Philadelphia (1114)

Left or right? Up or down? Yes or no? The human life is full of choices. We make them on a minute-by-minute, hour-by-hour, day-by-day basis. It’s what we do, how we live and move and have our being in the world.

Consider some choices you may have made in the last few years:

  • What car should you buy?
  • Should you ask her to marry you?
  • Are you ready for another baby?
  • Is this house right for you, or should you keep looking before you make an offer?
  • Who should be let go in the next round of budget cuts?
  • Will your department reach its goals this year?
  • Should you ask for a raise?
  • Is it time for your mom to enter a nursing home?
  • What do I need to do to lose weight?
  • What will you eat for dinner tonight?

Decisions are usually easier when we are only faced with two choices. Blue or red car? Two-story or ranch-style home? Slim Fast or Weight Watchers diet plan? Our brains are somehow wired better to choose between two competing choices.

It’s when we have more options that we sometimes stall, flutter or downright choke.

  • Three people from a team of eight in the department must be let go.
  • Should we marry now, when we finish college or after we find secure jobs?
  • In order to best reach our yearly goals, should we focus our attention on X, Y or Z, and how much of our remaining budget should we allocate to the project we choose?

Life is full of hard choices, and the bigger they are and the more options we have, the harder they get.

Through my years in working with individuals, groups, companies and organization, I have narrowed the questions we need to ask in order to make the right choices both in our life and in business.

Here are 3 of my best tips for making the right choice:

1. Analyze outcomes, not pros and cons.

Many of us have been taught somewhere along the way to take out a sheet of paper and divide it down the middle with a line. On one side we list the “pros” of a certain choice, on the other, the “cons.”

This old school way of making choices is time worn and tested, but I think there is a better focus: outcomes. In the end, the outcome of a choice made is what truly matters.

Working through a big decision can give us a kind of tunnel vision, where we get so focused on the immediate consequences of the decision at hand that we don’t think about the eventual outcomes we expect or desire.

When making a choice, then, it pays to take some time to consider the outcome you expect. Consider each option and ask the following questions:

  • What is the probable outcome of this choice? (This is the list we should make.)
  • What outcomes are highly unlikely? (This allows them less weight in the choice.)
  • What are the likely outcomes of not choosing this one? (These are negative outcomes.)
  • What would be the outcome of doing the exact opposite? (Play “devil’s advocate.”)

Our thinking should be in terms of long-term outcomes and not short-term pros and cons. And we should broaden our thinking to include negative outcomes. In doing so, we will find clarity and direction in making the right choice.

2. Ask why – five times.

The Five Whys are a problem-solving technique invented by Sakichi Toyoda, the founder of Toyota. When something goes wrong, you ask “why?” five times. By asking why something failed, over and over, you eventually get to the root cause.

Although developed as a problem-solving technique, the Five Whys can also help you determine whether a choice you’re considering is in line with your core values as a person and a business.

For instance:

  • Why should I take this job? It pays well and offers me a chance to grow.
  • Why is that important? Because I want to build a career and not just have a string of meaningless jobs.
  • Why? Because, I want my life to have meaning.
  • Why? So I can be happy.
  • Why? Because that’s what’s important in life.

We now see how the first two tips are interrelated. By asking the Five Whys, we learn that having meaning and being happy are desired outcomes that influence the choice made in asking the first question: Why should I take this job?

The continued relationship can be seen in revealing the third tips for making the right choice.

3. Follow your instincts.

This tip affords you the ability to work through the first two tips with a sense of personal confidence.

Why?

Because research shows that:

The conscious mind can only hold between five and nine distinct thoughts at any given time. That means that any complex problem with more than (on average) seven factors is going to overflow the conscious mind’s ability to function effectively, leading to poor choices.

Our unconscious mind is much better at juggling and working through complex problems. People who follow their instincts actually trust the work their unconscious mind has already done.

In summary:

When we allow ourselves to focus on long-term outcomes rather than short-sighted pros and cons, take on the task of asking “Why?” five different times, and trust and follow our instincts, we put ourselves in a much better position to make the right choice in any given situation in life and business.

Like anything we go through as human beings, this process takes work. Get to work and let me know how it goes.

DeLores Pressleymotivational speaker and personal power expert, is one of the most respected and sought-after experts on success, motivation, confidence and personal power. She is an international keynote speaker, author, life coach and the founder of the Born Successful Institute and DeLores Pressley Worldwide. She helps individuals utilize personal power, increase confidence and live a life of significance. Her story has been touted in The Washington Post, Black Enterprise, First for Women, Essence, New York Daily News, Ebony and Marie Claire. She is a frequent media guest and has been interviewed on every major network – ABC, NBC, CBS and FOX – including America’s top rated shows OPRAH and Entertainment Tonight.

She is the author of “Oh Yes You Can,” “Clean Out the Closet of Your Life” and “Believe in the Power of You.” To book her as a speaker or coach, contact her office at 330.649.9809 or via email atinfo@delorespressley.com or visit her website at www.delorespressley.com

While “location, location, location” remains a primary concern for a business choosing new real estate, the criteria used to compare buildings is shifting.

“It’s clear that hyper-connected businesses are increasingly relying on high-performance networks capable of supporting cloud computing, Software-as-a-Service (SaaS), business continuity/disaster recovery and other high-bandwidth applications,” says Mike Maloney, vice president of Comcast Business Services. “This not only makes having a highly reliable network connection essential, it also makes the advanced communications infrastructure of a company’s office space a key part of its IT strategy and daily operations.”

Smart Business spoke with Maloney about the rise of hyper-connected business and how advanced communications services affect commercial real estate.

How are hyper-connected tenants demanding access to advanced communications in commercial real estate?

An online poll of more than 450 building owners and property managers across the country asked respondents about the importance of advanced communications. Ninety percent said that advanced communications services are the fourth most important selling point behind location, price and parking. In high-rise commercial office buildings and with owners/managers of 2 million or more square feet of property, communications capabilities rose to even more importance.

This is as result of a changing workplace. Instead of a business hosting email servers in its office, storing backup files in its IT room and holding team meetings in a conference room, now a company is likely using a cloud service for email, with its storage backed up to a data center across the country and gathering teams via video conference. Public IT cloud services will account for nearly half of new IT spending by 2015, according to IDC research.

Can having advanced telecommunications services in a commercial building create a competitive advantage?

A majority of building owners and property managers view advanced communications services as a competitive advantage, regardless of other traits, according to the poll. A notable undecided group acknowledged a trend in the market but is unsure how it affects them; they may not have received direct feedback from prospective tenants to validate this. As businesses increasingly rely on network connections for day-to-day operations, ensuring those connections are modern and reliable translates into more uptime, revenue and customer satisfaction.

What role do multiple communication service providers play in occupancy rates?

Nearly two-thirds of the owners and managers surveyed said they have multiple providers of fiber-based communications services in their buildings. With a U.S. vacancy rate of 18.1 percent in the second quarter of 2011, a competitive climate has building owners and property managers looking for any advantage to attract and retain tenants. Nearly one out of two respondents said that access to multiple service providers in their buildings positively impacts occupancy rates by up to 19 percent. Warehouses make the most use of multiple providers, likely due to the key role they play in moving inventory, order fulfillment and related logistics that require redundant network connections to maximize uptime.

By having access to multiple service providers in one building, tenants have options for different services, plans, prices and service level agreements, and the flexibility to switch providers in the future. More important, access to multiple service providers provides critical redundancy and load balancing so the company can ensure that it maximizes network uptime and overall performance.

How often is advanced communications service a topic of negotiation with prospective tenants?

More than one-third of respondents say that in 75 percent of negotiations with prospective tenants, the topic of advanced communications is raised. This was even higher for respondents who own or manage suburban office buildings. In today’s competitive real estate market, negotiations are important, as the outcome represents a fixed outcome of revenue and cost for years to come. As lease rates often do not have much room for negotiation, other items grow in importance, including advanced communications services. If managers and owners do not have access to advanced communications services, they should discuss a plan for bringing them into the buildings and be aware of available service providers.

How can property owners and managers highlight their buildings’ communications services?

Once properties have the right communications infrastructure, ensure that marketing and sales materials list the services and providers available so these selling points stand out for prospective tenants. Highlight network access points, data rooms or other onsite communications facilities when giving tours and make sure brokers are knowledgeable about what services are offered in each building.

Do an advanced communications services audit that covers what service providers and associated products, services and prices are available as compared to competitive properties in the area. This will help you validate and communicate your competitive advantage, and identify and fill in any access gaps.

Research local service providers and discuss the requirements for extending providers’ networks, including the construction timeframe and the bandwidth capacity of the network. It’s critical to ensure that buildings have a wide range of bandwidth capacity options delivered over multiple, diverse networks so that if tenants access both, they can still be connected, even if one network goes down.

Don’t wait for tenants to ask about advanced communications infrastructure. Take the time to understand your tenants’ business and potential applications, as well as the services needed to run it. Then proactively discuss how your building’s infrastructure is suited to those needs.

 

Mike Maloney is a vice president of Comcast Business Services. Reach him at michael_maloney@cable.comcast.com.

Insights Telecommunications is brought to you by Comcast Business Class

The Pennsylvania Wage Payment and Collection Law (WPCL) allows employees to bring a civil legal action against an employer if they are not paid for work performed and wages earned.

“The law, which has the aim of making sure employers are paying employees what is due when due, provides tough consequences for employers who don’t comply,” says Alfredo M. Sergio, an attorney with the Employment Law and Commercial Litigation groups at Semanoff Ormsby Greenberg & Torchia, LLC.

Smart Business spoke with Sergio about what employers need to know about the Pennsylvania law, including possible individual penalties for noncompliance.

What are the highlights of the Pennsylvania Wage Payment and Collection Law?

The WPCL requires employers to notify employees at the time of hire of their rate of pay, the time and place of payment, and the amount of wage supplements and fringe benefits. Employers must pay wages on regular paydays designated in advance, and must pay non-salaried employees semimonthly or more frequently, unless stipulated in an employment contract. The statute has a fairly broad definition of wages, and includes all earnings of an employee, such as regular wages, overtime and commissions.

Employers are also responsible for keeping accurate records of hours worked and wages paid to each employee. If an employer is separating or terminating an employee from the company, the business must pay any wages due by the next regular payday.

If not, the employee can file a claim with the Department of Labor and Industry (which can take up the action on behalf of the employee), or the employee can file suit against the company.

What penalties can an employer and its personnel face for failing to comply?

Penalties for failing to pay wages can have a substantial impact on an employer, whether resulting from a private civil action or action by the Secretary of Labor and Industry. If an employee files a claim for unpaid wages, the employer must immediately pay any undisputed portion of wages.

If the employer or former employer fails to pay the claim or provide a satisfactory explanation of the failure to do so within 10 days after receipt of a certified notification (or ultimately, if the explanation is deemed unsatisfactory), the employer will be liable for a penalty of 10 percent of the portion of the claim found to be justly due, in addition to the principal. If the employer goes 30 days past the regularly scheduled payday without paying wages due an employee, the penalty increases to 25 percent of what is owed, or $500, whichever is greater, plus the principal.

Additionally, the WPCL provides for mandatory attorney’s fees in the event a lawsuit is filed to recover wages. The court has some discretion regarding the amount, but if an employer has violated the law, the employer will end up paying the principal, the penalties and some degree of the employee’s attorneys’ fees, which can be significant. While criminal penalties are not always imposed, the law provides that an employer can be fined up to $300 or for imprisonment of up to 90 days, or both, for each offense. The nonpayment of wages to each individual employee constitutes a separate offense.

Can company personnel be held personally liable for noncompliance?

In addition to general and criminal liability, the WPCL provides for individual, personal liability for violations. This surprises many employers, as they generally think of the corporate structure as providing protection from individual liability or debts of the company.

The WPCL defines ‘employer,’ in part, as including a company’s agent or officer. An agent or officer who has been involved in the decision to withhold wages can be found individually liable for violations of the law. This can even include the company CEO, president or CFO.

Employees often file wage claims not just against the company but also against individual officers of the company to place additional pressure on the employer and its principals to recover unpaid wages.

In what situations do employers most often violate The WPCL?

Among the biggest missteps to avoid are not paying an employee’s wages when due and making deductions from the last paycheck when the employer is not entitled to do so.

Wage payment and collection issues often arise when an employee is separated from an employer, either because he or she quits or is terminated. These issues are arising more often in recent years in a difficult economy. A company might be closing, contemplating bankruptcy or laying off employees, but employers need to pay employees what is owed.

When a company files for bankruptcy, employees often seek to hold corporate officers personally liable for unpaid wages. Even short of bankruptcy, if an employer thinks it will not have enough funds to continue the employment of certain employees, it is dangerous to fire them and not pay what is due.

Wage payment and collection issues also often arise when an employee owes money to the company at the time of separation. While certain enumerated deductions from wages are permitted by the law, it is easy for an employer to think it is justified in making a deduction from a paycheck, only to run afoul of the WPCL (for example, the employer might want to deduct from a separated employee’s final paycheck the cost of a missing piece of equipment or unreturned laptop).

In general, the employer needs to pay the full amount of wages owed to the employee and can pursue the disputed sums separately.  The WPCL needs to be foremost in employers’ minds because the consequences — including the danger of individual liability — can be severe.

Alfredo M. Sergio is an attorney with the Employment Law and Commercial Litigation groups at Semanoff Ormsby Greenberg & Torchia, LLC. Reach him at (215) 887-0200 or asergio@sogtlaw.com.

Insights Legal Affairs is brought to you by Semanoff Ormsby Greenberg & Torchia, LLC

Today it is standard practice for building owners and developers to require evidence of commercial general liability insurance from contractors that are doing construction work for them. This insurance coverage provides protection for bodily injury claims arising out of injuries at a job site, says Philip Glick, a senior vice president at ECBM Insurance Brokers & Consultants.

“It also covers claims due to physical damage to the construction site or adjacent property that may occur as a result of a negligent act by a contractor or subcontractor,” says Glick.

Smart Business spoke with Glick about how the right insurance can protect you against contractors’ errors and omissions.

Why isn’t general liability insurance coverage enough?

We are seeing an increasing number of claims arising out of negligent work by contractors that are not insured under their general liability policy. Examples include a pure economic loss the owner suffers as a result of negligent acts by the contractor but where the claim does not arise out of bodily injury or property damage liability. Such economic loss could include cost overruns as a result of the general contractor’s or construction manager’s failure to properly bid subcontracted work, or to manage the overall project costs, especially if the project is on a cost-plus basis.

Another example would be a loss suffered by a business owner or tenant as a result of construction delays, or a loss incurred by a retailer that was counting on occupancy prior to the Christmas shopping season but the space is not completed until January.

Almost all contractor’s and construction manager’s general liability policies contain an exclusion of bodily injury and property damage claims arising out of the rendering or failure to render professional services. Examples are negligence in the hiring or supervising of architects or engineers, or preparing or approving maps, shop drawings, surveys or drawings but where the loss is not directly caused by the contractor’s construction work.

How can a building owner or developer cover against these uninsured risks?

The solution is for the building owner to require the general contractor or construction manager to purchase contractor’s/construction manager’s professional liability insurance as a part of the contractor’s insurance. This is specifically designed to provide protection for economic losses incurred by an owner or another third party due to negligent scheduling, purchasing, cost overruns and delay costs described before caused by the construction manager’s or general contractor’s negligent acts. This coverage can also insure property damage and bodily injury liability claims arising out of a contractor’s professional errors.

What major exclusions or coverage gaps may be included in professional liability coverage?

Contractor’s professional liability insurance is not intended to cover contractual guarantees or warrantees made by the general contractor or the construction manager. If a contractor guarantees a project will be completed by a specific date, that the cost of the project will be no more than a specific amount, or that a project will perfectly meet the needs of the owner or tenants and then fails to meet those guarantees, these events will not be covered under the contractor’s professional liability policy. However, if these events were caused by the negligent acts or omissions of the contractor, the insurance would apply.

Contractor’s professional liability insurance typically does not include coverage for claims arising out of professional negligence of employees of the contractor or construction manager who are performing architectural or engineering work. Separate architect’s or engineer’s professional liability insurance is typically needed to cover these professional services. Some contractor’s professional liability policies can, however, be endorsed to cover these additional professional services.

Contractor’s professional liability insurance almost always excludes claims brought by one insured person or entity against another insured person or entity under the policy. An owner may, as an example, request they be added to the contractor’s professional liability policy as an additional insured similar to the requirement to be added to the contractor’s general liability policy. Unfortunately, if the owner is added as an additional insured, there is no coverage for a claim brought against the general contractor or construction manager. A solution may be to amend the insured versus insured exclusion so it does not apply to the owner or developer as an additional insured.

What else does this insurance not cover?

Contractor’s professional liability insurance also does not cover claims arising out of faulty workmanship. This includes the cost to replace faulty materials that have been used.Coverage for faulty workmanship or warranty repairs can be covered under a separate contractor’s performance bond.

General contractor’s and construction manager’s professional liability policies are almost always written on a ‘claims-made’ basis in contrast to the contractor’s general liability policies, which are typically written on an occurrence bases. Under a claims-made professional liability policy, there is only coverage for a lawsuit or claim filed by the owner against a contractor for negligent work if the contractor or construction manager has a policy still in force when the claim is brought, as opposed to when the negligent work was performed or when bodily injury or property damage took place.

One solution is for the owner to require the contractor to continue to renew its professional liability policy for a minimum period in the future after the work is completed, typically two to three years. Another requirement could be to specify that the contractor must purchase a ‘tail’ or extended reporting option that provides a 12- to 24-month extended reporting period for a claim to be filed arising from prior work, if the contractor should nonrenew his policy in the future.

Philip Glick is a senior vice president with ECBM Insurance Brokers & Consultants. Reach him at (610) 668-7100, ext. 1310, or pglick@ecbm.com.

Insights Risk Management is brought to you by ECBM Insurance Brokers & Consultants

Saturday, 01 September 2012 14:49

How to plan ahead for your departure from your business

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Many entrepreneurs devote the vast majority of their time to building their businesses — creating new products or services, building a team and developing new client relationships — often at the expense of ensuring that there is a viable way to monetize that value at some point in the future.

Unfortunately, this often leads to surprises down the line in the form of a delayed exit or a loss of value upon exiting the business, says Christopher F. Meshginpoosh, director, Audit & Accounting, at Kreischer Miller, Horsham, Pa.

Smart Business spoke with Meshginpoosh about the exit planning process and how to begin.

How soon should an entrepreneur start planning an exit strategy?

The reality is that it is never too soon to begin planning. Oftentimes, some of the early decisions, such as the form of the entity or the nature of the equity issued to the owners, end up having a significant impact on the timing or value of an exit.

Sitting down and spending some time early on thinking about long-term personal goals and exit options can help minimize problems down the road.

What are some of the exit options that an entrepreneur should consider?

There are a wide range of potential options that an entrepreneur can consider depending on his or her objectives. For example, there are strategies that an entrepreneur can use to transfer ownership to other owners, to nonowner employees, to family members or to outside investors.

What should an owner think about when contemplating a sale to another owner?

If this is a potential outcome for the business, owners should formalize their agreement about the mechanics and value of the transfer. If owners wait until an exit is imminent, it is often very difficult to get the parties to agree on these types of matters.

By entering into a buy-sell agreement that defines how the transfer will occur, owners can avoid many problems and distractions down the road.

What if the owner would like to keep the business in the family?

We see that quite a bit in our client base, and the good news is that there are several options available, including negotiating buy-sell agreements, transferring through gifts to other family members, establishing grantor retained annuity trusts, or establishing family limited partnerships. However, these options are all dependent upon identifying and grooming specific family members who can lead the business upon the departure of the existing owners.

Can you describe some of the strategies that can be used to transfer the business to existing employees?

First, there is one prerequisite: existing ownership members have to make sure that they have a plan to hire and develop managers who are capable of running the business. Assuming those managers are already in place, owners can provide senior management with equity incentives that reward management for increases in the value of the business.

This not only aligns management interests with those of ownership but also provides a way to gradually transfer ownership interest in the business. Once an owner is ready to transfer the remaining interest, it is often possible for management to obtain sufficient debt financing to purchase the owner’s remaining interest in the business. Other options include the formation of an employee stock ownership plan, or ESOP, to gradually or immediately redeem existing ownership interests and transfer those interests to employees.

What are the options if there are no other owners or employees capable of buying the business?

In those situations, either a partial or complete sale to a third party is necessary. Determining the right party is often a function of the owner’s goals, as well as of the willingness of market participants to purchase the business.

For example, if the owner is willing to continue to work in the business for a period of time, options such as a sale to a private equity firm or a roll up might be good alternatives. The sale of a partial interest to a private equity firm might also provide the owner with some upside potential if the business continues to increase in value.

If the owner plans to cease involvement at the time of a transaction, then other options such as the sale of the entire business to a strategic buyer might be the best alternative. Regardless of the strategy, owners really need to prepare for a transaction well before the planned exit.

In light of the time it takes to prepare, how do you recommend that an owner start the exit planning process?

There are many potential alternatives, and each one has its own unique complexities. Consulting with experienced advisers — including accounting, legal and wealth management professionals — is essential to avoiding obstacles and maximizing value upon an exit.

Christopher F. Meshginpoosh is a director in the Audit & Accounting group at Kreischer Miller, Horsham, Pa. Reach him at (215) 441-4600 or cmeshginpoosh@kmco.com.

Insights Accounting & Consulting is brought to you by Kreischer Miller

Wednesday, 01 August 2012 13:53

Why not use a book to tell your story?

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Being able to tell your story is critical in today’s fast-paced world, where cutting through the noise to be heard gets harder each day. With so many media options fighting for attention, it’s imperative to identify new channels where you can stand out.

That’s why as part of our expansion last year, we saw an opportunity to tell entrepreneurs’ stories in greater detail and share lessons learned by launching a book division.

Our book division is unlike traditional publishers, because we do all the work for you. We develop the story and outline, conduct the interviews with the author and other contributors, and then write the book and handle all of the other elements through publication of an e-book and hardback editions.

The time commitment from you is minimal. Once the story is determined, we will conduct a series of short interviews to get the information we need to write the book. You approve everything that goes into the story and have final say on every aspect of the project. We help you take an idea for a book and turn it into a reality that you can share with others.

As an example, last year, we worked with auto dealers Rick and Rita Case to produce “Our Customers, Our Friends.” In the book, the Cases lay out their theory that the secret to successful retail sales is through building long-lasting relationships with customers and treating them as you would your best friend.

Whether your goal is to use a book as a business card for your organization by sharing knowledge with others or to further a cause and help raise awareness for something you believe in, we work with our author-entrepreneurs to identify what makes them unique and what insight they can share with others. We also build an author’s website and set up social media channels to help them promote the book. And, we’ve recently established an authors’ speakers’ bureau that will help extend the reach of sharing that entrepreneur’s knowledge across the national footprint of Smart Business Network.

So far this year, we have eight books in various stages of production. Among them are books for the CEOs of three publicly traded companies on topics ranging from mergers and acquisitions to building sustainable businesses to how to conduct successful turnarounds. We’re also publishing books that introduce exciting new business theories, as well as one that explains how to lead with a philosophy of giving back to the community.

What direction your book takes is up to you. It can tell the story of how your business started small and grew into what it is today, or it can explain the details of what you see as the keys to being successful in business.

Breaking through the clutter of information is tricky, and writing a book is one way you can make yourself heard. It’s also a great way to explain your philosophies to employees, customers and your peers.

There’s a widespread belief that everyone has at least one book within them. In the business world, that’s even truer. If you think that’s you, we’d be happy to help you turn your ideas into reality.

If you are interested in learning more about publishing a book, please contact our publisher, Dustin Klein, at dsklein@sbnonline.com or (440) 250-7026.

Fred Koury is president and CEO of Smart Business Network Inc. Reach him with your comments at (800) 988-4726 or fkoury@sbnonline.com.

Wednesday, 01 August 2012 10:32

Why smart companies do dumb things

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Not a day goes by when I don’t ask myself, “Why do smart companies do such dumb things?”

A sweeping answer is that companies are run by smart people, and smart people do dumb things. However, when smart people assemble in companies, they are still capable of doing dumb, if not even dumber, things. Here are some reasons why.

Consensus. When it comes to doing dumb things, the sum of the parts is less than the whole. Throwing more minds at the problem means more data, more perspectives, more possible solutions, more critiques of these solutions and more minds (and hands) implementing the solution, right?

Possibly, but there’s also the downside of more people: Once consensus starts to build, it’s harder to alter a decision. It’s one thing to argue against a few people; it’s much more difficult to argue against the wisdom of a crowd. Individuals who hold out, question or disagree are labeled as clueless, uncooperative and not team players.

Conviction. Consensus rears its ugly head during the decision-making process. The situation can get worse once implementation occurs because the organization marches along with a firm belief in what it’s doing. At that point, a decision takes on a sacred life of its own, and a company cannot see flaws. Conviction is not inherently bad, and truthfully, it’s an important component of success. The trick is to combine conviction with open eyes and open minds to reduce the likelihood of having a conviction in the wrong thing.

Experts. If there’s anything smart people worship it is other smart people. It’s tough to be strong enough to not defer to an expert. Most experts have a tough time accepting surprises that are outside of their comfort zone.

Good news. A company is constantly assaulted by its competition, customers, governments and schmexperts (schmucks + experts). Faced with this onslaught, good news is an addictive, illegal and dangerous drug. It makes you crave more good news, and you refuse to communicate bad news up the chain of command. Ultimately, it may even make you refuse to hear bad news at all.

Lofty ends. Lofty ends can justify all sorts of weird and inappropriate means. Look no further than the quests for peace that produce mayhem and violence. Or, the desire to make a profit (something that is genuinely good for shareholders and customers) that warps a company’s code of ethics even though the company is made up of smart, honest people. Companies trying to achieve a lofty goal can start believing that any means to achieve it is OK.

So what can you do to prevent doing dumb things?

• Say, believe and act in a way that convinces employees that differences of opinion and diversity of thoughts are good things. Frankly, a couple of curmudgeons is a good thing for a company.

• Don’t be in a rush to meet consensus. In particular CEOs should not rush into a decision even though the image of decisiveness is so seductive.

• Spell things out. It’s not enough to say, “Plug this leak in our company,” and assume that it will be done legally. You should say, “Plug this leak in our company by using only legal, ethical and reasonable methods.” That’s when you’re done.

• Move the crowns. When employees go around saying, “We need to do it this way because Bill/Steve/Carly/Larry wants it this way,” you’re in trouble. It means that employees are making decisions based on what they think will make kings and queens happy, as opposed to what’s right for the customer, employees or shareholders. Good CEOs put the crown on the heads of customers, not themselves.

• Restrict the use of experts to narrow areas. Never use experts to create your product roadmap or marketing plans unless you want MBAs who have never run anything larger than a school snack bar to decide your fate.

• Ask for bad news. Don’t assume it will find you — you have to find it. You should allocate a time that’s specifically for communicating bad news.

• Don’t shoot the messenger who brings the bad news unless he or she caused it.

• And finally, don’t reward the messenger who brings good news unless he or she caused it.

Guy Kawasaki is the co-founder of Alltop.com, an “online magazine rack” of popular topics on the Web, and a founding partner at Garage Technology Ventures. Previously, he was the chief evangelist of Apple. Kawasaki is the author of 10 books including “Enchantment,” “Reality Check” and “The Art of the Start.” He appears courtesy of a partnership with HVACR Business, where this column was originally published. Reach Kawasaki through www.guykawasaki.com or at kawasaki@garage.com.

We’ve all seen it before, where co-workers in a company recognize a problem performer, but these same people can’t understand why the boss hasn’t yet taken action or has taken so long to come to grips with the issue.

Conversely, as the boss, how many times have you made what you considered to be an extremely difficult personnel decision and have done so only after protracted analysis, a fair measure of agony and more than an adequate amount of second guessing yourself?

Case in point: One of your top managers has hit the skids, and in your gut, you know that a change is needed. Fearing the worst, you play over and over in your mind the potential negative consequences that could occur if you were to fire this individual. Finally, after all else fails, you pull the trigger and decide to part ways with the onetime A player. Before you tell associates, you rehearse in your mind how you will explain your decision. Once you gather your lieutenants together and finally utter the previously unthinkable, the reaction is almost a unanimous, “What took you so long?”

After you breathe a sigh of relief, your team members start making not-so-subtle comments suggesting that they weren’t surprised, followed by a litany of examples of why your now fallen superstar wasn’t hacking it.

This begs a bigger question: Were you really the last one to realize that there was a problem? Furthermore, did it actually take you too long to make that final decision that, as they say in spy novels, this person was “beyond salvage”?

This provides a good opportunity for introspective analysis. The end result just might help you understand that you were not the last to know, but in fact, you may have been the first to recognize what was looming on the horizon.

Virtually every leader has to rely on experience, combined with instincts, to decide when to either cut and run or try to rectify a problem. Being an executive requires being a very good teacher. When a pupil is not measuring up, the first question is how can you help and what can you do to improve a person’s performance? Most everyone at one point in his or her career hits a rough spot, and with a bit of mentoring, a fair number of wayward employees can turn the corner and again blossom. Also, it’s more economical to at least try to turn someone around after investing time and money in developing the individual. After a certain period, the employee has gained valuable empirical knowledge about the ins and outs of the company and, just maybe, a little extra coaching can make the difference.

However, in some situations, your optimism for achieving Mother Teresa status through patient mentoring wanes, and you begin to come to grips with the fact that it’s time for a change. You then map out your what-if scenarios. Not only one but several. You ruminate over your game plan until you have the best probable solution locked and loaded in your mind for that moment when you have concluded that you’ve run out of road.

Most times, trying yet failing is not a bad thing; actually, it is a good thing and the way a responsible leader must approach an important human resource decision. You can never forget that you’re dealing with the life and livelihood of a person and his or her family, which can be adversely affected by the decision. Many top employees who veer off course and don’t work out were, at one time, effective and loyal contributors to the organization. It’s mandatory to make the effort not only to try to stem the negative tide of poor performance, but also to develop an alternative replacement and transition strategy. This takes time and can be a very solitary task depending on the level of the person to be replaced.

In reality, the boss knows in his heart of hearts before most, if not all, others when something ultimately has to give. Being the boss requires making the difficult decisions after meaningful deliberation and then living with them and making them work.

The boss the last to know? Highly unlikely. Instead, he probably is the first to know when the time to act was finally right.

Michael Feuer co-founded OfficeMax in 1988, starting with one store and $20,000 of his own money. During a 16-year span, Feuer, as CEO, grew the company to almost 1,000 stores worldwide with annual sales of approximately $5 billion before selling this retail giant for almost $1.5 billion in December 2003. In 2010, Feuer launched another retail concept, Max-Wellness, a first of its kind chain featuring more than 7,000 products for head-to-toe care. Feuer serves on a number of corporate and philanthropic boards and is a frequent speaker on business, marketing and building entrepreneurial enterprises. Reach him with comments at mfeuer@max-wellness.com.

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K’NEX Brands LP has been taking a bigger and bigger bite out of its market ever since Michael Araten took over as president and CEO in 2006. In the past six years, the manufacturer of building toys has formed partnerships linking the K’NEX brand with brands such as Nintendo, Sesame Street and NASCAR.

This year, the company will introduce a line of toys licensed by Rovio Entertainment, makers of the “Angry Birds” video game franchise.

The tie-ins that Araten and his leadership team have orchestrated are having a major impact on the company’s bottom line. In 2008, K’NEX produced about $100 million in North American sales. In 2011, the company’s North American sales had jumped to $150 million.

Given all the success that K’NEX has had, what is Araten’s first tip on managing growth?

“I would tell other leaders to be lazy,” he says.

No, Araten hasn’t discovered the secret to building a highly successful enterprise from your living room couch. But he has developed a good grasp of what a CEO should and shouldn’t be doing when piloting a company through a growth phase.

“What I mean is, the first question when I’m looking at a task is, ‘Who needs to be doing this, and is there a way I can put this in someone else’s hands?’” he says. “The key for the CEO suite is to recognize who has what talents, and make sure they do what they are great at. If you don’t have the ability to do something yourself, what you want is someone on your team who can help you accomplish the key things you need to do, so that you can execute your growth strategy.”

Araten has been able to successfully manage the growth of K’NEX through strategic planning and effective delegation — knowing where he wants his company to go, and who can take it there.

To Araten, the plan is the known quantity, and the people are the variables. The success of K’NEX — or any company — is dependent on how well the team executes the strategy.

“If you have the right people executing on the plan, it will go really, really well,” he says. “If you don’t, it doesn’t matter how good the plan is, it just won’t happen. That’s why the linchpin in all of this is assessing the talent of your people and making sure they’re doing what they are really good at.”

Draw a map

 

The first step in any journey with a destination is to plan a route. When plotting a journey for your company, your route is outlined in your strategic plan.

Araten gathers all his top thinkers together for periodic strategy sessions, during which the team assesses growth opportunities that have either been presented to K’NEX or that the company is considering pursuing. The strategy team members weigh avenues for growth against a number of internal and external factors.

“It’s a risk-reward calculation, really,” Araten says. “How much reward do we think we can get for a given opportunity, and how much risk is related to that reward? We look at how much risk we want to take, how much inventory we want to build, what does our distribution channel look like, and build a plan around that. Once we agree on how much upside there is related to how much downside, we go and execute on that plan.”

To develop an accurate strategic plan, you have to know what market factors stand the biggest possible chance of affecting your business. K’NEX exists in a market that is seasonal in nature, and produces a product with a very specific appeal to consumers. With that in mind, he set boundary lines for what his team could consider regarding growth opportunities.

“We’re a seasonal business, so there is a little extra risk involved with that,” Araten says. “With every opportunity that comes along, we also have to ask ourselves if it makes sense as a building toy. Not to single out ‘American Idol,’ but even though the show is very popular, it probably wouldn’t make sense as a building toy.”

When Araten and his team did research prior to signing a licensing agreement with Nintendo last year, they started by figuring out the type of reach Nintendo had with its brand and video game characters, and by extension, the type of reach K’NEX could expect with cross-branded building toy products.

“We started by asking how many users of Nintendo products there are in the U.S. and around the world,” Araten says. “For example, we know that 40 million Wii units have been sold and another 70 million Nintendo DS units. We looked at Q Scores of various characters, and those scores have always been in the top five over the past decade.

“We also did a survey of our key customers, so we knew that retailers were open to carrying a new product. So we took all of that information, looked at our budgets in several categories, where we’d find placement in North America, Europe, Australia and other places, and decided that we were comfortable making, let’s say, a $10 million investment in inventory.”

Good growth opportunities in the manufacturing sector usually center on two areas: new customers and new products. You either increase what you offer to customers, or you increase the pool of customers to which you offer your existing products. In most cases, your growth will result from a mixture of the two, and you need to account for that in any strategic growth plan.

In the toy industry, executives such as Araten are fighting a constant battle to stay current. Kids quickly grow bored of their current toys and parents are always on the hunt for the next smash-hit birthday or holiday gift, so the leaders at K’NEX have to harness their creative and collaborative power to stay a step ahead of demand.

In that battle, the wins you already achieved can act as a critical springboard for future wins.

“When you look at our history, our first big licensing deal was with ‘Sesame Street’ back in 2007 or ’08,” Araten says. “Once we had ‘Sesame Street,’ and people saw how good we were performing and how well we could capitalize on the opportunity, licensors started coming to us with ideas.

“We were the ones who approached Nintendo for that deal, but we’ve had a lot of other brands come to us. That is where you want to build a checklist into any strategic plan that it makes sense for you. That you can reach consumers with marketing and distribution, and that the idea is a good match for your company. As I said, we want to make sure it’s an idea that makes sense as a building toy.

“We’re also starting to leverage technology so that we can ship directly to consumers in pretty much every country on earth. We want to be able to ship to anywhere from our warehouses in the U.S., so we are modifying our websites to be able to launch in a variety of countries that make sense. We’re working on both of those, and that is why we’re so interested in product relationships with global appeal.”

Invest in human capital

A strong culture that embraces solid core values is a central component of any high-growth organization. But to have that type of culture, you need to first build a team that can embody and promote your values.

Many leaders reference the principle of getting employees in the right seats on the bus, as popularized in Jim Collins’ book, “Good to Great.” No matter what metaphor you use to illustrate it, the concept is true: In order to have a strong culture that can enable growth, you need the best possible people positioned throughout your organization in a way that allows them to grow as employees, and allows you to leverage their talents and skills for the best possible effect.

Araten says much of what he has learned about people stems from years of experience, which has helped him develop a reliable gut instinct regarding whether a prospective employee fits in the company, or whether a given team member fits in a specific role. But that isn’t enough. You also need to be able to ask the right questions.

“Some of what I do I’ll refer to as a ‘friendly deposition,’” Araten says. “You ask people a lot of questions about why they are doing what they’re doing, you apply common sense to what the answers are, and you see if they’ve thought about all the potential angles to a given problem or scenario.

“If they have experience dealing with that scenario in the past, that is something to consider as well, Araten says. “In some cases, you’re going to have some new employees with limited experience, so some of what you are able to do is going to depend on where you are in your life cycle as an organization.”

In assessing a person for a job, promotion or assignment, you need to get to the core of their thought process. If you can peel back the onion layers on how they process information and solve problems, you’ll get a much clearer view regarding how they might fit your team.

“You have to look at the thought process of how they came to their decisions,” Araten says. “If it makes sense, it looks like the probabilities are in your favor, and you can move forward.

“There is never a scenario where you have perfect information or a guarantee of success, so you just try to get as close as you can, make the move with the information that you have at the time, and the results are the results. More often than not, when we take that approach, things seem to pan out in our favor.”

If you hire or promote an employee into a new position, and the person falters out of the gate, making decisions that don’t bear fruit, you need to get to the heart of what is going wrong. It might be the person, or it might be the process. In either case, you need to get your hands on as much information as possible so that you can address the issue.

When K’NEX launched its line of Nintendo products, the team overseeing the launch made a miscalculation in the budget. Admittedly, Araten was not happy, but he didn’t go on the warpath, point fingers of blame at everyone involved. Instead, he used it as a learning opportunity.

“On a couple of the items, we underestimated somewhere on the order of $100,000,” he says. “We thought it was going to cost $100,000, but it ended up costing $200,000. As part of our review on all the product lines, this comes up, and you could tell the person who was telling this to me was a little nervous. But we went through why it happened, whether we missed anything, and found that our logic was sound.

‘In the end, we learned some things about what we could have done differently. We ended up improving some of our internal mechanisms.”

If you encounter a similar situation, Araten says you should do three things.

“One, figure out if the person in charge asked the right questions, and if the questions were based in logic,” he says. “Second, if you would have done anything differently, what is it and did the person you put in charge know it – or should they have known it? Three, teach them how to ask better questions. Oftentimes, as the CEO, you will have a much broader view of the organization, and will think to ask questions that the team or department leader didn’t. That’s part of the learning process. If everybody knew all the questions to ask, we’d have hundreds of CEOs in the organization.

“If you value teaching in your organization, teach people what questions to ask so they improved their logic. Then, the next time a situation arises, it goes smoother and reaches an even better outcome.”

How to reach: K’NEX Brands LP, (215) 997-7722 or www.knex.com

The Araten file

Born: Montreal

Education: Political science degree from Stanford University; juris doctor from the University of Pennsylvania Law School

First job: I worked as a part-time sales guy at a leather and fur store in suburban Philadelphia.

Araten on building a high-growth organization:

I think you have to develop a culture, along with some mechanical things. You need to be able and willing to reinvest in the mechanical infrastructure, but to me the more important thing is that you need to create a culture where it is OK to take a chance going fast, where you forgive people their mistakes as long as their logic is good. So I think it is setting that tone from the top and letting your leadership team say it to the rest of the crew.

We are going to go a hundred miles an hour to try and take advantage of these opportunities, and we are going to miss some stuff. But as long as the logic is sound, what we miss shouldn't be critical. Whatever mistakes we make, we will learn from and move on. It is easy to say, but the more critical part is the first couple of times you make those mistakes and learn from them and move on. That is what people really remember.

Araten on reinforcing a culture through communication:

I have one-to-one meetings with my leadership team every week. We are sitting together for at least an hour each week making sure that we understand what the priorities are and the logic behind the major decisions that we are making. When things go awry, it starts with me asking how we are going to learn from it so that it doesn't happen again, and then moving on. Then, encouraging them to do the same thing with their teams.

On the flip side, you want to make sure that you are giving positive feedback whenever possible, whenever they are doing things that you really like. We have a few mechanisms in place for that, such as awards that any employee can give to any other employee when someone goes above and beyond the call of duty.