mailed it to everyone. He says putting your notes from a meeting in writing is something executives should always do. It will help ensure that your communication gets through clearly.
“Even though you say something, not everyone hears the same thing,” Warmington says. “About one-third of the people said, ‘Well, that’s not what we talked about,’ and two-thirds said, ‘That’s exactly what we talked about.’”
If you’re trying to drive a companywide initiative, everyone needs to be aware of what you’re driving at. Warmington made sure every employee knew about The Warmington Way. At the beginning, employees weren’t sure what it meant or why all the department heads were meeting at the corporate office. But after the first meeting, the department heads were tasked with going back to their offices and gathering input from their own teams. Warmington sent out companywide e-mails to let everyone know what was happening and encouraging all of the employees to talk about their ideas with their bosses.
“I say, ‘Take this out and go out and talk to your field guys; see what they have to say,’” Warmington says. “So they took it out and spent a couple weeks talking to the field people, the salespeople and the office people, really all of their subordinates. Then we got together again.”
Deal with dissension
At the first few Warmington Way meetings, everyone came in totally committed to making the company better. Warmington says the department heads and vice presidents had no reservations and were all really excited about taking the best ideas and practices and consolidating them into a formal companywide philosophy. But there was one issue that quickly rose to the surface as the discussions progressed. Every person at the meeting thought his or her ideas were the best.
“Everyone was fighting for their ideas,” Warmington says. “As soon as we started questioning their ideas and saying, ‘Maybe we’ll go in another direction,’ you started to get a little bit of pushback. But we just kept talking about it and going through it. All the VPs would get together and go through it, and they would talk it through and come up with the best idea.”
Warmington says you should resist the impulse to be too delicate in a discussion like this one, because if you just dance around an issue without confronting it, you may not end up with the best solution for the company. You have to set the tone early if you want a fruitful discussion, he says.
“Even though no one is attacking anyone in a mean way, people take their work very personally, and when someone starts questioning it in a pretty serious way, it can seem like a personal attack unless you’re used to it,” he says.
Make sure your staff members understand that you are not criticizing their ability to do their job, you are just trying to dig down for a deeper understanding of the issue being discussed. Once that understanding is established, you can have a civil discussion about what’s best for the company — without emotions getting in the way.
During the meetings, Warmington would go around the table and let each person defend his or her idea. He asked questions like, “What do you like about your idea?” and “Why is your idea better than his idea?” He says you have to continue to ask questions until you can determine the reasoning behind the action the employee wants to take. Having a group of other executives or department heads involved in the discussion is a good idea, because it gives you more viewpoints and can eventually help you reach a consensus on which ideas would take the company closest to its goals.
Of course, even after all that discussion and after a near consensus is reached, some people will still think their ideas are better.
“At the end of the day, if we got five out of six of the VPs of construction to agree to a certain way, the sixth guy would basically say, ‘I trust all of you guys; you’re all really good at this, and if five of you think this is the best way, then I’m going to go along with it and we’ll try it for six weeks,’” Warmington says. “Because they had gone through the process, they totally bought in to it. Even if they didn’t agree 100 percent, they were willing to give it a shot because they knew it was better than what we’re doing now.
Sift through input
If you just talk to your department heads or your executive team, you’re not getting the whole picture. To get more good ideas, you need to go straight to the source.
After the first few meetings with his department heads, Warmington sent out an e-mail soliciting ideas. It went to all 550 employees the company had at the time.
“We said, ‘Send us your ideas; we’re going to categorize and work through them and start looking at the biggest and the best ideas — the things that would save the company the most money, make things operate better, improve who we are as a company the most,’” Warmington says. “People were really excited about it because they were finally getting contact, and they all had ideas.”
Warmington worked with his vice presidents and departmental leaders to sort through all the ideas. As an added incentive, whoever submitted what was judged to be the best idea got a cash bonus of $1,000. There were about 50 awards total, including several other cash awards and many gift cards.
He says the awards were just another way to get everyone even more invested and involved in the process. Every person who submitted an idea got a response from Warmington, even if the idea didn’t win an award or if it hasn’t been implemented.
Telling someone his or her idea isn’t going to be used can be a tricky test of your management touch. Warmington always uses examples of the ideas the company is actually going to use when he explains why one particular idea won’t be used.
“People would say, ‘Oh, you’re right, that’s really better than my idea. I see why you’re focusing on that,’” he says. “They got it because they could see that even if their idea was good, it took a lot of time to implement for a little reward, while some of these other ones were super easy to implement for a huge reward.”
Another way Warmington handles employee input is leaving the door open to possibly revisit an idea. Just because it may not work for the company at the time doesn’t mean the idea has no value, he says.
“We started with the best ideas, and we just trickled down,” he says. “Then a year later, we got to some of the other ideas, and we’d call them back up and say, ‘Hey, just wanted to let you know we’re working on your idea again. Have you given it any more thought?’ They’d say here are a few more things and some refinements, and we’d talk about it as a group and push it through.”
Warmington says continued patience is necessary when it comes to developing an all-encompassing business plan for your organization. Getting input from everyone is essential, and while progress may be slow, the final product will be one your entire company can stand behind, not simply an edict handed down from the CEO.
It took Warmington four months just to get a basic outline and about a year before the program was finalized and was rolled out across the entire company.
Once it was finished, the results spoke for themselves, as the company once broken into six silos had one set of brochures, one set of writing materials for new employees and one training program, with minor changes for product and location differences.
HOW TO REACH: The Warmington Group, (714) 557-5511 or www.warmingtonhomesca.com
If business executives took better care of themselves, they would stretch their life spans. Too often, they don’t. Reasons for pushing aside their health care needs include not being able to take time away from management duties, inertia, feeling invulnerable and out of control of the situation or a macho stereotype reflective of both male and female executives that believe consulting a doctor is a sign of weakness.
With the New Year in full swing, what can managers do to improve their health?
Smart Business turned to Barry Arbuckle, Ph.D., president and CEO of MemorialCare Medical Centers and immediate past chair of the California Hospital Association, for advice. And it’s advice you may wish to share with your associates, families and friends.
How serious is the situation?
For years, research revealed that too many men stayed away from physician visits and health screenings activities that can spot medical concerns before they become more serious. Now we’re seeing executives of both genders skipping medical visits and screenings. While women traditionally have a history of doctors’ visits, know the health system and find it less threatening, when men and women transition into the management suite, too often, they put their health needs on the back burner. Managers spend so much time taking care of employees that they often forget to take care of themselves.
When do problems arise?
Because of the level of stress associated with management which often translates into poor eating habits, lack of exercise and not enough attention to age-related screenings serious health problems can occur at any age. Worsening the situation are managers more likely to cancel appointments because they feel they can’t get away from work and who are less likely to take medications as directed, according to our MemorialCare physicians.
What steps should be taken?
Because tests and treatments can add years and quality to one’s life, executives can no longer avoid health screenings, ignore warning signs and hide emotions. The best time to visit a doctor is when you are well. This allows physicians to assess your overall physical condition through proper tests and screenings and get a baseline to observe future health.
Why are checkups so important?
Regular checkups and screenings tailored to your age, gender, personal and family history, and lifestyle can lead to early detection and quick treatment of many ‘silent’ disorders lacking obvious symptoms. These include high blood pressure, heart and vascular disease, diabetes, thyroid conditions, urinary tract infections and cancer. When test results warn of growing cholesterol levels, precancerous polyps in the colon, abnormal pap smear or other health issues, it allows you and your physician to map out a plan to lower the risk of serious disease because you are identifying concerns in their most treatable stages.
You can no longer dodge the doctor when faced with serious problems such as shortness of breath and chest pain. Some of the most common medical conditions men and women face as they age can be cured or controlled if caught early. Diseases like diabetes are also partly the result of an unhealthy lifestyle aggravated by stress, which allows for control by adopting better health habits.
What about more gender-specific diseases?
While men and women are screened for and adopt preventive measures for diseases that mainly afflict their gender, each is also susceptible to each other’s ailments. Nearly 2 million men age 65 or older have disabling bone disease and nearly twice that number are at risk. Older men suffering hip fractures have more than three times the risk as women of dying within a year. And while in much smaller numbers, men are diagnosed with breast cancer, contract bladder infections half as often as women and are increasingly subject to eating disorders. With more women smoking at an early age, their numbers of lung cancer and vascular and heart disease are climbing and often are much more disabling than when men have these diseases. More women, for example, die of heart disease then men.
Where should I start?
Take responsibility for your health. Get regular checkups, preventive screenings, tests and immunizations. Your physician can determine how often they are needed. Make prevention a part of your business. Collaborate with hospitals, physicians and health plans to offer health programs, preventive techniques and screenings at your site or another convenient location. MemorialCare’s business outreach programs include executive physicals and on-site seminars. Additionally, our Web site, memorialcare.org, offers free online tools, calculators, guides and referrals to physicians that can help you and your work force reach the goal of a healthier life.
BARRY ARBUCKLE, Ph.D., is president and CEO of MemorialCare Medical Centers (www.memorialcare.org) and past chair of the California Hospital Association. Reach him at firstname.lastname@example.org or (562) 933-9708. MemorialCare Medical Centers include Saddleback Memorial Medical Center in Laguna Hills and San Clemente, Orange Coast Memorial Medical Center in Fountain Valley, Anaheim Memorial Medical Center, Long Beach Memorial Medical Center and Miller Children’s Hospital in Long Beach.
President and CEO
MemorialCare Medical Centers
When Tom Kelly took over as president and CEO of Epicor Software Corp. in February 2008, he set out on a fact-finding mission to learn more about the organization.
Kelly knew quite a bit about the business after eight years of service on the company’s board, but he had been isolated from most of the day-to-day work that was done at Epicor’s locations around the world.
He wanted to know the enterprise resource planning software business the way his 3,200 employees did. He wanted to see what the customer saw.
“The essence of Epicor rests as close to customer as possible,” he says. “If you think in terms of communications, you go where your customers are. You start there.”
He headed out and spent the first few months in his new position in front of employees and customers, listening to their ideas and complaints. He asked them what they thought Epicor was doing well and what they thought the company could improve upon. Kelly met with employees in person, over the phone and through video-conferencing — whatever it took to generate a dialogue.
“Initially, I wanted to look the employees in the eye and listen to them tell me what they thought we could accomplish at Epicor,” he says.
One factor in particular was integral to the success of Kelly’s information-gathering travels: keeping an open mind.
“That was my foundation point,” he says. “I didn’t walk in with a game plan of changes or a game plan of what we had to do to bring Epicor to the next level — I walked in with my ears open because I knew there was a lot of transition under way.”
One of the things he quickly discovered was that Epicor’s growth was hurting the company’s long-term potential. What was once a small, agile, $154 million company in 2003 had become a $430 million rapidly growing enterprise through internal growth and acquisitions.
The company’s agility had always been a cornerstone of its growth. Without the ability to accurately interpret data and then rapidly take action in response to market changes, the company’s design and development of enterprise resource planning software may have never happened in the first place.
Kelly’s challenge was not to find ways to move more quickly, it was to find out how to keep Epicor’s agility as the company continued to expand. His objective was to adjust the company to its new size without sacrificing the core things that made Epicor so successful.
“Reinvention doesn’t necessarily mean changing your DNA,” he says. “It means allowing you to participate in a current market just as effectively as you participated in a prior one. We’re reinventing ourselves so we know how to operate in this new size just as effectively as we operated in our prior size.”
Kelly started his quest to keep Epicor agile by making it into a flatter organization and improving communication.
When he took over, the company had just made a major acquisition, and as a result, several executives moved to other roles within the company or left Epicor altogether. He took that opportunity to flatten things out by simply not filling those positions.
With fewer levels of management, communication at Epicor moved swiftly. The switch to a flatter management structure was intended to put Kelly a few steps closer to the company’s customers and bring everyone in the organization a few steps closer together.
“The smoother and more quickly you communicate, the quicker you can make decisions and respond to market opportunities or challenges,” he says.
One of the roles Kelly eliminated was the chief operating officer role. Previously, the functional heads of Epicor’s departments would report to the president and COO — now they report directly to Kelly. He says cutting that extra level of communication helps the company stay agile by speeding up the decision-making process.
“It’s much more real-time; there’s no filtering and no delay on that,” he says.
By eliminating the COO role and essentially taking on that responsibility in addition to his CEO duties, you could imagine that Kelly’s time is in short supply. But he says that there is plenty of time in the day for his constant communications, if you make the most of it.
“Yes, your staff meetings are important; yes, having the team together is important,” he says. “But it’s almost more important that when I’m driving into the office in the morning and it’s early on the West Coast that I’m on the phone to other parts of the company that are already up and about.”
Kelly takes advantage of that commute time for short conversations, used to touch base with his top team members who are scattered across different time zones. Taking advantage of hidden time like that to stay up to speed can help a lot in the long run.
“I listen to them tell me how they are doing in their business, what challenges they have, how they’re doing on their plans or objectives,” he says. “You don’t want to have such formal communication that they feel the only time they talk is the formal setting. You need that same informal constant flow of data: e-mails and those brief phone call catch-ups. Get up to date with how they’re doing.
“It’s the same with my customers. They don’t have to be long, two-hour meetings, but multiple, frequent touch points with customers.”
Successful communication requires that you be a good listener, not just a smooth talker. Kelly allows his employees to freely express their views but cautions that CEOs must listen for more than one thing.
“You can listen to their words, and you can listen to their actions,” he says. “If you do both, it’s pretty hard not to conclude whether somebody is on board or not.”
Kelly looks for the operating plans and tactical plans his team devises and then measures their performance by monitoring how the customers are responding. Basically, he looks to see if his executives’ actions are backing up their words. If they have clearly set objectives, detailed plans and their teams are responding well to them, then they are on the right track.
Set high expectations
With a thinner, leaner management team in place, Kelly needed to get more from the management team he kept around. They would be able to make decisions quicker, which would help the company’s agility, but more pressure would be on fewer people.
“I do have very high expectations,” he says. “I try to put people in place who I think are great people who can do great things.”
Kelly’s great expectations are both a reflection of the faith and pride he has in his team as well as a world-class motivational tool.
“Any individual performs best when they know people are relying on them and people expect them to perform well,” he says. “I think that’s true in anything.
“People tend to live up or live down to the expectations you have for them.
“I’d prefer to have very high expectations, because it’s a lot more enjoyable to live up to high expectations than to live down to lower ones.”
Some people could crack under the weight of such high expectations, but Kelly has faith in the team he’s assembled, so he empowers the team members by listening to them and showing them trust.
“That means you have to make sure that they know that when they’re not with me and they’re off making a decision that I will back them up, and that if the decision is a tough one, that they’ve got my support,” he says.
“If the decision ends up going awry somehow, they won’t feel that they’ve been thrown under the bus. Let them know that they are in this together with us to build this value.”
Part of becoming agile again means pushing decision-making down as low as possible, and that requires teamwork to get the best decisions.
“I encourage my team to work with each other — I try to discourage that stovepipe kind of thinking where somebody sees an issue and it goes directly to me,” Kelly says. “There are times when that is appropriate, but more often than not, it is appropriate for those executives to work with each other to make these decisions first and bring their different views of the world to me.
“If you are not able to accomplish that, you’ve got a lot of bad things that come out of that. You have a team that’s not working effectively together.”
In the end, it all comes back to communication. “What’s important is that we listen — do we listen to one another?” Kelly says. “We need to vigorously debate and challenge one another. Then, we must demonstrate through our actions that we are, in fact, applying the same requirements of ourselves that we would ask anyone else in the company.”
HOW TO REACH: Epicor Software Corp., (949) 585-4000 or www.epicor.com
Spoliation is the intentional or negligent withholding, hiding or destruction of relevant evidence in a legal proceeding.
“Corporate officers need to be cognizant of spoliation issues from the time they become aware of a potential claim,” says Irena Leigh Norton, a partner in the litigation department at Shulman Hodges & Bastian LLP. “Waiting until a suit is filed is often too late.”
Smart Business talked to Norton about the impact and consequences of evidence spoliation.
What types of evidence are most susceptible to spoliation claims?
Spoliation occurs when a company has lost or destroyed evidence that it knew or should have known to preserve for a lawsuit. Awareness of potential litigation imposes a duty on the manager or the corporate officers to preserve evidence that may relate to that lawsuit.
The evidence in question might include electronic records like e-mail, personnel files and physical objects. In the case of electronic evidence, specific federal laws address the preservation of backup materials and e-mail correspondence. Sometimes it’s not even enough to preserve an electronic copy of e-mail. In discovery, the opposing counsel may want to examine the computer hard drive and if you have failed to preserve that, you may have created a potential spoliation issue.
What sanctions might be imposed by a court?
Generally, spoliation of evidence is something that is proven by way of a motion or declaration to the court. One party in the lawsuit requests a sanction be imposed on the party that cannot provide pertinent evidence.
The scope of that sanction depends on a determination of why the evidence is missing. Is it missing because it was accidentally destroyed through no fault of the defendant? Was it purposely destroyed? You will face a much higher level of sanction in the latter case.
Sanctions could be anything from having an evidentiary presumption imposed against your side or not being able to dispute certain issues all the way up to striking an answer and imposing a default judgment. Sometimes monetary sanctions are awarded, as well.
Can you cite an example of evidence spoliation?
In an employment case alleging sexual harassment, there may be an issue about whether certain communications between a manager and the plaintiff employee were preserved.
In one instance, the hard drive crashes and pertinent e-mails are unable to be resurrected. Nothing intentional was done. If that complainant tries to seek an evidentiary sanction, he or she will have a really hard case to make. In all likelihood, a court will not impose evidentiary sanctions.
In contrast, if the exchange of e-mail is deleted from the system by the manager, then there may be a presumption that it was done purposely. The jury will be informed as such, and the defendant will be barred from making certain evidentiary and testimony objections. Depending on the severity of the event, the defendant may have a liability finding against him or her. There is not an assumption of guilt, but it’s an issue that courts take testimony on, and there may be a full hearing with expert testimony on how the materials were deleted and why no backup is available.
For instance, if deleting information from a server is a four-step process that requires a supervisory password, then evidence suggests that a corporation or officer purposely ordered the information to be deleted, because it’s not something that could be done by accident.
A judge is not likely to impose sanctions for vagaries of electronics breaking down or for accidents. But there are likely sanctions for purposeful acts, and there may be substantial repercussions.
Are spoliation claims subject to separate causes of action?
Under California and federal law, there is generally not a separate cause of action for spoliation of evidence.
If you are under criminal investigation, however, criminal liabilities may arise because the standards are different. Additionally, if your company does business in other states, there may be case law supporting a separate claim for spoliation or destruction of evidence in that jurisdiction.
What steps can a company take to discourage spoliation of evidence?
Every company should have policies and procedures in place regarding the preservation and destruction of its business records. High-level officers should be aware when potential claims arise and immediately take steps to preserve all potential evidence.
Instruct employees to maintain not only computer-based information but also physical devices like computer hard drives that would have potential relevance to a lawsuit. Even if you cannot foresee a lawsuit, as soon as you’re served, those steps must be taken.
Most importantly, take every precaution to assure that courts have access to all information bad facts as well as good facts so you have the best opportunity to represent your company’s interests.
IRENA LEIGH NORTON is a partner in the litigation department at Shulman Hodges & Bastian LLP. Reach her at email@example.com or (949) 340-3400.
We’ve all had days where we would rather not open the newspaper, turn on the TV or pick up the phone for the fear of learning about more bad news.
Unfortunately, there have been a lot more of those days for all of us lately.
The stock market is going through extreme ups and downs, capital has dried up, and key customers are cutting back. You start to wonder where the sales are going to come from to enable you to make this quarter’s budget. If things don’t turn around soon, you’ll have to consider drastic cutbacks yourself.
In times like these, what’s a CEO to do? The answer: Get back to basics. Focus on the things you do best and do them as efficiently as you can. Use your strengths to exploit your competitors’ weaknesses and outhustle them.
It’s often the simple things that made you a success in the first place, and it will be the simple things that keep you afloat during the economic storm.
With that in mind, we’ve assembled the best pieces of advice garnered from Orange County’s top leaders from throughout the year. We think you’ll find some great ideas to help you improve your business within these pages, and we encourage you to keep this issue as an ongoing reference to help you find your way through the trying times that lie ahead.
president and CEO, Claim Jumper Restaurants LLC
When Claim Jumper Restaurants LLC opens a new location, Robert Ott, subject of our May cover story, will be there. But the president and CEO won’t just be there to cut the ribbon and smile for the camera. He may be busing tables, or you may find him on the cook’s line. He delves deep into the operations of each new Claim Jumper because it provides a great opportunity to communicate with his employees and helps him maintain a solid grasp on the challenges facing his team.
“You can’t run your business from behind a desk,” he says. “If someone brings an idea to me, and they say, ‘Hey, this is something the guests are asking for,’ if you’re sitting behind a desk, you may not understand the reason why. But if you’re working with the managers and talking with the guests, they bring up examples of things that need to be changed. Then you have a deeper understanding of why this needs to happen and why the change needs to be made.”
All that face time with employees can cut into the other responsibilities of a CEO, but Ott says the benefits outweigh the extended hours. He visits stores several times each week, and his discussions with employees — from management all the way down to the hourly workers — have a direct influence on the direction of the company.
By making himself so accessible, Ott often finds himself stopped in a hallway by an employee with something on his or her mind, but he says the quality ideas you end up gathering are worth lengthening your day.
“It can be a little bit disruptive, but it’s a good kind of disruptive,” Ott says. “You may see a problem or hear about a problem that might come to bite you much harder six weeks or six months from now. You solved it ahead of time because that door was open and someone saw something that needed to be addressed, and you addressed it before it became a bigger issue.”
Create opportunities for your stars
CEO, Sukut Construction Inc.
Michael Crawford was only 24 when his mentor and boss, Myron Sukut, decided Crawford was ready to lead one of the company’s biggest projects. Now, as president and CEO of Sukut Construction Inc., Crawford gives each employee the same chance to excel that his boss gave him.
“The reason we continue to grow is I don’t want to lose the really good people,” says Crawford.
“So if we’re going to make opportunities for people within the organization, sometimes you have to grow.”
Highly talented and motivated employees need to see opportunities to stay with a company, so the company’s growth goals work hand in hand with the employees’ personal goals. In some cases, that may mean exploring new opportunities and opening new divisions to take advantage of new markets.
When Sukut’s management team publishes its five-year strategic plan, it identifies the new positions that would result from possible expansions. Those opportunities are advertised on job boards within the company.
By showing them the potential for growth, Crawford eliminates the risk of losing his best people because they have no opportunity for advancement.
“We try to take the lid off things,” he says. “We say, ‘Hey, you can aspire to be anything you want.’”
Give feedback to get feedback
Peter F. Bastone
president and CEO, Mission Hospital
Peter F. Bastone, president and CEO of Mission Hospital, says you should establish a process through which your employees see how their ideas are moving through the organization.
“Once you engage them, and once you ask a question and they give you input, you have to assess that input and get back to the people,” he says.
Even if you don’t see an idea immediately being stitched into the fabric of the organization, you still need to show the employee who originated the idea that his or her thoughts were carefully considered.
“If that’s the case, we get back to them and say, ‘Great idea, but we don’t have the infrastructure,’ or, ‘This is a systemic issue, but we may be able to do it in the future,’” Bastone says. “It’s a matter of cataloging, being an active listener to the people who are in those meetings, assessing the value of the recommendation and getting back to the group or individual who made the recommendation with a yea or nay.”
Whether you reject the employee’s idea outright or simply place it on the back burner, your reasoning doesn’t matter as much as the fact that you took the time to consider the idea. Bastone says that if you show you value employees’ thoughts, you will improve the quantity and quality of the feedback you receive and also reap the rewards of having happier, loyal employees.
On the rebound
Tracy K. Price
president and CEO, The Linc Group
Jack A. Hockema
CEO, Kaiser Aluminum Corp.
When Enron offered to buy his software company and put him in charge of a $6 billion division, Tracy K. Price thought it was the opportunity of a lifetime. It turned out to be the beginning of a two-year nightmare.
Price’s company, FieldCentrix, was rolled up with three other companies to create ServiceCo, a new building services company under the Enron umbrella. Nine weeks later, Enron collapsed and the newly minted ServiceCo didn’t stand a chance.
“We never even got the stock issued,” Price says. “It made the dot-com implosion look like a protracted illness by comparison.”
Even though the ink had barely dried on their contract, Price’s team was buried with negative overspray from the scandal. So he immediately began damage control and tried to sever his ties to the sinking corporation.
There was a lot of work to do to repair the company’s tarnished reputation, and he began by forging a new corporate identity, renaming the company The Linc Group.”
To combat the nagging specter of the “crooked E” that continued to haunt him, Price strove to make The Linc Group the polar opposite of its former parent company. He took employee accountability to new levels by operating in total transparency and purged the company of anyone who wasn’t on board with his changes.
Price led The Linc Group to more than $500 million in revenue in 2007. He’s not finished either: The 4,200-employee organization is projecting nearly $600 million in revenue for 2008.
Jack A. Hockema didn’t want to be the CEO of Kaiser Aluminum Corp. He certainly didn’t want to deal with the burgeoning asbestos lawsuits, escalating medical and pension obligations, and underperforming business divisions at Kaiser, let alone the avalanche of debt that was threatening to crush the company.
He was perfectly happy running the company’s fabricated products division, the lone ray of sunshine in the company.
Hockema had been asked before if he would be interested in the CEO position. He declined and said he would only take the job in the event of an emergency.
A few months later, Kaiser’s CEO stepped down, and Hockema got a phone call asking if he would honor his commitment. Hockema stood by his word and currently serves as Kaiser’s chairman, president and CEO.
“Somebody had to do it,” he says. “And it was pretty clear that I was the one to do it at that point in time. We just strapped it on and addressed the issues.”
It took Hockema nearly four and a half years to pull the 2,425-employee company out of its nosedive, but in 2006, Kaiser emerged from bankruptcy with its books balanced and a plan to move forward.
founder and CEO, VIZIO Inc.
William Wang founded VIZIO Inc. in 2002 with $600,000 — since then, the flat-panel TV juggernaut has grown to more than $2 billion in sales.
To effectively manage a fast-growing company, not only must you build a strong, balanced team but you also need to properly utilize that team. Wang, who was featured in the June issue, says the only way to keep your company afloat — and your sanity intact — in the face of tremendous growth is to delegate as much as possible.
“I’d like to delegate everything,” he says. “That’s my goal; my goal is to make sure I’m irrelevant to the company. That always has to be my goal, and I’ve been working toward that.”
Letting go of so much responsibility can be difficult. But Wang says you have to remember that your employees need to feel responsibility, too, and, in some cases, they may have better insight on a matter than you do.
“If a certain person is really good at something, we should have faith in that person doing that certain task and vice versa,” he says. “If you’re not good at something, somebody else has to make up your weakness.”
Executive MBA programs are geared toward people who have been working in the business world for around 14 years and have quite a bit of managerial experience, says Carla Hayn, senior associate dean of the Executive & Fully Employed MBA Programs at the UCLA Anderson School of Management.
“Most executives who enter an Executive MBA program are more mature, experienced and about 10 years older (with an average age of 37) than people enrolling in full- or part-time MBA programs,” she says.
Smart Business learned more from Hayn about how to find the right MBA program.
How can an executive determine whether getting an MBA degree is the right choice?
It you are on the brink of being promoted or have already moved into a top management position, an Executive MBA program will definitely enhance your skill set and your ability to succeed in your career. You’ll have opportunities to learn more about the specific areas in which you may need more specialized knowledge (e.g., corporate finance, brand management, supply chains, etc.). You’ll have classmates who are experts in their fields from whom you can learn. You can make use of the array of elective courses to acquire further expertise in your field.
Why are elective offerings an important part of MBA programs?
All Executive MBA programs provide you with the ‘core’ business knowledge in accounting, finance, marketing, economics, etc. However, programs vary widely in the number of electives available to executive students.
At UCLA Anderson, we provide 15 electives each year especially for our executive students in diverse areas such as Mergers & Acquisitions, Venture Capital & Private Equity and Online One-to-One Marketing. Executives can also choose from the wide array of electives offered in our full- and part-time MBA programs. In addition, executive students can travel through our International Study Programs (recent trips include Brazil, China, S. Africa, India) and our exchange programs with partner Executive MBA programs throughout the world. Executives can even earn certificates in finance, marketing, entrepreneurship, sustainability, or international studies, officially recognizing their accomplishments in these areas.
Are there other features that distinguish one Executive MBA program from another?
Absolutely. Among the other important factors to consider in choosing a program is the stature of the faculty. Exactly who will be teaching you? Are they excellent communicators? Is the classroom experience not only challenging but also invigorating? Ask to attend a class and find out for yourself if the students are engaged in the learning process.
UCLA Anderson is known as a leader in experiential learning. The Strategic Management Research Project is a capstone course that synthesizes the knowledge our executive MBA students acquire throughout the program. Five to six students work on consulting teams for a six-month period to solve a multifaceted problem confronting an organization.
All first-rate Executive MBA programs should also stress leadership development to help you develop your own management style, building upon your strengths. Look for a program with experiential workshops, engaging seminars and informative guest speakers.
Additionally, though executive students are quite accomplished, they still benefit from career guidance. A top program should have a knowledgeable career services director who is dedicated to the program and has a proven track record dealing with executives.
Talk to the current executive students and find out how satisfied they are with the various components of their program — the students are an excellent source of information.
Are there other benefits that Executive MBA students should expect from the program?
Beyond relevant knowledge, there are wonderful networking opportunities. Not only will you be sitting in class and working on teams with your classmates, they will be part of your lifelong network. A number of our Executive MBAs have gone into business together. Schools with strong alumni networks like UCLA Anderson’s make sure that you have the opportunity to know past and upcoming executive students, members of the other MBA programs and graduates from all of the schools on campus. UCLA Anderson’s network is very strong with access to more than 37,000 alumni. If someone is moving to Hong Kong, I can easily find a person among the 95 active alumni there who is eager to provide friendly advice and introductions.
Finally, what is the return on investment of the Executive MBA program?
Investing in an MBA degree is one of the most rewarding investments you can make, even when compared to the return during a bull stock market! Most estimates show that the present value of the incremental earning power over an executive career due to an MBA degree is about $500,000. This high return is due to the fact that executives with an MBA degree are usually promoted faster, are considered for a wider array of executive positions, have access to more job opportunities through their increased business and social networks, and have a different view of themselves that prompts them to explore higher and more financially rewarding positions.
A recent survey of graduates of the UCLA Anderson’s Executive MBA Program shows an average salary increase of 158 percent within five years from graduation. While this survey was taken when the economy was stronger, it is not unreasonable to believe that an executive’s salary would double (increase by 100 percent) within five years of graduation.
The knowledge acquired in an Executive MBA program translates to a higher rate of business success, whether you are working for a large public company, a smaller private company, or are self-employed.
Carla Hayn is the senior associate dean of UCLA Anderson, in charge of the Executive & Fully Employed MBA Programs. Reach her at (310) 206-9225 or firstname.lastname@example.org.
If you and your fellow corporate managers cannot agree on critical elements of doing business or if an outsider thinks that mismanagement is limiting your ability to pay bills look out. There may be a court-ordered receivership in your future.
“The receiver’s job is to literally operate the business,” says John Mark Jennings, a partner in the law firm of Shulman Hodges & Bastian LLP. “A receivership is an action brought against your company because it is being operated to the detriment of shareholders or creditors.”
After a receiver is appointed, maintaining the continuity of running the business may not necessarily be his or her first objective.
“If the right thing is to keep the business open, the receiver will do that,” Jennings says. “If a business cannot pay its debts and is a dying proposition, the receiver is more apt to wind down his operations, rather than spending his time attempting to resurrect the company.”
Smart Business talked to Jennings about how managers should react to possible receiverships.
How common are court-ordered receiver-ships?
They are becoming more common. With the current state of the economy, there is distrust in the marketplace. In the business world, when consumer confidence is down, so is the confidence in others being able to repay debts. That lack of confidence sometimes requires a neutral third party to help make decisions, to enforce existing agreements or to comply with the law.
Under what circumstances is a receivership a good thing?
Often, members of company management are divided into factions. Their personalities might not mesh, and their overall business judgment may be clouded by infighting. In that case, one of the parties can initiate litigation and ask the court to insert a receiver to oversee the business. That action establishes an internal decision-making mechanism to conduct business while owners or top-level managers iron out their disputes.
Very often, a creditor will ask the court to appoint a receiver over a company that owes it money. Even if no internal strife exists, the company may not be paying its debts as they become due. In that case, the receiver is charged with the task of making sure that money flows where it should.
Tactically, it may be beneficial to be the first person to request a receivership, because courts are often inclined to follow a party’s nomination for the receiver assuming he or she has proper credentials.
What impact does a receiver have?
A receiver, certainly, costs money, and charges by the hour. If the company cannot withstand that cost coupled with pre-existing financial troubles, the receivership process can be disrupted.
There is also the chance that the receiver will be talking to top managers about the company’s future direction. Very often, one of the parties can lose what control he or she had, which can lead to a true intellectual/financial rift among company leaders.
The receiver’s job is to get past the acrimony and animosity and do what’s in the company’s best interests.
In some cases, managers may agree that they will never reach a decision or compromise. In that event, the receiver also can provide a dispute resolution process.
What are a manager’s obligations under a receivership?
The very threat of being placed in receivership is a mission-critical turning point. You have to immediately focus on the problem, because you could be approaching the last decision you ever make as a corporate leader.
If my company were threatened with a receivership, I would first turn to my in-house counsel or an experienced attorney. You never want to go into a receivership process without having someone protecting your rights and those of the company.
Once you have been sued and a receiver has been appointed, you face a very large uphill battle. At that point, there is a good chance the court will keep the receiver in place until either the litigation runs its course or some kind of settlement is reached.
Under a receivership, a temporary restraining order is generally issued. Your obligations are to (1) make sure that you do not interfere with the receiver’s operation in any way and (2) help the receiver make decisions that are right for the company.
Initially, you have to determine whether or not you are going to oppose a receiver-ship, but after one is appointed, do everything you can to make sure the receiver’s job is easy and that you are not interfering.
What are the penalties for interfering with a receiver’s actions?
The consequences for those who choose to interfere with a receiver’s duties are predictable. Early orders and injunctions restrain corporate officers from doing something negative against the receiver’s actions. They also give the court contempt power over violations of its orders. Contempt penalties include sanctions and fines, which eventually can develop into criminal contempt charges. Bottom line never interfere with a receiver’s duties.
JOHN MARK JENNINGS is a partner with Shulman Hodges & Bastian LLP. Reach him at email@example.com or (949) 340-3400.
Gloria Robbins loves to see emotion and energy filling the boardroom at Specialized Marketing Services Inc.
“We can have a pretty fierce conversation going on at any time in the conference room with people who are very passionate about their opinions,” says Robbins, founder and CEO of SMS. “What we don’t want to do is squelch their ideas. They are bright, intelligent and successful individuals. I want that energy in that room. It’s what drives us.”
Robbins carefully stokes the fire within her 37 employees to generate fresh ideas for the firm’s clients and to satisfy the clients’ needs, and that passion has helped drive the direct response marketing company to 2007 revenue of $10 million.
Smart Business spoke with Robbins about how to spark your employees without losing control.
Q. How do you motivate employees?
In leading people, you really need to listen to them. It’s amazing what you’ll find out not just about your clients but also about your employees when you listen. It’s all about listening to them, hearing them and acting upon what I’m hearing.
Close your mouth. You can’t really assess a situation and what’s really going on unless you are listening to someone who really knows what is happening. Instead of just saying, ‘OK, here is the problem, I have heard this much of it, and I’m going to give you the answer and the solution,’ what I do is I listen to them.
Come to me with what the challenge and problem is, and then I’ll do what every good leader should do. Ask how they see the solution and what they would do. After assessing it, I have to make a decision if their solution is correct or not.
If you give people an opportunity, they will come to you with a solution. When they are in the fray and you are listening to them and you’re allowing them to talk, normally they will come up with the correct solution.
Q. How do you make yourself approachable?
If you’re sitting back, you’re approachable, and your arms aren’t closed and crossed. If people feel you are open and honest with them and relaxed with them, they want to open up and tell you what’s going on.
They don’t feel fearful walking into your office.
If you listen to them, it’s amazing what you will find out when they just stop in to talk with you.
Make eye contact with them. Welcome the conversation and ask a lot of questions.
Q. How do you manage passion?
Harness the energy in the room and manage through it. We have a strict rule about being respectful to each other. There are no bad ideas. We direct it. If we start speaking over one another, we know enough to stop it.
If it’s not stopped, I’ll say, ‘OK, we need to take a break. We have some good stuff coming out of this meeting. But we all need to walk out and clear our heads, and then we’ll reconvene.’
If we don’t have a lot of energy and that passion for what we do, we just sit around and we won’t be coming up with good ideas. There’s a ton of good ideas that can come out of a room filled with passionate professionals.
By giving everyone a chance to speak, they know that they are going to be heard.
Q. How can you avoid conflict?
Take a look at what’s going on and try to assess the situation. Apply logic to it. Getting upset and screaming and yelling upsets everybody.
I don’t bring everybody together and say, ‘OK, we have this problem.’ I go to my individual executive team members and say, ‘Let me tell you what the challenge is. This is what’s going on, and I want your thought on this.’
I get it from them before they’ve had a chance to listen to somebody else come up with a solution that perhaps isn’t theirs. I listen to their solution, I go down the whole team, and then I bring everybody together and we collaborate.
We have a lot of type A personalities here. So no one is afraid of speaking up and saying their piece. We’re going to go with the answer that contains a lot of common sense and with the person who feels the most passionately about it.
Q. How can you facilitate success?
Be open and honest. Be able to express yourself believably so they are not thinking you’re just placating them. I listen to what they are saying, and then I think about what they are asking me and I give them the most credible answer I can give them, and I do what I say.
It’s communication and having respect for the customer and respect for the employee. It’s the Golden Rule that’s applied to business.
HOW TO REACH: Specialized Marketing Services Inc., (800) 998-8600 or www.teamsms.com
Gary Pemberton, litigation partner at Shulman Hodges & Bastian LLP, is always amazed at how often businesspeople negotiating a contract consider arbitration clauses to be the Holy Grail.
“I think that’s a mistake, because arbitration is not necessarily the best vehicle for every type of dispute,” he says.
“Before you even place an arbitration clause in a contract, put a lot of thought into whether it is right for the deal you are negotiating. If it is, try to visualize what kind of potential disputes could arise with the contracting party, and then tailor the clause to address those contingencies.”
Smart Business talked to Pemberton about the pros and cons of arbitration clauses.
What are the advantages of arbitration provisions in contracts?
One is privacy. Unlike litigation, arbitration does not involve a public filing, a public litigation and a potential public trial. It is conducted behind closed doors, generally with no court reporter, there’s no file for the public to review and, generally, the decision is kept confidential.
Arbitrations also tend to be quite informal, rules of evidence are relaxed and discovery is limited, making them typically less expensive. They are also more convenient; you can agree on an arbitration date and be fairly certain that the case will be arbitrated the day that it is set.
If the matter is complex, you can select arbitrators that have expertise in the matters being litigated, unlike a court proceeding where the jury won’t and the judge may not have that expertise.
One of the nice things about arbitration especially with two parties that want to continue to do business together is that it tends to be more civilized. Unlike court litigation, there’s usually not as much acrimony and good business relationships don’t go down the tubes.
What are the disadvantages?
Things go wrong. The reasons that companies originally wanted to arbitrate turn out to be diametrically opposed to what actually occurs.
First, arbitration is not always quicker. Simply whether a case is required to be arbitrated may be litigated itself. If the parties do not agree that the arbitration clause is enforceable, you can spend a year litigating whether the clause is applicable. Arbitrations also can get expensive. Arbitrators can bill out at $3,000 to 5,000 a day for their services. For a panel of three, that’s a lot of money especially where, unlike California state courts with their fast-track requirements, there is no formal incentive to efficiently use time and move a case along.
Unlike a court trial, there’s generally not a mechanism to dismiss a meritless case with a summary judgment procedure. Even the most frivolous arbitration cases may be taken all the way to a hearing.
Also, there is no mechanism to compel third parties who belong in the arbitration but were not parties to the arbitration agreement to be brought into the arbitration.
Results can be less predictable since arbitrators are not required to follow the law and there is no right of appeal simply because the arbitrator gets the law or the facts wrong. There’s also the belief that arbitrators tend to compromise too much.
Because there’s no right of appeal from an arbitration award simply because it is wrong, you can be stuck with a bad the decision, whether it’s right or wrong, unless you can demonstrate it was the result of fraud or the arbitrator is not truly impartial. (It’s believed at least by some attorneys that not all arbitrators are truly neutral. They are human like everybody else, and in order to continue getting business from companies or attorneys involved in a lot of arbitration disputes, they don’t want to make those companies and attorneys terribly unhappy.)
What factors should a company consider before deciding to put an arbitration clause in a contract?
- If a dispute develops, who will have the evidence? If your adversary in an arbitration will have all the witnesses, evidence and documents, not having significant discovery can be a substantial detriment, and arbitration may not be right for you.
- Do you want to have summary judgment and adjudication procedures included in the arbitration clause? When you’re involved with a party that historically files frivolous lawsuits, it’s wise to do so.
- How is the other party in the contract viewed in the community as opposed to your company? If your potential opponent has a great reputation, you might not want to be in front of a jury and might want to go the arbitration route.
- How crowded is the local court’s docket? If it’s heavily congested, it’ll probably take longer to get the matter resolved than an arbitration would take.
- How important is your company’s public image? Arbitration’s privacy will minimize the impact of litigation on your company’s image.
- Will the issues in a potential conflict be simple or complex? If complex, you might want the expertise of an arbitrator.
- Is there a concern about potential punitive damages? Juries are more likely to become impassioned and hand out punitive damages, sometimes excessive. Arbitrators tend to be more reasonable and less emotional than juries.
GARY PEMBERTON is a litigation partner at Shulman Hodges & Bastian LLP. Reach him at (949) 340-3400 or firstname.lastname@example.org.