How many times have you received a 500 percent increase on a tax exemption? The federal gift tax exemption did just that — going from $1 million to $5 million for an individual and from $2 million to $10 million for couples — but only for 2011 and 2012.

As a result, you have a unique opportunity to make a monetary gift or interest in your business over the next 20 months that could be tax-free now and shielded from future appreciation from taxes.

Taking advantage of this window of opportunity may require you to think about some thorny issues that you’ve been putting off — including establishing or finalizing the succession plan for your business, and your retirement and estate plan. It’s important to keep in mind that you can develop a succession or retirement plan without putting it fully into action. And it’s far better to have a plan in place that allows you and your family to take advantage of a more generous tax code while it lasts, than to have no plan in place and miss the opportunity to transfer more of your wealth now.

Taking the First Step

The first step in this process will be determining what you plan to do with your business. Has it always been your plan to gift your business to your family? Have you discussed it with them? Do they share your interest in continuing the business?  Will they be have the skills and knowledge to lead it, if not soon, in future years? You’ll also want to address how you can treat other family members who are not in the business equally and fairly in your estate and succession plan.

If you plan to transition your business to family members eventually, consider gifting at least a portion of stock now, while the gift tax ceiling is low and the value is depressed due to the recession, even if you aren’t ready to actually complete the transition. You can maintain control of the business by issuing non-voting stock or retaining a majority of shares in your company. Use this time to mentor family members so that they learn the skills they will need to successfully take over the business when the time comes.

When You’re Not Sure

If you are unsure whether you will transition your business to the next generation, it may still make sense to gift a portion of stock to your family now while the gift tax limits are more favorable. If you do eventually sell your business, your family will still benefit from the sale of their shares in the company.

If You Plan to Sell

When you are certain that you will eventually sell your business, you may still wish to gift a portion of stock in the business to family members. As noted above, your family would benefit from the eventual sale of their shares. Knowing that you plan to sell your business also sets up a different set of goals to grow its value. You’ll make management decisions that help you grow your biggest investment over time, just as you would grow the funds in your stock portfolio.

Knowing Your Business Value

No matter which path you choose regarding the future of your business, the most important step when preparing for gifting is determining the value of your business. It is easy for a business owner to develop an idea of what they think their business is worth. However a valuation that reviews financial statements and comparable businesses can result in a realistic, but totally different, number. You don’t want to be blindsided by unrealistic expectations.

A business valuation can help you make management decisions that will enhance the value of your business before and during the transition process. This “investor’s mindset” can help you identify potential risks and minimize them, look for sustainable growth in your product or service lines and keep a close eye on cash flow. Certainly the earlier and more frequently you conduct a valuation of your business, the better informed you’ll be when making management decisions that will impact your company’s value.

Ensuring Your Retirement

Along with determining what will happen to your business in the future, you’ll need to consider your retirement needs. Is your current nest egg enough to sustain you in retirement? You may have time to adjust your current company pension plan to help you better prepare for retirement. For example, you might consider a profit-sharing, defined-benefit plan or even staying on at your company as a consultant or salaried employee after the transition. Your financial advisor can assist you in developing ways to meet your retirement as well as your business goals.

Now is the Time

No matter which path you choose to take with your business, you’ll never have a better opportunity to transition wealth to your family that you have during 2011 and 2012. Because sorting through your professional and retirement goals takes time, begin by setting aside planning time to begin the process. Then you’ll be able to present your gifts to take advantage of today’s generous gift tax limits.

Tim McDaniel, CPA/ABV, ASA, CBA, is a principal with Rea & Associates, Inc., a regional accounting and business consulting firm. He specializes in business valuation and succession planning and also consults with family businesses regarding family integration and succession planning. He can be reached at (614) 889-8725 or tim.mcdaniel@reacpa.com.

Published in Columbus
Wednesday, 01 February 2012 09:02

Succession planning starts yesterday

Succession should be at the forefront of every business leader’s priorities. The best CEOs, boards and management teams know this and put as much emphasis on succession as they do running the day-to-day operations of the business. Succession planning is often neglected as other (short-term) business matters trump proper planning. Although a painstaking and time consuming task, it is far less costly than being without a strategy in play. The reactive state of filling open positions and the true cost associated with this approach, in many cases, could have been avoided if proper planning was done earlier.

In January of 2004, Peter Burg, then CEO of First Energy, passed away prematurely. Although his were big shoes to fill, Tony Alexander was promoted to the CEO role and to those outside, First Energy never missed a beat. What most outsiders never realized was that Alexander was being groomed and developed for that role years before the transition actually took place. I was fortunate to work with Alexander, as well as key board members and executives during this time. As I spent time with these people, there was clearly sadness about the passing of Burg, but not a sign of panic or concern about the transition. The executives who surrounded Alexander knew that he was ready to assume the role. First Energy had prepared for this moment and was able to successfully make the succession move.

Transition at this level is rarely seamless, especially when due to the untimely death of an executive. However, we would all have to agree that First Energy has not only survived the transition, but has continued to move forward as a business. When you look at companies who have stood the test of time and continued to grow, succession is a key reason for their success.

Another local example of proper succession planning would be Parker Hannifin. It is common to see managers and executives with 10, 20 and even 30 plus years of tenure with the business. Parker Hannifin is one of the best companies in our region for effectively executing promotion from within the business. They identify high potentials early in their career and develop career paths that enable the employee to continue their career development, creating higher employee retention due to a defined growth path. Their talent is fluid, moving from divisions to corporate level roles to gain the necessary experience to manage functional areas, divisions and even groups for the business.

Parker Hannifin has also been flexible to offer key individual contributors, managers and executives the ability to maintain their residence while working at locations that are not close to their homes. This has further contributed to Parker Hannifin’s ability to better retain talent long-term which by default supports succession strategies. Many companies tend to push great succession talent away by not offering more flexible work arrangements, forcing this talent to pursue other companies that are in their backyard.

Succession planning is never a perfect science. Companies should dive deep into their talent pool, building multiple scenarios and contingencies whenever possible. The succession plan should be assessed on a regular basis to ensure that the plan is moving in line with the business’s progression. Talent that may be deemed for succession roles today may not be the right choice as time moves on. Companies need to react to this evolution to ensure that the talent is developed appropriately or that other talent is identified who may better fit the future succession needs.

We see it all too often in business. Leadership hits the panic button in an effort to backfill a role as unforeseen challenge become a reality. Top talent is becoming increasingly hard to find. Once you find it, take the proper steps to retain that talent by investing in succession planning. In my experience, there are two types of companies: those that grow and hold onto talent for the long-term and those that develop talent for other businesses to benefit. Make sure your business is on the right side of this equation.

Chris Carmon is the founder and president of CGI (The Carmon Group, Inc.). You can find out more about CGI by going to their website at www.carmongroup.com.

Published in Cleveland
Tuesday, 31 January 2012 19:12

Evolution of Manufacturing 2012

What does the road ahead look like for Northeast Ohio manufacturers?

If the past few years are any indication, we’re probably in for more of the same: Tighter supply chains, leaner organizations, greater pressure from globalization, more emphasis on innovation and sustainability, and a focus on customer service.

However, competing today, as well as in the future, requires much more. It requires a systematic change in the mindset, which recognizes that the business models that worked yesterday may no longer be relevant and the operational and delivery systems currently in place should be constantly tested and re-evaluated for efficacy.

Customers today are looking wherever they can to find greater value in their business relationships, and anything manufacturers do to meet those goals will mean the difference between success and failure.

Only one thing is certain these days — if you’re not adapting to the changes, your business has probably begun its march toward obsolescence.

The 2012 Evolution of Manufacturing honorees, whose stories you will read below, have demonstrated the ability to navigate their organizations well and better position themselves to compete in a more challenging global economy.

Later this month, we invite you to join us at the 2012 Evolution of Manufacturing Conference at Hyland Software, where you can learn more from these companies as well as participate in a town-hall-style discussion with three dynamic business leaders from Pringles, Visual Marking Systems and L’Oreal USA. They will talk about big-picture ideas that will offer action-oriented advice that you can adapt within your own organization.

Read more about the honorees:

ACS Industries, Inc.

Cobra Plastics Inc.

Empire Die Casting Co. Inc.

EYE Lighting International of North America Inc.

H.C. Starck

Magnus International Group Inc.

Majestic Steel USA

PolyOne Corp.

Saint-Gobain PPL

State Industrial Products

Thogus Products Co.

Published in Akron/Canton

With each day, companies are becoming more dependent upon their systems and data. While these changes offer significant opportunities and benefits, they also carry many new and significant risks, including cyber security risks that business owners and management need to be aware of.

To protect your business from cyber security threats, it’s time to start thinking like a hacker. What sensitive or confidential data do you collect, store or transfer that could be compromised? And how vulnerable is that data to attack?

The risk is significant for businesses that do not make cyber security a priority. Failing to put security measures and infrastructure in place can affect a company’s reputation, productivity and bottom line, says Christopher Byrd, manager of Security & Privacy, Risk Advisory Services, Brown Smith Wallace LLC.

“Exponential growth in the access to and use of data can give organizations a competitive advantage, but with that comes increased vulnerability for cyber attack,” says Byrd.

The types of organizations being targeted are becoming more varied, says Tony Munns, member, Risk Advisory Services, Brown Smith Wallace LLC.

“Several years ago, the primary targets were financial services and similar organizations, but we are now finding that other companies with a high dependence upon technology are becoming targets for attack,” says Munns. “The size of the company doesn’t seem to matter, as hackers often choose their targets based on ease of attack and availability of data.”

Smart Business spoke with Byrd and Munns about the cyber threats businesses face and how they can maintain data security.

What cyber security challenges are companies facing?

While companies are not purposely exposing themselves to cyber security risks, many have limited resources to understand and address their vulnerabilities. Today, companies are doing more with less at a time when the number and severity of attacks are on the rise. Companies often focus on keeping systems up and running, while information security drops down the priority list. The greatest challenge is that this is a complex area that is constantly changing, requiring expertise and resources that often aren’t readily available to companies. So, increasingly, they turn to a third party that specializes in cyber security to perform a security audit and testing to identify weak points that can be invitations for hackers.

What impact will companies face because of these issues?

There are many potential impacts if sensitive information is not adequately protected, including direct costs such as fines, investigation, notification and legal fees, and indirect costs, including lost business opportunities due to reputational harm. The impact can also depend on applicable laws and regulations, such as:

  • HIPAA — The Health Insurance Portability & Accountability Act, which addresses the protection of personally identifiable health information.
  • PCI DSS — The Payment Card Industry Data Security Standards, which is aimed at protecting payment (credit, debit) card security.
  • GLBA — The Gramm-Leach-Bliley Act, which is designed to protect personal information collected by financial institutions.

Many industries have regulations in place to enforce data security, and there are more regulations being enacted at every level. In addition, virtually every state has adopted data breach notification laws that companies must adhere to. Exposure of personal information can result in hefty repercussions — cost estimates exceed $200 per record lost. For organizations with hundreds or thousands of records, the financial impact can be significant.

Often, as a result of a security breach, company executives find their time and attention consumed by the response, similar to other types of major incidents.

It is critical today for businesses to establish security measures and an infrastructure that protects data so that if security is breached, there is a record of compliance with laws and regulations. Across the board, there is an emphasis on urging companies to get their house in order on matters of cyber security.

How do cyber security breaches occur?

There are generally two basic types of security incidents. First, there are unintentional situations, such as an employee losing a laptop computer containing company data. In these cases, data security is generally not top of mind, as no one plans on these incidents.

The other security threats are very much intentional. There are cyber criminals who make money by hacking into systems and mining data. Once a system is compromised, the attacker can siphon off data or steal money directly, for example by initiating large bank account transfers.

Recently, there has been a resurgence of ‘hacktivists’ — ideologically motivated hackers that attack an organization to damage its reputation because of a political or social stance. Additionally, there have been a number of recent breaches involving industrial espionage, some purported to have been sponsored by other countries.  These attackers can stay embedded in a company while compromising information that provides a competitive advantage.

What can businesses do to protect their interests?

The key is to identify security risks and put an appropriate security program in place. A company’s security program should include a comprehensive security policy with assigned responsibility, risk assessment, security control framework, independent assessment and employee awareness. And, for when all else fails, there should be a response program, which should be tailored to meet regulatory requirements and be regularly tested.

Reach out to an expert to get a security risk assessment and begin developing a plan to protect information from cyber threats. When — not if — a security breach occurs, you want to be prepared with a plan to protect your business interests.

Christopher Byrd is manager of Security & Privacy, Risk Advisory Services, at Brown Smith Wallace in St. Louis, Mo. Reach him at cbyrd@bswllc.com or (314) 983-1374. Tony Munns is member, Risk Advisory Services, at Brown Smith Wallace. Reach him at tmunns@bswllc.com or (314) 983-1297.

Published in St. Louis

In October 2010, Vince Donnelly was in the position of being acquired. PMA Cos. Inc., which he leads as president and CEO, was acquired by Old Republic International Corp.

The acquisition came with a number of positives for PMA. It provided an infusion of capital and additional resources, allowing the company to increase its operational flexibility. Old Republic also allowed PMA to retain a high degree of autonomy in terms of its day-to-day operations and culture.

But change is still change, and Donnelly needed to pilot an organization of more than 1,000 people through a foundational transition. He needed to quiet concerns and define what PMA would look like moving forward.

“Never having led an organization that became part of another company, it was certainly a challenge from a leadership perspective, both in terms of the internal and external processes involved, talking to our existing shareholders at the time, in terms of what was going on and why we were doing it,” Donnelly says. “Then, it was talking to our customer base and to our employee base.”

In short, the acquisition tested Donnelly’s ability as a communicator. He was quickly reminded that communication isn’t about talking or making speeches. It’s about connecting with people.

“I talked with different people about what the future was going to be like as we made this transition,” Donnelly says. “I found that it is always most effective to physically meet with people and look them in the eye. So I started out by visiting every single one of our locations, talking to our employees and explaining the rationale for this, and most importantly talking about what the future was going to be for us as an organization.”

Start a dialogue

The acquisition became official on Oct. 1, 2010, but the process of informing employees began four months earlier. In June, Donnelly and the leadership team at PMA began travelling to the company’s 20 offices, answering questions and disseminating the information they had available.

Donnelly says one of his most critical tasks was to outline the specific ways in which PMA would change. On the whole, the effect on the employees’ day-to-day tasks was minimal, but that’s not the default mindset of most employees when they hear a big change is in the works.

“There were some transitions in terms of our back room financial area, since we were no longer going to be a stand-alone public company,” Donnelly says. “There were some other functions that became integrated, but mostly everything was going to stay as it was before. However, when you announce some kind of change, whether small or large, people always personalize it. The biggest question they have is ‘What does it mean for me?’ So first, I tried to address what this was all going to mean on a day-to-day basis for our operation. I explained that to them, I gave them some information about our new parent company, about their operating style, their people and so forth, and what it meant for us going forward.

“Second, I talked about how I perceived this as an employee and as the leader of the company. I talked about why I viewed this as a positive for the companies, knowing that the fundamental question in their minds was ‘What is going to happen to my job?’”

The jobs question was one that Donnelly had to meet head-on, in an attempt to combat any speculation originating from outside the company.

“As we announced the acquisition, some of the local press automatically made the assumption that an acquisition was being made, so tons of jobs could be lost,” Donnelly says. “That is why I had to quickly emphasize that most everything was going to stay as it had been. The changes were going to be more like, instead of preparing documents as a public company would and reporting to the SEC, we were now going to share that information with the holding company, and they would take care of that kind of reporting.”

The need for repetition in communication during the first months after the acquisition announcement reinforced a valuable lesson to Donnelly: leaders need to open a dialogue with employees in a time of change and transition, because you can’t simply lecture to your team. You need to give your team a voice to raise questions and concerns to you and the leaders of the company.

“I would tell other leaders going through a transition a few things,” Donnelly says. “First, there is no such thing as communicating too much. Second, you can’t just send out memos or anything like that. You have to talk to people directly. They need to hear from you. Opening that back-and-forth communication creates an environment where people feel free and open to ask the questions on their minds. Because, as a CEO, you can get caught up in the fact that these are corporate decisions, but from an employee perspective it is a very personal thing. You need to be sensitive to that and make sure that the communication strategy, while you need to deliver a big-picture perspective, you need to make sure that you are focused on the impact it will have on each individual employee. While you are not going to talk to each individual employee, you are going to create an environment where hopefully people can ask questions and address their concerns.”

And if you’ve done it once, or even a few times, you need to repeat the cycle of talking and listening.

“It’s not just one and done,” Donnelly says. “Communication needs to be continual. You need to continue to reinforce the messages that you want people to internalize. So you need to understand that communication is a continuous process and not something that you do just once.”

Work as a team

You need to have an excellent grasp of your role in leading your company through a time of transition. But part of that role is knowing how your leadership team should support your initiatives. That includes not only your direct reports, but anyone in your organization with a supervisory role.

“It is on me to make sure that I sensitize our management people as to how important it is to communicate,” Donnelly says. “Like communicating directly with all of our employees, communicating with management is a continual thing. The leaders of the company have had to enable the other management people to answer questions throughout this process, and if questions need to be fed upward to the senior management level, or my level, we coached them to be responsive to that.”

Donnelly created multiple avenues for people to interface with one another, even when they couldn’t be in the same room — or even the same city — together, including videoconferences to update employees on the status of the acquisition. Even with the acquisition itself in the rearview mirror, Donnelly has continued the quarterly videoconferences.

The point, he says, is to continually engage not only the lower-level employees who have the most organizational separation from management, but also to keep management on their toes. If employees are willing and able to fire off questions, managers at every level should be poised like an infielder ready to pounce on a ground ball — on their toes and paying attention.

“The way we handled it, our communication during this time wasn’t supposed to be solely a cascading thing,” Donnelly says. “It always has to be a two-way street. You speak to your people, and they respond by bubbling messages upward. I try hard to think about what might be on people’s minds in a given situation, but you’re never going to be 100 percent right. You want an environment where people will raise the questions they have. And that doesn’t just go for the primary situation you want to address. It should be a day-to-day thing, where people are stepping up to interact not just with the CEO, but with all management-level people. You facilitate that dialogue and open up those avenues because you have to create an environment where it is as effective talking upward through the organization as it is talking downward.”

Be human

If you want to foster a team mindset throughout your company, you have to set the example by showing your staff that you view yourself as part of the team. Donnelly accomplishes that by, as he puts it, “humanizing” himself. It’s more than just making yourself visible and accessible. You have to be willing to relate to your people and, at times, appear vulnerable.

In the months leading up to the formal acquisition announcement, Donnelly didn’t have all the answers that every person at PMA wanted to hear. So he had to tell them exactly that. It doesn’t mean you shrug your shoulders and walk away. It means you are frank and honest, and make the promise to your people to share as much as you know, and build a sense of trust that will allow them to believe that when you know more, you’ll tell them.

“Throughout the process, I told people that there would be consolidation of some functions, but I also came right out and told them that I didn’t know the specifics yet,” Donnelly says. “I told them that when I knew, I would communicate that. You can’t be afraid to tell people that you don’t know something at that moment, or that you aren’t free to talk about something at that moment due to regulations. What you are asking people to do is trust you, [trust] that you have the best interest of everybody in mind, and [trust that] when there is news to tell, you’re going to hear it directly from the CEO — good, bad or indifferent. It goes back to interacting with people and remaining consistent in how you communicate so that people build a sense of trust. I still tell all the people there that they will never hear any significant news about the company from anybody but me. You will never hear it from the outside world first.”

If you aren’t forthcoming with information, not only will you lose that sense of trust, you will allow the rumor mill to power up. If you remain silent, your employees — and even your lower- and middle-level managers, will fill in the blanks on their own, with whatever bits of pieces of information they can find.

“If real information doesn’t exist, people will fill in the blanks,” Donnelly says. “They’ll stand by the water cooler or the coffee machine, and they’ll say ‘You know, I think this is going to happen because I saw that Vince didn’t have a smile on his face today, and there was this closed-door meeting.’ People will make assumptions, and when they make assumptions, they often don’t get things right. That’s why it is important to share information, and while you can’t always tell everybody everything that is going on, in general you need to be out in front with communication so that people don’t start filling in the blanks themselves.”

More than a year after the acquisition, Donnelly has kept the same communication strategy in place. He doesn’t want the trust factor to erode, because the next challenging time could be right around the corner, and it will once again be critical to have everyone in the information loop throughout the company.

“It’s like any relationship,” Donnelly says. “If all you do is talk when there is a problem, you have no goodwill to fall back on, and you’re generally not going to be successful. It’s always a continual thing. You can’t just walk in one day and say ‘OK, I’m going to tell you what is going on, and ask me any questions,’ and then walk away. If you go away or don’t address the situation again for a while, you can’t expect people to respond to that. You lose the human element that is so important to good communication, and good leadership.”

How to reach: PMA Cos. Inc., (610) 397-5298 or www.pmacompanies.com

Looking back

In January 2009, Smart Business Philadelphia previously featured president and CEO Vince Donnelly and PMA Companies (then PMA Capital Corp.) on its cover. Great advice doesn’t have an expiration date, so here is a look back at some of the leadership insights Donnelly shared with us three years ago:

Donnelly on having passion for what you do: Passion comes down to the fact that you have to want to be a leader. Part of that, admittedly, is something to do with ego. But not in terms of titles and positions. It’s that you want that responsibility. I used to be a schoolteacher, and in addition to that, I coached basketball. Being a leader means you want to be the one to take the last shot in the game.

Donnelly on honesty:  As far as honesty, people see through whether you are BS-ing or not. It’s a lesson I learned from my mom. She told me that there are some people in life who are two-faced. When things are going well, they act one way, but when things aren’t going well, they’re going to act a different way. People are looking for that honesty and consistency from you as a person. An effective leader is someone who is respected not just for their title but is respected as a person.

Donnelly on expansion: Successful companies are constantly challenging themselves. We charted a course to expand into the fee-based business. But I think that whether you make a new hire, open a new facility or enter a new territory, you have to ask how this fits in to what you do. Does it make you better or is it just something to do? Some companies change for change’s sake. We don’t do that.

Published in Philadelphia

Over the past few years, founder, Executive Chairman and CEO Don Murray has led Resources Connection Inc. by betting on customer service. The company’s upper management has coached the sales representatives at Resources Connection’s 80-plus offices around the world to spend as much time as possible with the company’s more than 1,900 clients.

“Lots of our clients have been going through huge issues, and you have to be empathetic to all the issues they’re going through,” Murray says. “There are a lot of ways that we can still help them. We have a great client base, and for us to be successful, we have to really keep on top of our clients and help them get through all of these issues.”

The focus on client relations has helped Murray keep Resources Connection in growth mode. The company — which operates through its subsidiary, Resources Global Professionals — generated $545 million in fiscal 2011 revenue, up from $498 million in fiscal 2010. But it has taken a lot of effort from management to find the talent and set the cultural principles that have allowed the company to continue performing at a high level, despite the economic climate.

“It really starts with the hiring,” Murray says. “If we don’t hire correctly, nothing else is going to matter. You really can’t teach talent, and to be successful, you have to have an inner drive, you have to be kind of impatient and you have to have a sense of urgency that is going to help you get through all of this. If you don’t hire the right people and you let your people become complacent, you’re never going to be successful.”

Play matchmaker

When Murray founded the company in 1996, he made up an acronym: “TIEL.” In short, TIEL spells out what type of person Murray wants on his team — the basic traits all company employees need in order to embrace and promote the culture at the company, and achieve success within the company’s framework.

“It stands for, first of all, hiring people that have talent,” he says. “We don’t want to have people who don’t have the necessary talent or skills, because then we’re carrying those people on our backs, and you’ll never win the race that way. If they have the talent, we need to make sure they have integrity. If they have those two things, we want them to have enthusiasm and a positive energy. Then, we want loyalty, so that we know those people can work well in teams. So that’s TIEL — talent, integrity, enthusiasm and loyalty.”

Job candidates, particularly for management-level positions, are assessed against the TIEL principles from the moment they walk through the door for the first interview. Murray and his leadership team try to get a grasp of a candidate’s alignment with TIEL throughout the interview process, asking questions about the person’s past professional experiences and past record of maintaining customer satisfaction.

“You get them talking about their experience and how they have actually handled things,” Murray says. “You get a feeling for whether they’re just telling you stuff that they think you want to hear, or whether they really have relevant ideas and experience. What we’ve found a lot is that people who are leaving their positions because of the changes in the economy, a lot of those people have become stale, they haven’t kept up their skill sets. So you bring all of that out in a conversation, over the span of a number of interviews. We do probably seven or eight interviews for people we are trying to hire internally, to get a broad range of opinions about that person.”

Murray says your decision on whether a job candidate is a match for your culture and mission will ultimately come down to a subjective judgment call. You will have to make up your mind one way or another. But if you know what you want in an employee and can measure each candidate against those selected qualities, you can make a much more informed and accurate decision.

Enforce standards

An involved CEO is always the best kind of CEO when it comes to management-level hires. You don’t want to sidestep your human resources department, but you do want to know what is going on, and get a detailed background on people that could potentially find their way into an influential role on your team.

At the company, Murray and his president, Tony Cherbak, don’t delegate interviews for key positions. They see to it that one or both of them have a chance to sit down and oversee a round of interviews.

“We make sure we interview those people, whether they are going to be in our Singapore office, Brussels office, London office or wherever,” Murray says. “Too often, CEOs delegate the process of hiring someone who is going to be very important to the company. With that approach, you have different people in the company doing different methods of hiring, which means you don’t always adhere to the same standards.”

Below the upper management level, Murray might not interview the candidate directly, but he sees to it that the people who are performing the hire maintain the same standards.

“Below the people who are critical to us directly, it is really about working with the managing directors in the offices, to give them the same sense of quality,” Murray says. “We keep the principles of TIEL in front of them, and ask them to focus on those principles. That is how you keep those standards consistent, no matter where you’re hiring throughout the company.”

One of the hardest components to maintain high standards in your hiring practices is the willingness to wait out a drought. If satisfactory resumes aren’t showing up in your e-mail inbox or candidates don’t impress you during the interview process, you can begin to feel the pressure to get someone hired as the process shuffles along. But you need to remember that the wrong hire will cost you more in the long run than having a vacant position in the short-to-medium term.

“We have offices that could use five more people, but those offices haven’t yet found the right people to hire, so they aren’t hiring,” Murray says. “We have some places that are three people down because they can’t find the right people. What happens is you need the people already in place to chip in, do a little extra and realize that you’re just going to have to lose some of the short-term growth that you would have if you were able to hire a few more good people. You keep reminding them that hiring the wrong person creates so much negative energy, it wastes so much time, you are simply better off not having a person than having a person who creates a negative effect.”

Get motivational

Even with the most thorough and well-defined hiring practices, the employees you hire will only bring their raw materials to the table. It is up to you and your leadership team to mold them and leverage their skills and talents to improve the company.

It’s a question of culture, and culture starts at the top of the organization. You have to set the values you want emphasized, communicate those values frequently and develop a system of accountability. Murray wanted client satisfaction to be the focus at the company moving forward, so he communicated and developed incentives around it.

“A lot of companies have great mission statements, have really good slogans and philosophies, but a lot of the behaviors at the top don’t back up the mission statement,” Murray says. “That leads to a loss of leadership’s credibility in the eyes of the organization. You have to keep instilling what you think is important, you have to keep reinforcing your culture with your behavior. You can’t tolerate bad behavior.”

To align incentives with the performance and values that Murray desires, the leadership team has tied a portion of the compensation system at the company to group performance. If a given unit performs at a high level regarding client satisfaction, the whole unit receives a bonus.

“People don’t want a substandard person on their team, so when you reward teamwork, you help enforce high standards across the board,” Murray says. “A lot of companies put an emphasis on awarding the most money to their stars, and they have a performance rating system where 70 percent of the company is rated as average. We don’t tolerate average, and our employees don’t either, because a portion of their compensation is tied to how their group does. No one wants to be average, because no one wants an average person bringing down the whole group.”

Use customer feedback

You can accomplish a lot by developing and enforcing high standards internally. But if customer satisfaction is the lifeblood of your business, there is no substitute for giving your customers a voice, and letting your company hear it.

If you want to know if you’re achieving customer satisfaction, ask your customers if they’re satisfied. Murray and his management team frequently meet with clients during stops at field offices. Once a year, the company holds a meeting of all staff members who interface with clients. During the meeting, Murray asks representatives of several client companies to take part in a panel discussion.

“We typically have three or four clients on a panel,” he says. “Those clients give their view of how we’re doing, how we could do better, and then they’ll answer questions from the people in the audience. We have a number of our major clients represented in that forum, and that approach has been very successful. Last year, we had a meeting in Detroit in a building attached to General Motors. When our people around the world hear our clients talk about what they like and how we can do better, it is a lot more effective than having one of us in management do it. It involves our clients in business, and shows our people that our clients want us to be successful.”

Building those bridges help engage customers and motivate the employees that you worked so hard to identify, hire and train. It is an example of perhaps your most important role in the living, breathing organism that is your company — that of connective tissue.

“Nothing is better than visiting with your clients,” Murray says. “It helps you assess yourself, it allows you to listen to what people are trying to tell you. A lot of cultures in business are based on the belief that you don’t want to tell the boss anything bad, so if you want the reality of the situation, you need to find out for yourself. You need to visit your clients and customers, you need to talk with them. You need to thank them for being your customer, build that relationship, then get an assessment from them on the service or product you are providing. That will help you get a feeling of whether the people in your company are telling you the whole truth about how you are serving your customers.”

How to reach: Resources Connection Inc., (714) 430-6400 or www.resourcesglobal.com

The Murray file

Born: New York City

Education: Accounting degree, California State University, Los Angeles; MBA, University of Southern California

First job: I worked in an A&P supermarket in New Jersey when I was 15 or so.

What is the best business lesson you’ve learned?

One of the most painful lessons I’ve learned is that you can’t change people. If somebody doesn’t have a sense of urgency, it is very hard to instill that in them. Over the long haul, you really can’t motivate low performers to be high performers, and you can’t teach talent.

What traits or skills are essential for a business leader?

You need to be a good communicator. You have to be intelligent enough to understand the environment of business. And you always have to be on the lookout for new ideas. Don’t become mired in the old way of doing things.

What is your definition of success?

If you look at the best athletes in the world, they are usually very well balanced. So my definition for success is being balanced. If you are serving your clients well, and motivating your employees, and all of that is in balance, the business is usually successful and you are pretty happy.

Published in Orange County
Tuesday, 31 January 2012 19:00

Avoiding the ambush

If you were in the grocery business in the late 1990s, you already had plenty of competition. There were larger chains like Kroger plus all kinds of smaller IGA stores, not to mention the various convenience stores like Dairy Mart, all of whom were fighting for the same grocery dollar.

The market couldn’t possibly take another competitor entering the marketplace, but that’s exactly what happened. Walmart started selling groceries.

When the behemoth entered the grocery market, most smaller players couldn’t compete. The mom-and-pop stores mostly closed their doors and even the big chains suffered. Business was down and margins were hurt.

The surprising part about this is that most of the players in the market didn’t expect it. They were “business as usual,” and then, suddenly, Walmart came to town. Walmart now controls an estimated 16 to 25 percent of the grocery market nationwide, depending on who you ask. Before the late ’90s, Walmart’s share was zero. The market didn’t anticipate being attacked from that direction, but that’s exactly what happened.

The music industry suffered a similar fate. Remember all the retail record stores that were out there? There were multiple stores in each mall plus specialty retailers on every corner. If you wanted music, you drove to the store and bought a CD. Then iTunes and iPods showed up. It was a game changer. Most of those record stores have long since been shuttered. Who would have thought that you would just download music over the Internet and all those stores would be gone?

The lessons are clear: You will have new competitors, but you won’t necessarily know who they will be or what direction they will come from.

Too often, we are locked into studying our existing market, carefully watching every move our known competitors are making. But while we are doing that, an unknown threat is creeping up behind us.

The only way to fight these unknown dangers is to always be prepared for the worst. It’s the old “an ounce of prevention is worth a pound or cure” adage.

The companies that operate the most efficiently and leverage technology to their advantage will be the ones in the best position to fight off all threats, both known and unknown.

Your management team has to be open-minded to all new ideas and be structured in a way that can quickly adapt to market changes. If your team can’t do this, then either you don’t have the right team or the structure is wrong.

Making changes requires quick reactions, and people need to buy in as soon as possible. To be fair, you need to give people the opportunity to change, but if they can’t adapt with you, then you have to replace them or find a position better suited for them.

In today’s ever-changing economy, there are a lot of very difficult decisions that need to be made regarding your people. You can’t be an effective CEO and run your company like you are the head of a fan club with your employees as the members. Making the changes required to survive and thrive in the world requires fast action, and many of the decisions will not be popular. If you are constantly surveying them to see if they approve of your actions, you’ll probably be headed for failure.

Sell your direct reports on your vision and get their buy-in. After that, you need to get as many people on board as possible. Those that can’t do that in a reasonable time need to move on.

Most people don’t like change, but this is a new era we live in. Speed is imperative. In the time you took to read this column, some unknown future competitor just crept a little closer to launching an attack on your market share. Are you ready for them? Or do you need to send out a survey first?

Time’s up.

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

Published in Akron/Canton

If you’re a manufacturer or supplier who does business in California, keep reading.

Effective January 1, 2012, the California Transparency in Supply Chains Act requires large manufacturers and suppliers who do business in California to add a link to their websites disclosing their efforts to eradicate slavery and human trafficking from their supply chains for all tangible goods offered for sale.

According to the California legislature, the Act is intended to “educate consumers on how to purchase goods produced by companies that responsibly manufacture their supply chains, and, thereby, to improve the lives of victims of slavery and human trafficking.”

Who is subject to the Act?

The Act, signed into law by Governor Schwarzenegger as Senate Bill 657 and enacted as Section 1714.43 of the California Civil Code and Section 19547.5 of the California Revenue and Taxation Code, applies to every retail seller or manufacturer that does business in California and has more than $100 million in worldwide gross annual receipts.

  • A company will be considered a retail seller or manufacturer if it reports its primary business activity as retail trade or manufacturing on its California Franchise Tax Board returns.
  • A company will be deemed to do business in California if it meets at least one of the following conditions from the California Revenue and Taxation Code:

    • It is organized or commercially domiciled in California.
    • Its sales in California for the applicable tax year exceed the lesser of $500,000 or 25 percent of the company’s total assets.
    • The value of the company’s real and tangible personal property in California exceeds the lesser of $50,000 or 25 percent of the company’s total real and personal property.
    • The amount paid by the company in California for compensation exceeds the lesser of $50,000 or 25 percent of the total compensation paid by the company.

  • A company’s worldwide gross annual receipts, for purposes of the Act, will be determined by the worldwide gross annual receipts disclosed on the entity’s filings with the California Franchise Tax Board.

What does the Act require?

Every company subject to the Act must issue a disclosure statement detailing its efforts to eradicate slavery and human trafficking from its supply chains for all tangible goods offered for sale. A “conspicuous and easily understood link” to the disclosure must appear on the home page of the company’s website. At a minimum, the disclosure statement must set forth the company’s efforts (if any) to do each of the following:

  • Engage in the verification of product supply chains to evaluate and address the risks of human trafficking and slavery. The disclosure must specify if the verification was not conducted by a third party.
  • Conduct audits of suppliers to evaluate supplier compliance with company standards for trafficking and slavery in supply chains. The disclosure must specify if the verification was not an independent, unannounced audit.
  • Require direct suppliers to certify that materials incorporated into the product comply with the laws regarding slavery and human trafficking of the country or countries in which the suppliers are doing business.
  • Maintain internal accountability standards and procedures for employees or contractors that fail to meet company standards regarding slavery or trafficking.
  • Provide training on human trafficking and slavery, particularly with respect to mitigating risks within the supply chains of products, to company employees and management personnel who have direct responsibility for supply chain management.

If a company does not have a website, it must provide all of the above information within 30 days after receiving a written request from a consumer. The sole remedy for any violation of the Act’s disclosure requirement is an action for injunctive relief brought by the California Attorney General.

What are other companies doing to comply with the Act?

Disclosure statements vary widely. Some companies issue short, simple statements that contain only the required information. Other companies incorporate the disclosure statement into existing reports concerning corporate social responsibility or use the disclosure statement to promote their efforts to manage their supply chains in an ethical, legal and socially responsible manner.

Corinne Sprague practices corporate law at the Michigan law firm of Warner Norcross & Judd LLP. She can be reached at csprague@wnj.com or (616) 752-2756.

Published in Detroit

Want to motivate employees? Improve your communication skills? Express your thoughts and ideas clearly and concisely?

Then you need better presentation skills. Luckily, Joe Takash, the president of Victory Consulting, is here to help. In his latest Smart Connection video, "Four Musts When Giving a Speech or Presentation," Takash highlights the four keys to any good speech:

1. Keep perspective

2. Structure, not script

3. Nonverbal approachability

4. Create interaction

Watch the video in its entirety here.

Joe Takash is the president of Victory Consulting, a Chicago-based executive and organizational development firm. He advises clients on leadership strategies and has helped executives prepare for $3 billion worth of sales presentations. He is a keynote speaker for executive retreats, sales meetings and management conferences and has appeared in numerous media outlets. Learn more at www.victoryconsulting.com.

Published in Chicago
Wednesday, 18 January 2012 20:01

Enhancing the quality of life

Medical Mutual 2012 Pillar Award

for Community Service — Cincinnati

Kent Clapp CEO Leadership Award

Timothy Johnson, founder, president and CEO of Johnson Investment Counsel Inc., whole-heartedly believes that being an active member in your community and giving back is what makes a company thrive. For the investment management and financial advisory services firm, community service has been instilled in the corporate culture.

Johnson founded his wealth management company in 1965. In 2001, the company became employee-owned and is now the largest independent employee-owned wealth management firm in Ohio, managing more than $6 billion in 45 states. Johnson has been sure to get his employees and his clients involved in community initiatives.

Community involvement comes in many different forms and Johnson has worked to make as many of those forms apart of his firms charitable philosophy. One way Johnson and his employees give back is by serving on the boards of various organizations. The giving of services and expertise is something that Johnson and his employees and the boards they serve on value very much.

Presently, Johnson Investment employees serve on 58 boards within the community. The employees hold another 40 leadership positions in various committees and advisory councils.

Johnson leads his company’s charitable efforts through demonstrating ways to give back. He is an individual who represents the true spirit of giving, enhancing the quality of life in the Cincinnati community. He has a commitment toward philanthropy and passes that quality on to his employees and clients who work with him every day.

That commitment has resulted in more than $350,000 being donated by Johnson Investments and the creation of the Johnson Charitable Gift Fund, a way for the company’s clients to manage endowments. Over the past four years more than $22 million has been given to nonprofit organizations through this fund.

HOW TO REACH: Johnson Investment Counsel Inc., (513) 661-3100 or www.johnsoninv.com

Published in Cincinnati