Matt McClellan

Saturday, 26 December 2009 19:00

Are you ready?

It may seem like wishful thinking, but business owners and executives need to start planning how they’ll handle increasing revenue to avoid problems when the economy rebounds.

“Economic times have been very difficult over the past 18 months, but there is a light at the end of the tunnel,” says Nicholas Browning, the president and CEO of FirstMerit Bank’s Akron region.

The economy will eventually rebound, and when it does, will your company have the necessary working capital and internal cash flow to grow again?

Smart Business spoke to Browning about how to ensure your company is ready to take advantage when the economic upturn hits.

How can you survive today while positioning yourself for when the economy turns around?

Many companies, although historically healthy, have experienced extreme sales declines and many other challenges to their businesses over the past year. To survive in this new challenging environment, these companies have reacted by using a three-step approach.

The first step is aggressively reducing expenses. The second is focusing on the collection of accounts receivable. The third step is stretching their vendors and/or extending payables.

All of these actions have the ability to create an immediate positive effect on cash flow. However, none of these strategies can be implemented forever or provide long-term success for a business. In my experience, companies have an amazing ability to cut costs in order to survive in the short term.

What pitfalls should companies be aware of as the economy begins to turn around?

What many owners do not realize is that companies weakened by the recession have a high risk of failure when the economy rebounds and their sales start increasing again. Revenues that increase quickly require cash to fund receivable and inventory increases. Businesses that carry substantial inventory, such as manufacturers and distributors, will be affected the most dramatically, but all companies that are growing will use cash. It is the responsibility of the business owner and his or her financial team to assess the company’s cash needs for the upcoming year. Your banker can help with this.

What needs to be done to assess a business’s upcoming cash needs?

There are five key items that a business needs to examine:

  • Collection time period for receivables
  • Collectability of those receivables
  • Payment terms for suppliers
  • Actual expenses paid
  • Access to additional capital or line of credit to cover any potential cash shortfalls

These factors will determine if your company will have the access to liquidity it needs to fund additional revenues, which will become necessary when the economy rebounds.

What should business owners do next?

There are a few different paths I can recommend for business owners or executives planning for the future. First, they should craft two separate sets of cash flow projections for their company.

One set of projections should have flat revenues as I think sales have bottomed out but will remain weak for some time to come. These projections will demonstrate whether the expense changes made to the business are sustainable. For instance, has your company adjusted its expense structure enough to sustain itself with lower revenues for the foreseeable future? This illuminates a major cash flow issue: Has your company survived based on short-term fixes, such as stretching payables to generate cash? With payments now due and no increase in sales, getting caught up may not be feasible.

A second set of projections should show revenue increases and the corresponding effect of those increases on your cash flow.

Depending on the business, new orders mean additional inventory or staffing to meet the production levels. Both of these issues require upfront cash with the resulting cash inflow not seen for possibly 30 to 90 days or more. Consequently, the owners or executives must consider how much additional cash will be needed to fund the expenditures and what sources are available.

How can businesses fund cash shortfalls?

Shortfalls can be filled from three sources, depending on the amount of the shortfall and expected duration.

First, the bank can help fill the gap, provided there is sufficient collateral from either the working capital assets or possibly excess value in fixed assets. Second, there are mezzanine providers that can provide bridge financing on a short-term basis to get the company through the cash crunch. Finally, the owner may be required to provide personal liquidity to meet the needs of the business.

Where can businesses turn for help?

If you need help calculating your cash flow, you should meet with your accounting or banking advisers, any of whom should be willing to provide assistance. A rolling six-month cash projection that effectively encompasses a company’s cash cycle is an exceptional tool for this type of planning.

Once a company has the information from its cash flow projections, it should meet with its banker and develop a plan to fund a projected liquidity shortfall if one exists. Banks are best able to help in these situations when all of the potential factors are identified and brought forward, giving all parties full knowledge of a situation. Surprises are a worst enemy for both client and bank. A company’s foresight in this regard exhibits management maturity and planning abilities. The time to do this is now.

NICHOLAS BROWNING is president and CEO of FirstMerit Bank’s Akron region. Reach him at or (330) 384-7807.

Monday, 07 December 2009 19:00

Paper pains

Most organizations have different strategies for integrating document management processes into their operations. It may be a corporate strategy, an IT strategy or a specific document strategy.

However, few organizations have a dedicated document strategy. As a result, most documents moving through an organization don’t effectively foster corporate objectives.

“Most document management strategies include these basic elements: increasing revenue and customer satisfaction while decreasing costs,” says Matthew J. Brooke, solutions analyst at Toshiba Business Solutions.

Smart Business spoke with Brooke about how to develop a strategy that attacks those three elements.

What steps need to be taken for a company to move into a document imaging solution?

The first step is to recognize what kind of document related challenges and processes an organization is experiencing. If a company decides that it needs some type of organization of its documents, and understands that moving documents throughout the enterprise via a paper-based process is costing money, then there is some type of pain.

According to statistics from Cooper’s and Lybrand, an average office makes 19 copies of each document, spends $20 on labor for filing each document, spends $120 searching for each misfiled document, loses one out of 20 office documents, and spends $250 on document recreation. If you put it together, you’ll see a lot of unnecessary costs.

Document solutions providers review business processes and related documents and offer businesses document process recommendations, which convert receivables to cash faster, cut costs and improve employee productivity and customer satisfaction.

Virtually every type of business that is filing hard copy documents will experience an immediate return on investment with an electronic document management system.

What are some of the most common document-related pains?

Every business sector has several types of document management pain. Generally, there are several pain points to look at. The first pain is to secure the information as it flows through the business processes. The second is trying to improve productivity. That can be done by trying to offer customers a better, faster way of getting their hands on information. Companies are obviously trying to reduce costs by eliminating expenses like rent for additional storage space or paper folders or file cabinets.

The most important pain point is disaster recovery. Because 60 percent of all information is still stored in hardcopy, a disaster recovery plan is crucial, making a document management and imaging solution vital.

How can a document management solution fit into different types of business processes?

There are common document management challenges that exist in all companies. Generally, a document management solution would focus on the accounts receivable and accounts payable departments. Most companies have a collection department. You’re trying to increase revenue by bringing in as much receivable cash as possible. You may have customers who are behind on their invoices. With a true document imaging strategy, you can reduce that accounts receivable past due by 30 to 40 percent, bringing cash receivables to the company quicker.

How can document imaging help reduce late payments?

If I’m in an AR roll at an organization and I call a customer to follow up on a past due invoice, their usual response is that they lost or never received the invoice. Nine times out of 10, that collector has to put the customer on hold, or stop the conversation, go to a file cabinet and search for the invoice, which might be misplaced or, on someone else’s desk. Then, the collector has to call the customer back, make a copy of the invoice, then either fax it or mail it to the customer. Now, four or five days have gone by. The collector calls the customer again but can’t get a hold of them.

With a document management solution in place, the collector can have a copy of the invoice up on the screen when the call is placed. Then when the customer says they can’t find the invoice, the collector can e-mail or fax it from his or her desktop right then and there. A true document management solution cuts back on the cost of those receivable days out.

What are some solutions to other pains you mentioned?

When it comes to accounts payable, having a true document management process in place will reduce AP process time, and relieve any miscommunications within the organization. An invoice from a vendor is scanned into the system, attached to it is a bill of lading from the vendor with a purchase order from your organization, along with a copy of the actual check that was sent to the vendor.

Consider this: a purchase order is processed for 10 PCs, which is then issued to the vendor. The vendor processes the PO, sends 9 PCs and attaches the bill of lading for those 9 PCs, then sends an invoice for 10 PCs. The issue is the bill of lading goes to shipping, the invoice goes to accounting. The problem: without the accounts payable and the shipping departments communicating to each other, they are not going to know that there were 10 ordered and paid for, and only 9 were received.

With a document management process in place, you would have all these images electronically. You can link all these documents together and view them all on your screen so you know exactly what you’re getting, what you’re paying for, what you received, and what you need to cut a check for. This way, the entire organization is linked together.


Matthew J. Brooke is a solutions analyst with Toshiba Business Solutions. Reach him at or (216) 525-8385.

Wednesday, 25 November 2009 19:00

Brand-new brand

Whether you realize it or not, people form opinions about your company based on your brand. And every organization, no matter how large or small, can benefit from using public relations and strategic marketing to improve the way it communicates its brand to potential customers.

“PR can help you define that brand, so you are presenting yourself and your qualities the way you want to,” says Maria Evans, adjunct professor with Delaware Valley College and president of Martino Evans Communications. “It can then help you create messages to help you communicate that brand.”

Smart Business spoke with Evans about how to use effective public relations to bolster your brand.

What can a good public relations program do for you?

A good PR program can create greater awareness of businesses and individuals, attract additional clients and increase the revenue of the business — not necessarily the number of clients but how much and how frequently they are purchasing.

If you are recognized as an expert, you can increase your revenue through additional sales or through increased demand generated from raised awareness.

PR can build your credibility, enhance your reputation and establish you as a leader in your particular niche, area of a profession or geographic area.

That doesn’t necessarily have to be tied directly to the business. An employee’s good deeds or involvement in community events can increase your company’s reputation. The halo effect gives that benefit to your company or the products and services that you sell.

How can a company improve its brand?

The first step is to decide on your brand. Keep in mind your unique offering and what the competition offers. Develop your message, then get it out consistently and constantly.

It can be something everyone can do. For example, the signature on your e-mail and the incoming and outgoing messages on your voice mail should all be consistent. They should all include whatever benefit you are trying to make sure people realize you have to offer. Whatever that benefit is, you need to get it out consistently and constantly in small and large ways.

What different avenues can you use to get the word out about your brand?

There is a lot of chatter out there, so you need to participate in the chatter that your target audience pays attention to. You can go on some of the social media sites, but if your target audience isn’t on them, that’s not going to benefit you.

However, if they spend a lot of time online, you want to make sure that you keep coming up and coming to their attention. It’s a matter of focusing.

Public relations can help you get a buzz going on your services, and it can help create that word-of-mouth, that raised level of enthusiasm and awareness about your products and services. PR also works to cultivate media, which is not just pushing out stories. It means learning what people who are important to your audience need and becoming a resource for them.

Public relations done right is a very time-consuming endeavor.

Public relations also involves managing a crisis. A good PR program deals with that before it happens and has a plan in place so you have people trained to speak to the media so they can be clear and concise about what they need to communicate. It also helps make sure they get the information out in a timely manner. Public relations is all about timeliness.

Is spending money on PR or marketing wise in today’s economic climate?

With the downturn in the economy, a lot of people say they can’t afford to do PR or marketing. Now is the time you should, though, because it is a little bit quieter out there.

Whether you are a small or large company, you want to position yourself as viable. If you intend to be a company that is around in five years, you need to be out there letting people know you’re still out there doing good things.

People say they’ll get the word out when the market gets better. But remember: Out of sight, out of mind. Public affairs is about consistently being involved and sharing your knowledge.

How can a business determine which branches of PR or marketing it might need?

One thing I always advise clients is that you don’t want to start with, ‘I need a press release!’ You need to start a few steps back. Ask yourself, ‘Who am I trying to reach?’ It’s basically a marketing plan. ‘What do I have to offer them? What is special about what I’m trying to offer them? Where are those people I’m trying to reach?’

If you figure out what that is and develop your message, it starts falling into place. You have to start by looking at it strategically.

Once you’ve decided that, you can determine priorities. Sure, it would be great to reach all your targeted audiences, but your resources may allow you to only do some right now.

Your PR plan needs to be strategic, or else you’ll be overwhelmed, and nothing will happen.

Maria Evans is an adjunct professor with Delaware Valley College and president of Martino Evans Communications. Reach her at (215) 738-2544 or

Wednesday, 25 November 2009 19:00

Climbing back

One of the consequences of the financial meltdown is that business owners can expect a more hands-on approach from their bank.

“The lenders are going back to how banking has been since the beginning of time,” says Kenneth M. Haffey, CPA, CVA, partner with Skoda Minotti. “They want to be more closely aligned, understand what their customers are doing even better, see how they are running their businesses and determine how they can help them at different times with their lending needs.”

The days of a lending institution making a loan based strictly on if its calculated ratios predict that a business will be able to pay the loan back are long gone. Entering numbers in a spreadsheet is a poor substitute for asking in-depth questions to their customers.

Smart Business spoke with Haffey about how banks are becoming more of a financial partner than just a lending institution.

What types of challenges does the finance industry face today?

One of the challenges is working in this interest rate environment. In my life, I never thought I would see 4.5 percent 30-year mortgages or treasury rates down in the very low single digits. That puts pressure on financial institutions because they work off margins. Lending out money at this rate and bringing in money at that rate — that differential provides the margin.

They have some fee income that will hopefully cover some of the operating expenses, but the margins have been squeezed because they can only go so low on deposit and loan rates. When people are getting 0.4 percent for a one-year certificate of deposit — it’s almost not worth the gas driving to the bank to make the deposit.

The next challenge is credit quality and the credit market. Many companies are struggling to make their loan payments. With so many organizations having trouble paying their loans, the banks have been forced to tighten down on credit and loan covenants. Tighter loan covenants make it more difficult for organizations to make money in the traditional ways.

What must financial institutions do to adapt and succeed today?

You, people you know, people you work with, successful businesses, etc., have been paying their loans down all through these tough economic times. We hear that loan delinquencies are up, but there are still lots and lots of people paying down their loans. So now banks are sitting on larger mounds of cash than they’ve had for some time. They are trying to invest that cash in U.S. treasuries, which are safe investments earning 1 percent or so.

Next, they are being told by the regulators to lend out more money. Their ratios are out of whack. They have lots of liquid assets, short-term investments on their balance sheet that otherwise in a normal situation would be money lent out to customers. For financial institutions to start improving their margins, they need to do more lending.

What needs to happen next?

Lending needs to pick up some steam. We’re starting to see, hear and feel that now. I was in two separate meetings with two local bank presidents in Cleveland this week and both told me that they have been loosening the purse straps a bit and have been funding more loans over the last two to three months. That will start improving their margins first and foremost, getting them back to more profitability. The regulators will feel better about that.

Hopefully the underwriting they are doing is sound so these loans won’t end up on a watch list. But there are fewer companies found creditworthy than there were a few years ago, so the banks are working harder to make sure the companies to which they’re making loans will be able to repay the loan. It is starting to happen.

On an investing end, that should improve interest rates for depositors to make people more interested in depositing money and committing it for some time period. That allows the asset liability matching that banks do to stabilize themselves.

What lessons can other industries learn from the challenges of the finance industry?

Be innovative but don’t go into things blindly. It didn’t make sense to me or to a lot of people when we received pieces of mail stating you could have a 1.2 percent mortgage for a period of 18 months and then it will reset. Many smart people and organizations went along with that just because it was available, like lemmings jumping off a cliff. Many bankers moved in the same direction offering these loans. It was very visible because lots of people touch banks.

Other industries can learn that if it looks, quacks and walks like a duck, it generally is a duck. Does having a duck make sense for your organization?

Don’t just do something because others in your industry are doing it. Some very well-run financial institutions got into this lending. The notion was that there will always be value in real estate. Then if someone has a problem, they’ll sell off the real estate and that’s that.

Well, banks are in the business of lending money, not owning and selling real estate. If there is a lesson to be learned here, it’s to truly make sure that industry trends aren’t something to blindly or hurriedly jump into because your neighbors in your industry are doing it and you want to keep up with the Joneses.

Kenneth M. Haffey, CPA, CVA, is a partner with Skoda Minotti. Reach him at (440) 449-6800 or

Wednesday, 25 November 2009 19:00

Road risks

Employee usage of company vehicles, while convenient and sometimes necessary, can create costly exposures if the proper policies and procedures aren’t in place.

Jonathan Theders, CPIA, president and COO of Clark Theders Insurance Agency Inc., says there are three main vehicle uses that should concern business leaders: driving personal vehicles for work-related purposes, driving company vehicles for work purposes and driving company vehicles for personal purposes.

“Typically, the focus has always been on company use of company vehicles,” Theders says. “Very little is spent on the things that fall outside that.”

Smart Business spoke with Theders about how to protect your company from the risks associated with employee driving.

What issues can arise from personal use of company vehicles?

Some businesses don’t allow people to take their vehicles home, but a lot of businesses do. Think of a contractor who has a pickup truck that’s used at job sites. It’s not necessarily convenient to always come into the office in the morning before going to the job site, so the employee takes the vehicle home.

Then, if the contractor’s friend needs help moving something and he has the pickup, he can find it hard to refuse to help. Or, he may not have an extra car, so he takes the company vehicle to the grocery store, or his spouse uses it.

There are many different factors that should concern a business because insurance and liability always follow the vehicle. So if you allow an employee to take a vehicle home and that person allows a spouse or child to use it, or he or she uses it for another purpose, that liability comes back to the owner of the vehicle — the company. There is no escaping that liability on a company-owned vehicle.

How can a company protect itself from these situations?

You need to make sure the company has a driver policy. The company needs to qualify who will be allowed to drive its vehicles. While drafting the policy, the company’s decision-makers need to say, ‘If we allow personal use, it’s only going to be the employee driving for personal use.’

Some companies allow the spouse to drive for personal use. If you do that, you need to do the same due diligence on the spouse that you would do for an employee because that person is riding on your liability. So if someone has three DUIs and takes the company truck to the neighborhood pub, that liability is going to come back to the company, even though it’s an employee’s spouse, not the employee.

More times than not, companies just don’t have a policy for personal use of company vehicles. They don’t think about it because they’re more concerned about driving to and from the job. It becomes a nuisance for some people because they don’t see that as a great exposure. But when you think of the range of liability for the company, it can be quite amazing.

What should be covered in a company’s driver policy?

When you set up criteria for a vehicle operation policy, you want to make sure all your drivers are evaluated and that you discuss if the policy will affect only employees. If you’re going to allow personal use, will you allow other members of the family to drive? If you allow other members to drive, how are you going to do due diligence to make sure they are safe and tracked? Are you going to put a restriction on how far they can drive? Are you going to stick to within 50 miles of their home, or will you allow them to take it to Florida for the family vacation? I’ve seen kids take company cars on spring break, and the company ends up bearing the burden of that claim for what never should have happened.

Another risk factor that should be addressed is the use of vehicle restraints like seat belts. You also need to deal with potential driver distractions, whether that is the use of cell phones, text messaging or other drivers on the road.

All these issues can be written into policies, then communicated to your employees. Provide training to keep your drivers safe while they are operating motor vehicles under the scope of their employment.

Your employees have to realize the risks to which the company opens itself by allowing these things to happen. Maybe the executives are comfortable with that, maybe they’re not. Maybe your insurance company is comfortable with it, maybe it’s not.

The involved parties need to have these discussions ahead of time rather than get into a situation and wish they had addressed it (proactive versus reactive).

How can your company’s driver policy affect the amount you spend on insurance?

These decisions certainly have an effect on exposures and rates from an insurance company — especially if you have incidents.

When you are working with underwriters who are pricing the risk, you need to realize that they only know what they have been told. You can draw a better picture for them if you can say, ‘This is the policy we have in place. We don’t allow personal use of the company vehicles.’

Whenever you draw a clearer picture, it makes them feel more comfortable, which gives them a reason to lower rates.

Jonathan Theders, CPIA, is president and COO of Clark Theders Insurance Agency Inc. Reach him at (513) 779-2800 or

Monday, 26 October 2009 20:00

A painful problem

Many people assume that low-back pain in the workplace is an issue that only affects those who have jobs that require some sort of physical lifting. However, lower back pain affects everyone — it’s the most common reason people see a doctor other than the common cold.

“The truth is, back pain is not just for construction workers,” says David M. Weir, president of UPMC Work Partners. “It’s an equal opportunity health issue.”

Smart Business spoke with Weir about how to stop low-back pain from negatively affecting productivity in the workplace.

Why is low-back pain an important issue for employers?

For employers, low-back pain is an important issue because back problems are the single largest cost drivers in terms of days away from work, both for occupational and nonoccupational reasons. It is also the most common reason that people see a doctor other than the common cold. Studies have shown that back pain can make it difficult to concentrate on the job. According to research by Duke University, up to 80 percent of people will deal with back aches at some time in their lives.

Isn’t low-back pain at work mostly associated with certain jobs?

Certainly, there are some occupations that put special stress on backs such as nursing, construction and factory work. But even routine office work can hurt your back if you fall into risky habits. In many cases, back injuries, even those that occur on the worksite, are manifested over time. It’s a general degeneration of the body and core muscle fitness that leads to the problem.

Can someone learn how to prevent low-back pain at work?

Historically, prevention of back pain at work has been viewed as a ‘body mechanics’ problem. The thinking has always been that if employees are taught the correct way to bend, stretch and lift, they can learn how to avoid back injuries. But, in many cases, low-back pain is not caused simply by bad mechanics or by what someone does in the workplace. Often, it is more of a fitness issue in combination with a work-related issue.

Factors such as age and genetics can play a large role in terms of whom it affects. To a great extent, once you reach age 35, it’s not a question of if you’ll get back pain so much as when you’ll get it.

What is the biggest factor that drives back pain?

The lower back is a complex anatomy that protects the spinal cord, allows mobility, provides support of the spine and allows the attachment of many muscles that involve hip motion: standing and walking. Some causes of pain due to muscle or ligament strain are degenerative joint diseases, disc disease, spinal stenosis or osteoporosis as we age.

Many times back pain can result from a lack of overall fitness. Muscles, joints and bones all benefit greatly from regular physical fitness exercises.

People who lack good physical fitness are more likely to get back pain than someone who participates to some extent in regular exercise. And, persons with chronic lower back pain are most likely less fit than those who do not have it.

What can be done to combat low-back pain?

Over the years, loss control and safety programs have had a positive impact on the frequency of traumatic-type injuries involving falls, slips and trips, etc. What we are seeing more of is strains and sprains associated with overall fitness/core muscle strength than acute-type events.

One of the best ways to manage lower back pain is to improve general physical fitness with cardiovascular exercise, because that helps increase the supply of blood to all the tissues in your body. Regular stretching and movement are some of the best things you can do to prevent back injuries.

How can being fit help your back?

Being fit, which involves strength and flexibility, helps you maintain a healthy weight. Being overweight increases the risk of having lower back pain. Exercise also has a positive effect on mood, and having a positive mood is an important part of managing a chronic condition such as low-back pain.

What work-related things can you do to help avoid back injuries?

Even though the causes of back pain are not easily pinpointed and are probably due to a combination of factors — family history, overall fitness, flexibility, lifestyle — there are factors that are within your control. There are work-related factors that can impact your back. These include:

  • Force. If you exert too much force on your back, you can cause injury, so jobs that require frequent lifts or moving of heavy objects can be a problem.
  • Repetition. Overly repetitious tasks can lead to muscle fatigue or injury.
  • Posture. Aches and pains can result from sitting still for long periods, such as in front of a computer. Adjusting your body every 20 minutes can help avoid problems.
  • Stress. Pressures at work or home can increase stress level and lead to muscle tension and tightness, which can cause back pain.

What strategies can you employ at work to reduce the risk of back pain?

There are some things you can do to limit risk such as planning your moves, minimizing hazards, examining your workstation for potential issues such as proper chair height, position of monitor and keyboard, lighting, etc. But, remember back problems can be caused by many factors and your best defense is good body mechanics, following solid safety practices, and maintaining a physically active lifestyle.

David M. Weir is president of UPMC Work Partners. Reach him at (412) 454-8720 or

Monday, 26 October 2009 20:00

Ethical decisions

Business ethics is often dismissed as a topic that requires passing reference in meetings, little more than just being sure to include a routine paragraph in your employee handbook.

However, Jim Triplett, a faculty member at University of Phoenix’s Cleveland Campus who teaches management coursework on building a culture of business ethics, says that making it a core value of your business can actually provide your company with a method for gaining an advantage over your competitors.

When everyday decisions need to be made outside the borders of the established procedure, that’s when a commitment to business ethics starts paying dividends.

“When the environment changes and gets beyond the scope of your regulations, you’re left in a Wild West environment, hoping your employees will make the right decisions,” says Triplett. “We’ve all seen how the wrong decision can not only be costly, but catastrophic to the organization’s very survival.”

Smart Business spoke with Triplett about how to create an environment that ensures your employees will make the choice that’s best for your business when that time comes.

Why is ethics important in business?

Evidence suggests that in the absence of an established and appropriate formal structure — rules, policies and procedures that exist within the organization or among legal/regulatory bodies that dictate how people should behave — it is ethics that ultimately determines how individuals will behave.

What will employees do when faced with dilemmas that don’t fit into previously established rules and guidelines? How do they make that choice, and will it be a choice you’re comfortable with? The external environment and competitive landscape changes much faster than our ability to create new internal rules and guidelines. So you have to rely on your culture and business ethics to ensure people will behave appropriately.

How can focusing on ethics change the way businesses make decisions?

It ensures employees behave in appropriate ways that avoid legal trouble, as well as embarrassing situations that impact the products and services your company provides. Creating that additional mindset among your employees is important.

This is particularly critical for small-business owners that tend to be spread in so many directions because of the size of their businesses. With responsibility and involvement in everything from the finances, sales, and production to making sure people are behaving consistently with the employee handbook — their attention to each task is by definition much more diminished. They have to trust their employees to do the right thing.

How can businesses stop ethical lapses?

A company’s culture is a direct reflection of the ethical behavior of that organization. Begin by observing what your organization does when no one appears to be looking. You have to indirectly assess your culture, because if you ask people directly, they are less likely to be honest. They are going to give you the answer they think you want, not the answer they would normally give.

Then, if necessary, take steps to change the culture to make sure it is consistent with your organization’s objectives. This is the critical mistake about business ethics owners and managers typically make — they fail to ensure that ethics and objectives run parallel to each other. Once you’ve addressed ethics/objectives alignment, then the business owner has to be sure to model the behavior. People have to see it reinforced. It’s one thing to tell people they need to behave ethically. But if they don’t see it being reinforced at all levels, it simply falls through the cracks as unimportant or inconsistent with ‘true’ expectations.

Managers have to make an exceptional effort to make sure they are modeling how they want employees to behave. People will absorb whatever actions they see others take. If the actions are toxic to the organization, they will adopt that pattern as well.

How can people learn to make better ethical decisions?

As a manager, it’s important to realize that so much of ethical behavior is simply being aware of how your organization makes decisions. Because we’re bombarded with a tremendous amount of information each day, we develop mental shortcuts as a stress reliever. However, when using these shortcuts, we’re not necessarily aware of when something exceptional may be happening. Then, a number of ethical lapses begin that can silently build in intensity.

I encourage my students to become more aware of their environment and make a conscious effort to be aware of everything around them. They come back amazed. That’s the first step, because when you are aware of surroundings, behaviors and decisions, you’re more conscious about the things you do on a regular basis. Periodically asking yourself why you do something breaks that routine you’ve settled into. Think about what you may have ignored in that process. In a business environment when you are dealing with transactions on a daily basis, it’s very easy to overlook things.

The second step is introducing ethical frameworks. There is no such thing as a right answer, or good ethics or bad ethics.

There’s no definitive truth for every situation, but they find that business ethics is about picking a model and remaining consistent to that model. If you’re consistent, then you can sleep at night without worrying about the decisions you made, or what is going to be on the front page of The New York Times tomorrow about your organization.

Jim Triplett is a faculty member at University of Phoenix’s Cleveland Campus. University of Phoenix, the largest private university in North America, serves a diverse student population, offering associate’s, bachelor’s, master’s and doctoral degree programs from campuses and learning centers across the U.S. as well as online throughout the world. University of Phoenix’s Cleveland Campus serves students online and at locations in Independence, Beachwood and Westlake/Crocker Park. To learn more, contact University of Phoenix at (216) 447-8807 or (800) MY SUCCESS or

Monday, 26 October 2009 20:00

The deal of a lifetime?

The downturn in the housing market and the glut of condominiums in Chicago have combined to drive down prices and entice interest from potential buyers, as investors and disgruntled commuters alike are thinking about getting a place in the city.

“What we are seeing is a lot of people trying to take advantage of the slump in the condo market and purchase investment properties or weekend homes,” says Patricia A. O’Connor, a partner with Levenfeld Pearlstein, LLC. “If they have the cash or the ability to finance, there’s no doubt it’s a great opportunity to buy now. But you really have to think twice about the short-term benefit and the long-term commitment you’re making.”

Smart Business spoke with O’Connor about how to avoid common mistakes when purchasing a condo and how to make sound decisions.

What major issues should potential buyers be aware of when looking at condominiums?

If you are going from a single-family, freestanding home and moving into a condominium or town home, there are going to be issues, and the two biggest are economic commitment and lifestyle.

You have to understand that what you are buying into is membership in the organization. You are going to be bound by restrictive covenants, and if it’s a condo, you are also going to be bound by the terms of the Illinois Condominium Property Act.

Many purchasers want to buy a condo because they think they won’t have to take care of much, but that’s not the case. You’re not a renter. You are a joint owner of the common elements with every other owner in that association.

There are also rules of the association. People don’t necessarily realize that they can’t always do the construction they want to do. You have to go to the board for approval on anything that impacts the common elements.

Many issues can be avoided simply by doing due diligence. Take that extra step, because purchasing a condo is not like purchasing a single-family home, where you recognize that you are going to be able to make changes and will be responsible for the cost. People who buy condos don’t necessarily give a lot of thought to what they will and will not be responsible for cost-wise and what they can and cannot do.

What common mistakes do prospective buyers make?

You really need to think ahead. If you are looking at a foreclosure or short sale, it can be a great investment opportunity, but if there are a multitude of short sales and foreclosures in that building, that means there are a lot of condo units that aren’t paying their assessment. Who pays those assessments if they’re not paying? It falls on the other owners.

Also, if you have a personal economic crisis and you can’t pay your assessment, the association can evict you. You could end up out on the street.

What else should purchasers be aware of?

Someone who is looking into an older building where there hasn’t been a recent influx of purchasers is going to be dealing with owners who have been there for a long time.

Generally speaking, an older, more established condominium is a safer purchase, but you have to balance the risks and rewards of an older condo. The real deals are in the associations and condominium developments that came online in the last five or six years, in which the initial purchasers are ‘under water’ on their mortgages.

Find out what the level of assessment increases has been over the last few years, and compare the assessment amounts to similar buildings in the area with like amenities. Your broker can help you with that.

The comparison is important, because if there is one building that has similar amenities to every other building in the immediate neighborhood and the assessments on it are disproportionately lower, it should be a red flag to any potential buyer. That tells you that the association is not funding its reserves as much as it should. It also tells you that the association isn’t addressing any deferred maintenance.

Although the low assessment may look more attractive on a monthly basis, if a big project like a roof replacement comes up, you may be hit with a special assessment when the association doesn’t have the money to otherwise pay for it from its reserves.

What can prospective purchasers do to protect themselves?

The law requires that you be provided with certain information regarding the financial situation of the association and whether the association anticipates any special assessments in the next couple of years.

You are entitled to see the declaration, the bylaws, and all the rules and regulations. There may be something in there that may be a red flag and make you decide this condo would not be a good fit for you for one reason or another.

Take it a step further and ask for information that the condo board is not required to disclose. Ask for minutes from the board’s meetings from the last year so you are aware of what’s going on in the building and to see if there are any design defects or claims against the developer.

Prospective purchasers simply need to do their due diligence to ensure that the association they’re looking at buying into really meets their needs. Work with brokers and real estate agents, and use their knowledge of the industry and the area to make a sound decision, as those professionals have the ability to explain the complex details to prospective purchasers.

Patricia A. O’Connor is a partner with Levenfeld Pearlstein, LLC. Reach her at (312) 476-7523 or

Friday, 25 September 2009 20:00

No surprises

As a business owner, you need to be on the lookout for indemnification clauses in every agreement you sign, or you could be in for a surprise.

Indemnification clauses are the language in a contract that creates the transfer of risk. Brian Chance, vice president of claims and services at ECBM Insurance Brokers and Consultants, says that can be costly if you’re the party taking on risk in the agreement.

“You could become responsible for paying for things you didn’t anticipate, that were not budgeted, or that you didn’t build into your pricing for the work you performed,” he says. “It could create a liability that you aren’t prepared to handle.”

Smart Business spoke with Chance about how to avoid getting more than you bargained for in a contract.

What is the most common mistake people make when navigating contracts?

People sign agreements every day in the regular course of their business, and they don’t read all the fine print that can be in a contract. Contracts can be a page long, or they can be 25 pages long. Many times, people won’t read the nonbusiness transaction-related information in a contract.

For example, if I’m hiring you to paint my house, I might read the part of the contract that discusses what room you’re going to paint, what kind of paint you’re going to use and how much I’m going to pay you to do it, but I may not read the other stuff in that contract you give me. That ‘other stuff’ is where the problem lies.

What types of problems can occur in a contract?

When you sign a contact with an indemnification provision in it, you could become obligated for many different kinds of liability and payments you wouldn’t normally anticipate. If the contracts are ordered properly, those transfers of risks and costs are valid. After you discover the problem you can’t say, ‘I didn’t read the whole thing, so you can’t hold me accountable for this.’ Once you’ve signed it, you’re stuck with what the agreement says. The scary thing about an indemnification provision is it can cause you to become responsible for things you didn’t do or didn’t cause to happen simply by signing a piece of paper.

What can business owners do to ensure they don’t fall into that trap?

The most important thing is to read the entire contract before it’s executed. Second, don’t assume that a contract that is sent to you on a standard form is just like all the other contracts that look just like it and that you’ve signed in the past. Third, consult with someone who has experience at reading those types of agreements. It may be your insurance broker or attorney.

Why is professional help needed to read contracts?

You need someone who is experienced at reading the contract to help you realize what it is that you are being asked to do. Business owners can assume responsibility for many unusual and/or problematic things that someone looking at it logically wouldn’t ever think was possible. So you need someone who is experienced at reading contracts to help you understand exactly what you are being asked to be responsible for. A typical example of an unpleasant surprise is if you agree to be responsible to pay reparations for something that is not your fault. Signing contracts without consulting with someone who understands how they work can directly impact your bottom line.

How can contract mishaps affect your bottom line?

First, you can be responsible for something you didn’t expect to be responsible for and didn’t consider in your pricing. Second, if you sign contracts without someone advising you, you could be taking on legal responsibility for things for which you don’t have insurance coverage. By creating responsibility for yourself, you could be creating an uninsured liability. You may have to pay out of your own pocket because you agreed to do something your insurance policy won’t cover.

It’s one thing to take on responsibly for something your insurance carrier will pay for; it’s something else altogether to take on responsibility for something you have to pay for out of your own pocket.

How can a business owner become better at navigating contracts?

You have to read things you’re asked to sign. Many things you are asked to sign contain indemnification agreements that you wouldn’t naturally expect to be there. For example, you could sign a purchase order for something and it could contain an indemnification agreement.

Look for clauses in the contract that use the words ‘indemnify,’ ‘defend’ and ‘insurance.’ Phrases containing those three words are typically where you will find the problematic language in an agreement. That doesn’t mean it won’t be somewhere else, but most of the time the troublesome language is in those areas.

Work with a consultant, broker or attorney who can help you understand how to read contracts.

And last, take classes from local insurance societies that can educate you on contractual indemnification.

Brian Chance is vice president, claims and services, for ECBM Insurance Brokers and Consultants. Reach him at (610) 668-7100 or

Friday, 25 September 2009 20:00

Printing money

Whether or not you realize it, print volume at a typical office is increasing by 10 to 15 percent annually. In fact, network printing costs are the largest unaudited expense in business today. According to industry sources, 1 to 3 percent of corporate revenue is spent on internal printing.

Ned Bergen, vice president of sales at Toshiba Business Solutions, says many businesses are focused primarily on their copiers’ flashy features and cost-per-page, overlooking their other document output devices, like printers, scanners and fax machines.

“On average, for every copy-based product you have, you’ll have four to eight printers,” Bergen says. “You’re only looking at a small slice of the pie.”

However, analytical programs can provide an enterprise-wide assessment of your document production.

Smart Business spoke with Bergen about how evaluating your company’s document usage could reveal costly inefficiencies.

How can using an enterprise-wide document output strategy benefit a company?

The benefits begin with significant cost reduction. You get a technology refresh — right-sizing of your technology fleet based on today’s demands and the needs of the current work force. Right-sizing your technology while offering significant cost savings is more appealing than ever.

What steps are involved in a document output analysis?

The first step is to select a document management partner and establish mutual goals along the lines of cost-cutting, technology refresh and workflow analysis, such as moving from paper-based processes to digital business processes.

It requires executive sponsorship because it’s about changing business processes, not about how many bells and whistles a new printer has, or how many pages per minute the copier can do.

Then, the document management partner would do a physical walk-through of the facility and inventory of all the output devices. Next, the partner compiles the hard costs involved with all the devices and reviews some of the soft costs, like labor.

A quality document management partner will set the goals, do the assessment, do an inventory of the devices, interview the users, and then quantify what their needs are. Then that partner will create the baseline based on the current inventory of devices’ usage and cost.

In many cases, businesses do not have all the pieces of the cost puzzle. A good partner will be able to supply them with verifiable street pricing on the cost to run these different devices.

At this point, you have figured out document volume. From there, you can identify fleet needs and end cost. Then you can compare that to national benchmarks and determine how many print devices per employee exist in that organization compared to national benchmarks -— how much volume is being done per employee.

Then, ultimately, you can identify any areas in which the current technology fleet is not satisfying the needs of the staff.

What mistakes do you tend to find businesses making during the ‘diagnosis’ part of the document analysis?

Many people don’t know what their costs are. If your company has 100 employees with 10 departments, each department may be buying their own sets of supplies.

We’ve seen instances in which the same company is buying the same toner cartridge from three different vendors and at three different prices. It’s a decentralized purchase at a department level. The low incremental cost of each component makes the process seem insignificant. Most people in the organization could put a $100 cartridge on their expense account. But, if you have six or seven different people in the organization ordering 10 or 15 of them a month, you could be spending $5,000 to $8,000 a month in print supplies alone.

Another part of the diagnosis is analyzing color usage. Color inkjet printers are a classic example of giving you the razor for free if you buy the blades. There’s a reason why people are giving you these free printers to put on everyone’s desk. The cost per page is extraordinarily high.

Also, multi-function printers are significantly less expensive to operate per page in both black and color ink. Single-function printers can cost three to 10 times more per page than these larger multi-function devices.

There is no doubt that a low-cost or free printer may cost you more than it should, and give you lower-quality results than you need.

What happens after the ‘diagnosis’ part of the document analysis?

The ‘prescription’ part of the analogy — the optimized solution. Your document management partner will show you how their recommendation dovetails with your corporate goals and provide solutions for any areas that might be significantly outside national cost and usage benchmarks.

Of course, that has to be balanced with the organization’s workflow. The logistics of the workflow has to be kept in mind as well. For example, you can’t just put one big multifunction device in the middle of a large building and tell everyone to walk there.

Next, your document management partner would make a recommendation on right-sizing your fleet. It would likely be a combination of new multi-function print devices along with some current print devices. It’s important to note that an optimized technology placement strategy doesn’t mean you’re going to have to acquire all new technology.

Finally, you’ll see a comparison of current cost and proposed cost, which shows you the projected savings. Once the solution is implemented, periodic follow-ups will ensure that the new workflow processes and technologies are delivering the projected savings.