I N B USINESS DECEMBER 2008
IN THIS ISSUE: Focus on Manufacturing Being a Better Salesperson A special section, Made in the Region Plus many more features
PRESENTING SPONSORS
2 ■ IN BUSINESS
I n This Issue:
FOCUS ON MANUFACTURING This issue of In Business focuses on manufacturing. Among the stories you’ll find: • Manufacturing is essential to our economy/Page 3. • Dimensional Group focuses on adding custom products for wide client base. It’s our cover story and appears on Page 4. • A look ahead: Financial volatility is possible in North Iowa/ Page 8. • Greene company molds a path to success with custom Robert Hobson of American molds/Page 9. Tool & Engineering in • Charles City Greene. firm designs, makes wood products for variety of applications/Page 13.
FOCUS ON SELLING • So you want to be a better salesperson? Experts tell you how/Page 15. • NIACC program will show you how to make the sale the Ultimate way/ Page 16.
NEWS YOU CAN USE • HR: Right-sizing poses many challenges/Page 20. • Finance: Tough economy changes merger, acquisition picture/Page 22. • Tech: Get wise — digitize/Page 23. • Q&A: Gregg Gillman, North Iowa’s new industry recruitment guru/Page 24. Gregg Gillman • Plus many more features to help you and your business.
ON THE COVER The men behind the Dimensional Group: Adam Gold, president; his father, Paul Gold, chairman; and Bob Stoyles and Jay Stoyles, vice presidents. Photo by TERESA PRINCE/In Business
DECEMBER 2008
Getting Started:
New format, same helpful content
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Welcome to the December edition of In Business, the Globe Gazette’s quarterly business magazine. For those who are new to this publication, a bit of background: We have been publishing In Business each December, March, June and September since the fall of 2003, mailing it to about 5,000 people in North Iowa and Southern Minnesota. For a variety of reasons — including a desire to reach more entrepreneurs and business leaders and to provide Globe Gazette readers with something extra — we decided to publish the magazine in the Sunday newspaper. While the look is slightly different, the content will stay the same, focused on providing business owners and managers information they can use to run their businesses more profitably. Each edition delves into at least one theme topic, offering readers tips on how they might overcome such issues at their companies. Topics of recent issues include diversifying the work force, overcoming the challenges of family owned businesses, trimming costs of health care, marketing and coping with higher energy costs. The topics are chosen with input from an advisory board that meets at least twice yearly to discuss issues that our region’s businesses are facing and to identify sources of information that will help our reporters and correspondents develop the stories. In this edition we focus on manufacturing, a sector of our economy that employs more people than any other. While the region’s largest manufacturer, Winnebago Industries, has been going through a difficult stretch, many other smaller manufacturers are doing much better. We profile three companies many of our readers may know little about: Dimensional Graphics in Mason City, American Tool & Engineering in Greene and Custom Wood Products in Charles City. As usual, we ask business leaders for tips that others can use to improve their businesses (see the “Gold-en tips for success” on Page 7 and “American Tool business tips” on Page 12). A sub-focus of this edition is sales, which of course is the lifeblood of business and increasingly difficult in the current economy. You’ll learn of the importance of listening to prospective cus-
tomers and having the right mindset. Again, the point of our stories in In Business is to offer information that will help business owners and managers improve their business. Our regular human resources columnist, Jim Cronin, writes in this edition about the many challenges of right-sizing a business — something Winnebago and many other companies have had to go through. The accounting and finance column — this one written by Randy Davis of the Mason City office of RSM McGladrey — focuses on several specific things to look at if you’re analyzing a company’s finances, considering it for a merger or acquisition. Joe Our health story this time Buttweiler In Business focuses on making sure you get Editor your exercise during the winter. Tech columnist Michael Munshower offers advice on how to digitize business documents. The Q&A is with Gregg Gillman, executive director of the North Central Iowa Growth Partnership. You’ll also find several “toolbox” stories on topics such as helping employees handle their money, year-end planning and managing employees during a down economy and the holiday season. Hmmm. That last one sounds interesting no matter what line or level of work you’re in. We’re also featuring a special section called “Made in the Region,” which is a comprehensive list of manufacturers in North Iowa. We put it together in hopes that more businesses in our region will do business with each other, stimulating the regional economy. Whether you’re a business leader or not, we think you’ll find many of the pieces in this edition of In Business helpful. To those who are new, I welcome you and hope you enjoy this and future editions. To those who have been with us for years, thank you, and I hope you will continue to find our stories useful. If you would like to suggest a story topic for a future edition, please contact me by means listed below.
In Business: Vol. 6, No. 4, December 2008 Publisher: Howard Query 641-421-0500 howard.query@globegazette.com Editor: Joe Buttweiler 641-421-0542 joe.buttweiler@globegazette.com Managing Editor: Tom Thoma 641-421-0566 tom.thoma@globegazette.com Associate Editor: Jane Reynolds 641-421-0564 jane.reynolds@globegazette.com Associate Editor: Bob Steenson 641-421-0530 bob.steenson@globegazette.com
Photo Director: Jeff Heinz 641-421-0543 jeff.heinz@globegazette.com Advertising and Circulation: Greg Wilderman 641-421-0545 greg.wilderman@globegazette.com
North Iowa & Southern Minnesota In Business is a quarterly publication of the Globe Gazette. Reach us at P.O. Box 271, Mason City, IA 50402-0271 or by e-mail at news@globegazette.com.
IN BUSINESS ■ 3
DECEMBER 2008
FOCUS ON MANUFACTURING
File photos
Mason City’s two cement plants, Holcim and Lehigh, have been stable employers for decades. Holcim (formerly Northwestern States Portland Cement Co.) celebrated its 100th anniversary in May. Lehigh began operations in 1911.
Essential to our economy One in five jobs are in manufacturing; work force is well-educated BY JAN HORGEN For In Business
Manufacturing is an essential component to the North Iowa economy. “It is the largest employment sector,” Terry Schumaker, development director for North Iowa Area Workforce Development Partnership, said. “One in five jobs in North Iowa are in manufacturing.” Those employees make up slightly more than 20 percent of the ninecounty North Iowa work force in large and small production businesses. These workers bring a variety of education levels to the workplace, with nearly 50 percent having some type of higher education, according to Schumaker. “We have a well-educated manufacturing work force in this region,” he said. “From what state officials tell us, that 49.9 percent higher education percentage is pretty high in comparison to other areas in Iowa. On average, North Iowa workers have more education than their counterparts across the state.” A North Central Iowa annual labor shed development analysis found that 11.5 percent of manufacturing workers have an undergraduate degree
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Schumaker On average, North Iowa workers have more education than their counterparts across the state.”
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while 2.4 percent have a post-graduate degree. Median wage for salaried employees in the manufacturing sector was $42,500. Most of those salaries are paid to employees in fields such as administrative, accounting and engineering. Median hourly wage for non-salaried workers was $14 an hour, with starting salary wages varying from business to business. “But I would estimate the starting hourly salary averages somewhere between $10 and $11 an hour,” Schumaker said.
IT IS TOO SOON to estimate just how deeply the impact of the U.S. economic downturn will impact North Iowa manufacturers, according to Schumaker. “There will be, and already are, some that have been hit hard and oth-
ers, with essential products, that seem to be holding steady,” he said. According to laborshed analysis statistics, employment was 83 percent in 2007. That figure decreased in 2008, according to work force analysis experts. Iowa Workforce Development’s 2008 second-quarter statistical report estimated unemployment at 4 percent in Iowa with 66,900 of Iowa’s 1,672,300 eligible workers out of work. Unemployment rates across North Iowa also increased between June 2007 and June 2008. WINNEBAGO COUNTY took the hardest hit, with unemployment jumping from 3.7 percent to 5.3 percent. Layoffs at Winnebago Industries Inc.’s motor home manufacturing plant, one of North Iowa’s largest employers, accounts for a portion of that increase. Hancock County also suffered a 1.4 percent unemployment increase during that time, again mostly in manufacturing. Unemployment in Cerro Gordo and Butler counties rose by 1.1 percent durContinued on Page 6
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DECEMBER 2008
FOCUS ON MANUFACTURING: COVER STORY
TERESA PRINCE/In Business
Karl Kessler prints tags with a machine he says is more than 100 years old. The Dimensional Group uses a variety of new and old technology.
Adding new dimensions to graphics Focus at Dimensional Group is adding custom products for wide client base By JAN HORGEN For In Business Seeds of success for The Dimensional Group were carefully planted and nurtured. New York City native Paul Gold ventured west in 1987, taking over Dimensional Graphics Corp., a manufacturer of custom screenprinted and die-cut products. He built the business with a vision for the future, searching for other familyowned companies to integrate with
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Dimensional Graphics’ operations. “Today, ours is a national customer base of industries and distributors, some in print, some in advertising” as well as a strong local market share, President Adam Gold says. “Our focus is on adding new custom products for our clients,” he said. VYING FOR CUSTOMERS with overseas producers has created an extremely competitive business market, he said. “No one gets a pass these days.”
Knowing that, Paul Gold found five companies to enhance expertise and add product variety to business over the next two decades. Risto came under the Dimensional umbrella in early 1994, producing leather and vinyl merchandise for the truck stop marketplace. Commercial offset printing and bindery products came next with the acquisition of The Printing Office in 1997. This strategic move made Dimensional GraphContinued on Page 7
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DECEMBER 2008
Manufacturing/From Page 3 ing the 12-month period. Worth County unemployment increased by 0.8 percent, Floyd County by 0.7 percent, Franklin 0.5 percent, and Wright and Mitchell counties by 0.2 percent. Mason City’s laborshed force is estimated at 30,660 eligible worker, with 29,210 employed, according to the 2008 second-quarter figures that found 1,450 workers unemployed. “It would appear that the manufacturing sector in North Iowa has shrunk since late 2007,” Schumaker said. “Winnebago is probably the most visual as one of the largest So many other employers.” AGC, a glass economic sectors coating manuare greatly impactfacturing plant ed by the health of in Hampton is another. It manufacturing.” — Terry Schumaker announced the closing of its plant there as well as in California and Quebec and the shutting down of a line in Tennessee. In all, 800 workers were affected.
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WITH MANUFACTURING playing a 20 percent role in North Iowa’s job economy, when that sector begins to shrink, other jobs are lost. “So many other economic sectors are greatly impacted by the health of manufacturing,” Schumaker said. “Personal and professional services, dining, retail and service industries that support manufacturing all take a hit.” While there have been visible closures, there has also been growth of local industries across North Iowa that help offset the pure manufacturing losses, he said. Some manufacturing businesses continue to advertise for qualified workers, allowing
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some of the displaced workers to transition into different manufacturing positions, Workforce Development officials say. Other displaced workers are furthering their education to increase future job opportunities. “The trend in our national economy has been so visible because of the presidential election and regular news reports on the credit crisis, Wall Street problems and problems with companies from auto makers to CitiGroup,” Schumaker said. “The numbers are a moving target with dramatic changes from week to week and even day to day.” So far, Iowa’s economy has stayed relatively stable based on its diversity of business, according to Workforce Development reports. LOCAL ECONOMIC development groups are working on industry retention and growth, officials say. One example is the increase in jobs with the green initiative through wind farms and renewable fuels plants. North Iowa Area Community College has expanded its curriculum due to the growth of green initiative and renewable fuels businesses in the area. NIACC now offers a wind technician program, a training initiative with Florida Power & Light. There is also an electrical/mechanical program for maintenance, assembly and other skills needed for efficiently servicing and running the turbines. SALARIES FOR these positions are better than the prevailing manufacturing rate, with FP&L starting wage approximately $17 an hour for wind technicians, according to Schumaker. The agricultural sector remains fairly strong as well as the warehousing and distribution portion of North Iowa’s economy, Schu-
maker said. “With today’s global economy, everything is so interconnected, so those could eventually be affected,” he said. “The truth will come out in the beginning of 2009 when fourth-quarter numbers for 2008 are available.”
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IN BUSINESS ■ 7
DECEMBER 2008
Dimensional/From Page 4 ics a full-service printing company. Between 2001 and June 2008, three more family-owned companies were purchased. Midwest Plastics, a manufacturer of heatsealed products — imprinted binders, checkbook covers, portfolios — was a good fit for enterprise expansion. Then Acme Tag & Label, a century-old Minneapolis manufacturer of flexographically printed labels and tags, those clear plastic tags used by numerous mega-corporations including Target and Menards, was relocated to Mason City. Acquisition of Stoyles Graphic Services in June 2008 brought on board a prospering offset printing operation with direct plate technology and employees with high levels of printing expertise. FROM A HANDFUL of employees 20 years ago, Dimensional Group evolved into a diverse, integrated, custom operation with 80 to 90 employees. Adam Gold Clients get the benefit of ... graphic design, laser, digital, perEverysonalized and flexographic printone around ing for commercial and private here sells, use; heat sealing for calendars, starting binders, checkbook covers, home with the planners and portfolios; screenperson printing of vinyl and lexan who decals, labels, banners; as well answers as die cutting, laminating and the phone.” foil stamping. The company has a fully staffed art department of five who create and prepare press art for clients. There is offset printing of brochures, fliers, newsletters, pamphlets, user manuals, business stationery and custom forms. Heat-sealed products can be custom imprinted or foil stamped. Seed tags are manufactured for many agricultural companies. Workers are involved in custom sewing and fabrication of products. Mailing services include folding, inserting, presorting by carrier route, ink jet addressing and laser printing. “This is a very technical business,” Adam Gold said. “To continue growing we look for employees with knowledge and training in our processes. That’s important. We are so customized it can take a year for a new employee to get their feet under them.”
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IT CAN BE a challenge to find new, qualified employees. Referrals from current employees and Workforce Development are recruitment resources. Temporary employment services, such as Manpower, are helpful in finding seasonal employees. Dimensional also works with Opportunity Village and Comprehensive Systems for that portion of the labor pool that can be done by special needs workers. Continued on Page 8
Gold-en tips for success
Teresa Prince/In Business
Xuong Luong works at a folding machine for the Dimensional Group. The company manufactures a variety of printed goods from its two factories in Mason City.
Tips for business success as defined by Adam Gold, president of The Dimensional Group: • Communicate, communicate, communicate. Don’t rely on automation for client services. In a business that provides customized products, it is vital to speak with customers to determine individual needs and priorities. Personal communication will pave the way for better understanding of specific product needs. • Before acquiring a company or expanding processes, study carefully how these will fit into the current business equation. Determine benefits and possible pitfalls. • Be flexible. Know the needs of clients and business customers and find ways to meet those needs efficiently and effectively. “Losing sight of customer needs is dangerous.” • Prepare a comprehensive business plan that involves current financials and operation practices, with realistic future goals and managed growth. “There is no cure for lack of revenue.” • Don’t get too lean. “You can’t save your way to success, you have to sell. You can only cut so far.” — By Jan Horgen
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Dimensional/From Page 7
MANUFACTURING: A LOOK AHEAD
Financial volatility a possibility Winnebago layoffs could be indicator of turbulent times, ISU expert says By FRED LOVE In Business Des Moines Bureau
North Iowa’s dependence on manufacturing as an economic engine could lead to financial volatility in 2009, said an economist at Iowa State University. The closure of the Winnebago Industries Charles City Manufacturing Facility in August and other layoffs in the company could indicate a turbulent economic year ahead for a region of the state that relies on jobs in heavy manufacturing, said Liesl Eathington, coordinator for the Regional Capacity Analysis Program at Iowa State University. “We’re starting already to see some job losses in that sector, so the extent to which Mason City and the surrounding counties depend on that sector for jobs is probably going to a big factor in that area’s economy,” Eathington said. Durable goods manufacturing companies like Winnebago that produce long-lasting heavy machinery are often more susceptible to lean
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Although he declined to discuss specific salaries, Adam Gold said Dimensional has some people “making close to six figures” and laborers paid “very competitively, and well above minimum wage.” The company has 10-, 15- and even 20-year employees on staff, something Gold points to as a good example of the desirable working environment. “We also feel it is very important that all our employees have health insurance,” Carol Gold, marketing director, said. There are five in-house sales people and one in a Minneapolis suburb. But a secret to success, according to Adam Gold is that “everyone around here sells, starting with the person who answers the phone.” Dimensional Graphics has chosen to shy away from an automated phone system. Phone calls and face calls are vital to the operation. “You won’t get a recording when you call; you will always get a live voice answering the phone,” Carol Gold said. That personal touch, according to Carol Gold, “is very important to our customers. “Because so much of our work is custom, we need to fully understand their products needs.” Personal communication is also important in relating to workers. “We are family and that means knowing and understanding what is happening with our employees.
They can come to us with a problem, personal or professional and we will listen,” Adam Gold said. DIMENSIONAL CONTINUES to add to its customer base through distribution network marketing, trade shows and word of mouth. “Our best marketing is communication,” Adam Gold said. “In our business, talking directly with our customers works very, very well.” This family business has opened a new operation as a way to “give back” to nine different non-profit organizations in Mason City and Clear Lake. Customers of Community QuickPrint at 19 Eighth St. S.E. can have business cards, letterheads, envelopes, color and black/white copies, brochures, postcards and posters printed and 10 percent of the purchase price will be donated any of the nine organizations customers choose. More information on this charitable enterprise is available at www.communityqp.com. “Through Community QuickPrint, we can to invest in some wonderful, non-profit groups,” Carol Gold said, pointing to the Community QuickPrint mission statement, “ ... giving back is part of every successful growth process,” as one more example of this company’s commitment to customers and community.
Continued on Page 11
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IN BUSINESS ■ 9
DECEMBER 2008
FOCUS ON MANUFACTURING
Molding a path to success Around your home or office there’s a chance plastic products were made from a mold created in Greene BY JAN HORGEN For In Business
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GREENE — Molding is an extremely specialized industry. There are unique qualities to each mold designed to create an array of products from medical backboards to torque wrench cases, coolers to football helmets, toy wheels to large storage compartments. American Tool & Engineering Inc. designs and builds these specialized forms, supplying national and international clients in plastics manufacturing. There are several processes such as thermoforming, blow, vacuum and pressure form molds creating these products. Around your office, vehicle or home there is a chance that at least one of the hundreds of plastic products may have been formed in a mold designed by AT&E. A THREE-PERSON operation in 1992 when AT&E President Dennis Hobson and Vice President Jerry Taylor broke away from a blow molding company, the company has grown to a work force of 60 individuals in management, sales, engineering, design and manufacturing. There are two shops, a 16,000square-foot mold-making area and the original 8,000-square-foot plant for wood pattern and cast mold operations. Initially AT&E had a three-year non-compete clause with the founders’ former employer.
JAN HORGEN/For In Business
Robert Hobson, vice president of operations, shows some of the products made from American Continued on Page 12 Tool & Engineering molds, including decoys and medical backboards.
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DECEMBER 2008
Volatility/From Page 8 economic times than companies that produce smaller-ticket items that have to do with food or chemicals, she said. Economic hardship at large employers like Winnebago can spread to other small businesses in the area, said Larry Kramer, owner of Kramer Hardware stores in Clear Lake, Mason City and Garner. Kramer said nearby plant closures and layoffs mean people have less money to spend at stores like his. “The more people who are let go or are without jobs, like Winnebago shutting down their plant in Charles City and laying off a number of workers, that does affect us,” he said. His stores have weathered uncertain economic times over the course of two decades, and he said he expects his business to outlast the current downturn. “I think the next year is going to be a tough one, but I think if people make plans for the worst and have a good business plan, I think you can do it,” he said. Souring conditions in the financial sector and the national and world economies could begin to take a greater toll on the area in the months ahead, Eathington said. “I think that with what’s going on in the
national and global economy, we’ll start to see reduced demand, and it shows up in some of these manufacturing industries,” she said. Eathington said Iowa may not sustain the heavy economic losses other states may feel, but the state’s economy generally moves in the same direction as that of the nation. And right now, that direction is down. “I don’t have any reason to believe Iowa is going to be immune to these big Eathington forces that are occurring,” she said. She said Iowa’s unemployment rates are lower than the national average, but that’s hardly unusual. She points to recent unemployment trends as a more telling indicator of the state’s economic health. Iowa saw its seasonally adjusted unemployment rate rise to 4.4 percent in October, the second straight month unemployment has gone up in the state, according to the most recent figures from Iowa Workforce Development.
The national unemployment rate rose to 6.5 percent last month, its highest mark since 1994. Eathington said North Iowa will likely still be feeling the effects of the current economic downturn a year from now. “There’s not really anybody who can say with any certainty how long this downturn will last,” she said. Joe Paulsen, owner of Kleen Sweep Construction in Mason City, said he normally has plenty of projects scheduled for springtime by this time of year, but the combination of flood damage and the national economy have tamped down the demand for new concrete construction. “People have more to worry about than concrete work,” said Paulsen, who has owned the business for around 26 years. He said the current economic environment has led him to hold off on buying new equipment for his business. And he said other small business owners in the area are bracing for harsh economic conditions. “I’ll make due with what I have, but I’m a little leery,” Paulsen said. Fred Love can be reached at 515-243-0138 or fred.love@lee.net.
Wine Talk
Holiday Favorites The Holidays are now upon us. You could be invited to many functions this time of year. Here’s a suggestion: why not bring a bottle of wine with you for your host. Don’t expect them to open it, but if you are lucky they will and you can enjoy the wine with them. What should you bring? First of all find out if they like a red or a white wine. Be sure to ask if their tastes run more to a fruity or a dry wine. If you don’t know or aren’t sure just bring what you like. Holiday dinner invite? If your hosts are having turkey a white wine will be a great choice. Here are some good selections: On the lighter side you could bring a Gewurtztraminer or Riesling. Want something a bit drier: unoaked
Leese-Fitch Cabernet Sauvignon 2006
Ryan Evers Hy-Vee East Wine Dept.
Bruce Long, Mgr. Hy-Vee Wine & Spirits
Pete Bjugan Hy-Vee Drugstore Wine Dept.
Chardonnay is a nice choice. Looking for a red wine might we suggest Pinot Noir Merlot or the seasonal Beaujolais? If Ham is the featured meat you can pair the taste of ham with a Riesling or a dry Rose or White Zinfandel. You could also choose a Pinot Noir.
Happy Holidays from all of us at Hy-Vee!
This is a dark red colored wine with a bouquet of Cherries, chocolate, cedar with flavors of red currants, blackberry with a little walnut and rich oak.You will find this great with your big steak off the grill or how about a big hearty stew? This wine has the new closure called a Zork. No corkscrew is necessary. Whenever you have a wine question please ask any of your local Hy-Vee wine specialists about this wine or what wine goes with certain foods or for a special occasion gift. Don’t forget we do offer holiday gift cards.
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DECEMBER 2008
AT&E makes one-of-a-kind molds or can develop a series of similar molds. Orders come from East to West coasts, Canada, Mexico and even Ireland. JAN HORGEN/ For In Business
Molds/From Page 9 “That’s when we got involved in thermal form molds,” Robert Hobson, vice president of operations, said. The need for innovation is one of the factors in the company’s success. AT&E makes one-of-a-kind molds or can develop a series of similar molds. Orders come from East to West coasts, Canada, Mexico and even Ireland. “The core of our business is here in the Midwest, but the West Coast client base is also very strong,” Hobson said. APPROXIMATELY 75 TO 80 PERCENT of AT&E clients are thermal form manufacturers with about 15 to 20 percent blow mold operations. Manufacturers use thermal form molds by heating sheets of plastic to desired pliability, then sucking the plastic into the mold, forming a specified part. Injection molds are made so polymers can be blown or forced into the mold, heated and shaped. Thermoform, an alternative to injection molding, is used in lower volume products with thicker sheets of plastic that allow for a cosmetic finish on one side of the piece and can produce varying thicknesses. A product made with a two-piece blow mold form uses a bag of plastic dropped into the form, injected with air through a pin or needle and inflated as the mold closes then contours the product. “We have gotten into the automotive, cautiously, with less than 5 percent of our business in that area,” Hobson said. “And we do some injection molds but are not concentrated in that area.” Primary end markets are industrial, agriculture, appliance, computer and business machines, containers and other closures, lawn and garden, medical and pharmaceuti-
cal products, recreation and sporting goods and waste management. The in-house research and development department has engineers creating mold patterns using two- and three-dimensional computer-aided drafting software at several stations. AT&E IS KNOWN for developing preliminary mold prints quickly. Quality assurance and customer service are hallmarks of this small, family-owned business. Clients get progress reports each week. Marketing is done primarily through personal contact at trade shows, technology online meetings, client network referrals and “hammering the phones and getting on the road” to contact perspective clients and retain current customers, according to Robert Hobson. The Web site www.atemold.com is also used to promote sales and marketing. Finished molds are delivered by drivers or sometimes one of the four-member sales force. There are four designers and two modelers, and in the shop there are eight CNC machines using precision electronic programming for each specialized mold created. Designers have a mix of two- and four-year degrees with a CAD software background. Raw sheets of aluminum are squared and bored according to design, moved from station to station by overhead cranes. There may be 40 tool processes for one product, 16 to 18 for another. Each of the tools is temperature-controlled up to 220 degrees and cycled for hours to be sure the mold does not fail. ANOTHER NICHE of AT&E is creating Continued on Page 13
American Tool business tips: • Network with other producers, market experts and clients for successful marketing. Take advantage of industry catalogues and annual directories to advertise your company and products outside the immediate area. • Retaining long-term employees who have honed their skills and understand the operation process allows for more seamless development and production, especially for a business with very specialized products. Knowing and listening to workers enhances the chance of retention. • Teamwork is essential, with crossreferencing in design and product development. Make it easy for employees to speak with one another about progress and possible problems. • Work closely with suppliers on research and development. Delivering quality products with speed and precision is vital, requiring close contact with clients during the development stage. AT&E puts out weekly progress reports during development and tooling stages. • Create a recognizable brand. New technology creates a “shrinking globe” and opens doors for expanded national and international sales. A recognized brand and broadened company contacts extend the sales market for a quality product. • If possible, find a niche market through concentrated research and development, it can open doors to a greater product market. — By Jan Horgen
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FOCUS ON MANUFACTURING
Advanced by design Charles City firm designs, makes wood products for variety of applications By RHONDA REGAN For In Business
A locally owned Charles City business is doing its part in maintaining Iowa’s reputation for advanced specialized manufacturing. Custom Wood Products designs and manufactures wood products that provide a variety of applications. CWP uses computer technology to design and manufacture wood or plastic products for commercial and residential applications. “We’re a job shop for the computer numerical-controlled (CNC) wood and plastic market” says Mike Wilkinson, president. “A customer can bring in a drawing of something they need and we can make it for them.” From that drawing, the part is machine tooled from raw material using a CNC router and then it’s ready for finishing. A raw piece of wood can be finished to replicate marble, stone, metal, wood grain or a solid color.
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THE FACILITY has the capability to make store fixtures, countertops, desktops, signage, molding, cabinet doors and drawer fronts in addition to custom trade show displays. However, Wilkinson said their largest market is in kitchens. “Our relative market is in kitchens. And we do a majority of the countertop work for Winnebago,” said Wilkinson. With the lull in the housing market, homeowners are opting to remodel instead of build new so work orders for countertops have increased. Formerly known as Blong’s Custom Wood Products, Wilkinson and Kurt George purchased the 25-year-old business in 2002 when owner Terry Blong retired. Wilkinson had been in metal sales
before that and it was through his contact with George’s other business, Machine Tool Engineering, Charles City, that they formed their partnership. “Kurt called and wanted to know if I was interested in doing something different. I said, ‘Sure, why not?’ That was in July and we owned the business by September.” Since acquiring the business, they have increased sales from under $1 million in 2002 to $3 million in 2007. WILKINSON SAID they didn’t rely on advanced marketing techniques; instead they reconnected with previous customers from before the Winnebago days. “At the time of purchase 97 percent of the products being made were for Winnebago,” said Wilkinson. Today, they still manufacture a large share for the RV giant, but through connecting with previous customers they are able to attract job requests outside of Winnebago, providing diversity in their income. Their objective was to grow the business without focusing solely on Winnebago. And grow the business they did: A larger facility, more machines and additional employees. CWP RETAINS 27 full-time employees, and finding willing workers has never been an issue for them. Wilkinson says it’s because of their industrial park neighbor. He believes the reason that the company retains employees so well is because of the “mom and pop” atmosphere. “We let employees take care of family when they need to. And as an employer, you need to let them take care of their Continued on Page 14
Molds/From Page 12 aluminum pressure form molds. This is an operation specialty, forming the molds out of solid aluminum billet. Shifts run 24 hours a day, 10 or eight hours depending on the department, five days a week, with sporadic shifts on weekends when demand is greater. Qualified employees are found through several channels. “We advertise, go through Workforce Development and use the community colleges to find trained workers,” Hobson said. Renewed concentration of these colleges on technical tooling and similar programs has been very beneficial in Hobson training workers for the operation, he said. Since Salaries include entry we level employees at $10 work with to $12 an hour with so many experienced workers different getting as much as $20 markets — an hour. industrial, “We have long-term medical, employees, five or six recreational — busipeople, who have been ness has with us as long as 10 been good, years,” Hobson said. “We and we look for people with a have not tool and die background seen a and CNC experience downturn through technical at this schools or work experipoint.” ence. Hands-on experience is very valuable.” AT&E payroll for 2007-08 was approximately $2.5 million. According to Plastics News, AT&E in Greene ranks 32nd in North American tooling sales with corporate sales for the 2007 fiscal year around $5 million. It looks like the firm is on track to reach that same figure in 2008. “Since we work with so many different markets — industrial, medical, recreational — business has been good,” Hobson said, “and we have not seen a downturn at this point,” Hobson said.
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14 ■ IN BUSINESS
DECEMBER 2008
FOCUS ON MANUFACTURING
Coping during Winnebago’s tough times Merchants look for unique ways to attract business during down times By DICK JOHNSON In Business
FOREST CITY — You’ve got to get creative when times are tough. Are you thinking what we’re thinking? Yep. Extreme Pasta Bar! They opened one in late October at The Lodge in Forest City, in the face of Wall Street gloom and more layoffs at RVmaker Winnebago Industries Inc., which had been North Iowa’s largest employer. At the EPB you pick your own veggies, pasta and meat from tons of choices. Then you pick your sauce: marinara or alfredo? “Usually my mouth is watering the entire night and I can’t wait until the dining room clears so I can eat some,” said Brittney Sterner, a front desk person at The Lodge. It’s hard telling how North Iowa’s economy is faring since Winnebago’s downturn, said Kathy Rollefson, executive director of the Forest City Chamber of Commerce.
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But people are watching their finances, shopping more and dining out less, so creativity is a necessity for restaurant owners. “Restaurants are being a little more creative with marketing, to get people in the door,” Rollefson said, adding that many local grocers have increased advertising, and they’re doing it smart. Rollefson Hansen Hardware Hank II’s new slogan asks, would you leave Forest City to buy quality stuff? “What’s your time worth to you?” the sign says. “It definitely helps their traffic,” Rollefson said. “I think it’s working for them.” They’re creative all over the place: • Pizza Ranch in Garner has given discount cards to eighth-grade students raising money for next spring’s trip to Washington, D.C.; the kids can put all the
money they raise toward the adventure. • Bill’s Family Foods in Garner and Forest City has offered “double vendor” coupons, up to 75 cents. Show a coupon for 75 cents off, get $1.50 off the item. “That helps elsewhere, whether it be the electric bill or whatever,” said Lisa Formanek, executive director of the Garner Chamber of Commerce. • Until the price of gas plummeted recently, you saw fewer kids on the roads. “I haven’t seen as many high-schoolers driving around,” Formanek said. “A lot of mopeds.” Although Winnebago’s troubles have made regional shockwaves — many employees commute, or have commuted, from afar — Formanek thinks better times are coming. Research, she said, shows there’s a recession about every 10 years, then another economic upswing. “Things are tough right now,” Formanek said, “but they’ll come back up. Just tough it out.”
CWP/From Page 13 family,” he said. He said another reason for CWP’s great retention is its open-door policy. “If there’s a problem, I can help you fix it, but if I don’t know about it I can’t do anything about it,” Wilkinson said. He adds that the employees know that
he’s willing to pitch in wherever he’s needed, that he “won’t ask anybody to anything that I can’t do or won’t do.” He’s even willing to trade positions to give employees the opportunity to know how hard it is to be the man in charge. He is responsible for every aspect of the
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IN BUSINESS ■ 15
DECEMBER 2008
FOCUS ON SELLING
So you want to be a better salesperson Be prepared to be a good listener and do work the average person won’t By LAURA ANDREWS laura.andrews@globegazette.com Every business needs a good salesperson, but what does it really take to be the best at it? “I would say that No. 1 is they have to have the right mindset and really want to sell,” said Jamie Carda, corn product manager at Latham Hi-tech Hybrids, Sheffield, who has more than 20 years of sales experience. Part of the right mindset includes learning to listen instead of talking. “A lot of people have the impression that talking a lot is the right way,” said Renee Ritter, director of commercial sales at TeamQuest, Clear Lake, who has 12 years of sales experience. “The best salesperson listens more than they talk.” Listening helps build trust with the client and helps the sales person determine what’s really important to the client. Carda said some clients might view a salesperson who talks about nonessentials as wasting their time. Knowledge about the products someone is selling will help prevent this. “They need to know how their products can be best used, know how to position their product with the customer relative to other products or similar products,”
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Carda said. Product knowledge is also important because clients have become more sophisticated, Ritter said. “What we have found is the client wants an integrated solution from a business partner,” Ritter said. “That’s very different from buying product from a vendor.” Someone viewed as a Carda business partner would be trusted, know a lot about I would say their client and be able to that No. 1 tell the client how much is they money they’ll save by buyhave to ing their product, she have the said. right mindOther aspects of having set and the right mindset include really want enjoying the profession to sell.” and being determined. People who are positive in nature, sociable, like people and enjoy finding out how clients think will fare better than other people, Carda said. Being a top salesperson might also take more work than the average salesperson.
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“The other piece of it is you’re willing to do things other aren’t willing to do,” Ritter said. “Making the extra calls, sending an email or other extra touches — investing your time in your career.” Other investments might include reading books about selling or attending seminars. All of these things are essential if a salesperson Ritter wants to be the best and survive in a shaky economy. What we If a salesperson really have found understands their client is the and products, they’ll still client do well in a bad economy, wants an Ritter and Carda said. integrated “A salesperson who can solution ask the right questions to from a find out what’s important business to that consumer and partner.” show the value of the product to what the customer really needs ... will still be very successful,” Carda said. ■ New NIACC program offers unique training for salespeople. See the story on Page 16.
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16 ■ IN BUSINESS
DECEMBER 2008
FOCUS ON SELLING
Making sales the Ultimate way New NIACC program draws on 100 years of experience to make salespeople even better By MARK OLCHEFSKE John Pappajohn Entrepreneurial Center at NIACC
The Chinese have a curse: “May you live in interesting times.” The last few months in particular have been very interesting and it may remain that way for some time. A business’ survival is going to depend more on its ability to increase sales and cash flow than cutting costs and laying off people. Even in the best of times, the most challenging part of business is meeting sales objectives. Many companies did not meet their sales goals last year and may not this year, but every business depends upon the skill of its sales representatives for its survival. For that reason the greatest human resource Mark shortage nationally and Olchefske is internationally is profesdirector of sional business-to-busiRegional ness (B2B) salespeople. Business Recognizing this need, Development North Iowa Area CommuServices at nity College led a consorthe North tium of educators, busiIowa Area nesspeople, content develCommunity College John opers and skilled sales practitioners that develPappajohn Entrepreneur- oped the Ultimate Sales ial Center in Academy. The program draws on Mason City. more than 100 years of research and best practices to teach the fundamental disciplines that enable graduates to adapt and respond to selling opportunities regardless of industry sector. “The greatest human resource shortage nationally and internationally is for professional business-to-business salespeople,” said Jamie Zanios, director of NIACC’s John Pappajohn Entrepreneurial Center. “We regularly field calls from
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Continued on Page 17
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IN BUSINESS ■ 17
DECEMBER 2008
BUSINESS BOOKSHELF
Book on Wal-Mart informs, doesn’t preach By ESTER VENOUZIOU St. Petersburg Times First, let’s get the misconception out of the way: “The Wal-Mart Effect,” by Charles Fishman, is not a book bashing the world’s largest retailer. Instead, Fishman, editor-at-large of Fast Company magazine, says it’s about how Wal-Mart’s low prices have an impact on society and on the economy. And along the way we find out how the company went from being a role model for capitalist society and the American dream to perhaps one of the nation’s most hated corporations. His book isn’t preachy. He doesn’t tell you not to shop at Wal-Mart.
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“Half the adults in America go into Wal-Mart every week,” he says. Fishman buys stuff there, too. But he wants shoppers to know low prices come, well, with a price. Yes, that sweater for $12.97 might be a great deal. But down the street there is the little boutique owner, trying to explain to customers why sweaters at his store are double that price. Somewhere out there is a supplier who decided to lower quality to meet Wal-Mart’s lowprice expectations. “We need to look at the consequences,” Fishman says. When researching the book, Fishman says he hadn’t realized how reducing
prices would affect the quality of products. He said he visited 150 Wal-Marts in 26 or 27 states. “They’re all different,” Fishman says. “They all have slightly different character.” Fishman said the world is very different inside Wal-Mart. In the past few years, executives have “tried to open up, to understand the criticism,” he said. “They don’t have horns and fangs, they’re not plotting ways to destroy the world. ... They think of themselves as really providing a service and don’t understand why they inspired so much Continued on Page 19
Ultimate/From Page 16 businesses across North Iowa asking if we know someone who can sell. They tell us, ‘If you know someone who can sell, we can teach them our product.’ “I experienced the same thing as a company president; the shortage of really good salespeople is acute, particularly in rural areas. This program effectively addresses it.” The Ultimate Sales Academy teaches selling as a profession, equipping both new and experienced salespeople with the skills and Zanios disciplines necessary to be the top B2B salesperson at any company, regardless of industry sector. BEING THE BEST is hard work; but the Ultimate Sales Academy makes that hard work more productive. Learning in general and sales training in particular are never complete for those who want to stay at the top. The Ultimate Sales Academy provides a sound foundation for lifelong professional development and success. Jerry Wells and Tom Geurdet of Enterprise Performance Solutions were selected to help develop the course content. “Early in the development process, even before we were selected,” noted Wells, “there was a thorough evaluation of existing sales training on the market. Nothing met the rigorous standards that NIACC and the sales professionals on the steering commit-
tee laid out. Together, Tom and I have been in sales and sales management for over 70 years and we have never seen a program this comprehensive.” The Ultimate Sales Academy is highly interactive with an emphasis on video role playing and performance feedback. The program draws upon the last 100 years of research and best practices to help professional salespeople achieve their goals and the goals of their customers and employer. After course completion, the instructors follow up with the graduates and their employer to validate improvement. “I was fortunate to serve on the initial steering committee for this endeavor and also had the opportunity to participate in a curriculum review,” said Renee Ritter, director of commercial sales for TeamQuest, the Clear Lake computer firm. “I was struck by the quality of the content and the passion everyone had for developing a ‘best of breed’ program. This collaborative effort is sure to reflect positively on NIACC and those who leverage The Ultimate Sales Academy.” THE ULTIMATE Sales Academy meets for eight hours once a week for five weeks and, after a six-week gap, meets for one more eight-hour session for a total of 48 hours. During that time, participants self-assess their commitment to being a sales professional, learn disciplines that prepare them for sales success and demonstrate their sales performance skills.
For medium to large sales forces, delivery of the program can be customized to meet specific needs. Private programs can be delivered anywhere, including at the company’s facilities, at another off-site location, on the NIACC campus or even out of state. “This is a first step, not an end point,” said John Schladweiler, dean of Continuing Education at NIACC. “In addition to the regular class on campus, we have the capability of co-delivering it in other areas, customizing it to meet specific training goals for larger sales forces and eventually incorporating a version into our ‘for-credit’ business program; enabling students to graduate with an associate’s degree with a sales emphasis.” NIACC HAS a course on Mondays beginning Feb. 2 and another course on Fridays beginning Feb. 6. Both courses are on the Mason City campus. The Monday course is No. 62132 and the Friday course is No. 62637. Register by calling NIACC’s Continuing Education Department at 641-4224358. For more information about course content, contact Mark Olchefske at the Pappajohn Center at 641-422-4191 or Bill Burdick at NIACC Continuing Education at 641- 422-4183. “I have had the opportunity over the years to attend some of the best-known and best-quality sales courses in the country, including IBM and Xerox,” Zanios said. “I believe that this new course will become a standard by which others are measured.”
IN BUSINESS ■ 19
DECEMBER 2008
FOCUS ON HEALTH
Skip your workout? Don’t even think of it Even if you’re at home or in the office, you can get the exercise you need to boost your health By RHONDA REGAN For In Business There’s two feet of snow on the ground, it’s 10 below zero, you’ve been working hard on a special project, Friday’s here and you haven’t been to the gym all week — and you just don’t feel like going. Whatever the reason — the snow, the cold, exhaustion or laziness — there’s no reason to miss your workout. With these simple exercises, you can get a great cardio-vascular workout that will help beat wintertime diseases and you can do them within the comfort of your own home. Jason Laube, director of Cutting Edge Fitness, Clear Lake, says the key to burning calories is a high-intensity workout that lasts at least 45 minutes. “Working out for half an hour isn’t high enough to burn off fat — 45 minutes will get your heart rate up,” he said. In absence of workout equipment, basic household or office objects can substitute nicely. • Step-ups: Use a stair step; this works the muscles in the legs and buttocks. • Dips: Use a chair with arms. “This exercise is great for the triceps,” says Laube. • Wall squats — slide up and down a smooth wall. • General calisthenics — “pushups, sit-
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Jeff Brandow, trainer at Ironhouse Gym in Mason City, says your exercise doesn’t have to be fitness oriented — walk around the block a couple of times or around your house. ups/crunches, jumping jacks, anything that will get the heart rate up and keep you moving for a constant 45 minutes,” Laube said. • Walking — add a little extra distance to your destination. Jeff Brandow, trainer at Ironhouse
Wal-Mart/From Page 17 anger.” vate retailer whose daily What can small businesses sales volume might be just a ... Don’t try do to survive when a Walcouple of hundred dollars, Mart moves into their neighthat’s an unrealistic profit selling as cheaply borhood? as Wal-Mart ... you’ll margin. “The most important thing “There are plenty of arenas is, don’t panic,” Fishman says. get crushed.” in which Wal-Mart is not — Charles Fishman on what to going to be able to win. But “And don’t try to sell as do if a Wal-Mart opens near cheaply as Wal-Mart. If you head-to-head on price is not a your small business. try to compete by matching way for a local business to prices, you’ll get crushed.” win. Wal-Mart’s profit margin is extremely low. “And businesses shouldn’t imagine that For every $10 of merchandise it sells, it price is all that matters. If it were, Starbucks keeps only 30 cents, Fishman says. For a pri- wouldn’t exist.”
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Gym in Mason City, says to “park your car further out, take a short walk on your lunch hour or take the long way to the bathroom.” Brandow offered some other tips to help keep you focused during your inhome workout: • Listen to music — wear a headset to use as a zone director to block out your surroundings to give you more focus. • Just move — your exercise doesn’t have to be fitness oriented, just physical movement. Walk around the block a couple of laps, or if you want to stay closer to home just circle your house or run up and down the steps a few times. Both Laube and Brandow stressed the importance of changing your eating habits to stay fit. Eating smaller portions more frequently helps to disperse the calories throughout the day. “If you eat every three hours you don’t get as hungry, so you don’t eat as much” said Brandow. The contents of your meal are just as important as the frequency. Laube recommends that your smaller portions contain protein and carbs, such as fruits or vegetables, water or low-fat milk. Or complex carbs: red potatoes, wild rice, brown rice. Stay away from simple sugars but use them for pre-workout or instant energy. Laube advises that the more you work out, the more you will boost your immune system. “The more you exercise, the higher you boost your heart rate which will decrease your risk of cardio-vascular disease.”
By the numbers: ■ 60,000: Items offered at a typical Wal-Mart. ■ 120,000: Items offered at typical Wal-Mart Supercenter. ■ $6,778: Profit per employee at WalMart. ■ $180,000: Profit per employee at Microsoft. ■ 500: Typical number of jobs created by a new Wal-Mart Supercenter. ■ 450: Typical number of retail-related jobs eliminated in a community five years after the opening of a new WalMart Supercenter.
20 ■ IN BUSINESS
DECEMBER 2008
ADVICE: HR
Right-sizing poses many challenges By JIM CRONIN For In Business Operating a private business or public agency has never been easy and in recent months has become even more difficult. Establishing and maintaining a balanced work force are two of the major challenges. Meeting these challenges begins with hiring and continues with maintaining and adjusting the work force numbers as future operational and financial conditions require.
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HIRING Employers need to be realistic about how many employees are needed at any given time. Economic realities usually dictate the starting numbers, but there are other factors to be considered: 1. It is important to avoid hiring other employers’ problems. There are frequent articles in business magazines about how problem employees can poison workplace morale. Good employees lose respect for employers who hire poor-performing and abusive employees. One effective solution is one I have referenced before. It originated with a very well-regarded Washington, D.C., attorney whose practice involves representing employers in cases involving workplace discrimination claims. After being involved in several cases in which it was revealed that the corporate “offender” had engaged in similar serious misconduct at his or her previous place(s) of employment, the attorney told a management seminar audience that she advises her employer clients not to consider hiring applicants who will not authorize their previous employers to unconditionally release all available jobrelated information. The reality is that previous employers who hide behind the “all we do is provide dates of hire and length of employment” policy don’t do prospective employers any favors. 2. It continues to be important to avoid the “warm body” syndrome during the hiring process. Too often employers who are seeking applicants become frustrated too easily in their search efforts and hire a marginally qualified individual just “to
fill the slot,” with very negative productivity consequences. Under-qualified employees are typically unable to do the required tasks which frequently must then be performed by other employees who already have fulltime work, causing employee-to-employee resentment. 3. A much better alternative involves using the services of a qualified temporary employee while continuing to search for the right permanent applicant. Still another alternative is to pay overtime and have qualified employees perform the needed work until a qualified applicant is located. 4. Another potential hiring assist: Employers who create comfortable and pleasant work places while maintaining needed high productivity levels should not hesitate to use their best-performing employees as recruiters. Frequently, such employees have competent friends and acquaintances who are looking for a good starter position. Still other acquaintances may have been laid off recently and are seeking an intermediate or upper level position and have the requisite skills and experience. A guiding principle is to ensure that your referring employees are sponsoring only individuals who have the exact skill sets your operations need and that the referrals are not being made on a “sympathy” or pure friendship basis. MAINTAINING AND ADJUSTING YOUR WORK FORCE. The recent volatility of both domestic and foreign markets has caused negative ripple effects on many companies in many different job markets. This has made frequent communication with employees about developments in your workplace and in suppliers’ and competitors’ workplaces increasingly important. The fact is that many management representatives do not read national business magazines or even the business section of local newspapers and therefore do not have valid current information about their own or related industries. The same is true for non-management employees who typically watch sports
About the author: Jim Cronin has been an employee relations (management) counsel with the Minneapolis-St. Paul law firm of Felhabor, Larson, Fenlon & Vogt for more than 30 years. The content of his column is presented as general information, not as legal advice. Specific situations must be assessed individually by counsel of your choice. Cronin is the author of “No Fluff, No Puff: Just Management/Communication Principles That Work.” Readers may preview chapters of this resource manual at www.nofluffnopuff.com. It is also available for purchase at www.Barnes&Noble.com. Cronin would like to respond to readers’ needs by addressing workplacerelated questions of general interest in future issues. Send your questions or comments to Jim at jjcanddrb@earthlink.com.
and other television programs which do not include business or industry references. Smart employers know the importance of transmitting accurate, detailed information about both their present operational conditions as well as potential positive and negative business developments. Nothing is worse than having some of your better-performing employees leave your organization because they relied on inaccurate information from outside rumor mills or uninformed employee “grapevines.” One of the most effective management communication tools is the town hall meeting format during which upper management representatives report in detail both current positive developments as well as current or expected near-term operational challenges. After management’s presentations are concluded, the floor is opened for employee questions about various managers’ projections and opinions. This communications tool is very effective because it enables employers to answer many employees’ questions on the spot. Employees respond very positively when they feel management representatives are telling them the “whole truth” Continued on Page 21
IN BUSINESS ■ 21
DECEMBER 2008
Cronin/From Page 20 and are not pulling any punches. On the flip side, management needs to understand that the town hall approach can blow up in its face if the employer’s responses are not truly responsive, or worse, raise false hopes about likely future progress. Another effective communication tool to transmit timely and accurate information to the employees involves sending monthly newsletters to their homes. THE REALITY is that too often employees don’t share enough accurate workplace-related information with their spouses and their children, many of whom may be in school and/or working for another employer. It is unfortunate when good employees leave their jobs because of inaccurate information about their employer’s future based on what other family members have “heard” at their places of employment or “on the street.” A monthly newsletter to the home is a good way to ensure that employees are receiving accurate information on a current basis. It is true that some employees may not bother to read the newsletter, but by sending a copy to the employee’s home you increase the chances that a spouse or other adult relative will read it. And we know that most employees consult with their spouses and/or other family members before deciding to make a job switch — especially in this economy. Arming family members with accurate information about the employer’s operations can help prevent the loss of a good employee who leaves based on information received from other unreliable sources. LAYOFF DECISIONS • In non-union settings: It is obviously very important that employ-
UAW members who lose their jobs due to plant restructuring or shutdowns up to 90 percent of their wages and benefits. ers enable themselves to retain the most proThousands of out of work employees have parductive employees in the event of negative ticipated in the program over the past several operating developments which require reducyears with the costs running into hundreds of tions in the work force, and accurate performance evaluations can be very helpful assets in millions of dollars. The coming months will determine the fate of layoff situations. the Job Banks program. On the other hand, managers who want to be “loved” rather than respected and give average or above-average appraisals to employees who don’t deserve such ratings can lay the groundwork for time-consuming challenges by those who did not earn their higher rating — if they are laid off while other employees are retained. • In union settings: Unions do not favor performance evaluations and instead push to have seniority become the primary factor in determining which employees are subject to layoff. Hence, the specific language of a union contract’s seniority article can be critical. Language which speaks in terms of seniority being the tie-breaker in cases where employees are “equally qualified” gives the employer the most flexibility. Language which refers to employees being laid off based on their relative ability to do the remaining work or based on their ability to “meet the minimum qualifications of the job” can effectively prevent the employer from retaining the most competent but less senior employees.
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22 â– IN BUSINESS
DECEMBER 2008
ADVICE: FINANCE
Tough economy changes merger, acquisition picture
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By RANDY DAVIS RSM McGladrey, Mason City Mergers and acquisitions are in limbo waiting to see what happens as the $700 billion from the Emergency Economic Stabilization Act works its way into the financial system In a troubled economy, though, healthy companies may find attractive targets in a growing population of troubled organizations. And private equity groups, which have played an increasingly active role as a source of growth capital or as an exit strategy for companies in a number of industries, are sitting on a sizable pool of capital and looking for places to invest. Buyers must realize that due diligence is a different game in today’s difficult economy. Troubled targets may take a variety of steps to try disguise negative trends and poor results and make operating decisions that may have long-term negative effects on the value of the business. A disciplined due diligence process is more important than ever. Take a close look at the following areas if you are considering a deal. LAST 12-MONTH (LTM) RESULTS In a difficult economy, trends may be
About the author: Randy Davis is a director and the location leader of the Mason City office of RSM McGladrey. He has more than 28 years of experience in providing accounting, assurance, tax and consulting services to clients. For more information, contact him at randy.davis@rsmi.com. more important than raw numbers. LTM EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) may be falling, so a close review of the most current results and a comparison to historical results is vital. If results are trending down, the target company may be slow to release financials. Also, watch for accounting changes, such as deferring costs that used to be and should be expensed or changes in accounting for inventory. The target also may attempt to accelerate revenue by offering incentive and discounts to customers. Normalize for
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IN BUSINESS ■ 23
DECEMBER 2008
ADVICE: TECHNOLOGY
Get wise — digitize By MICHAEL MUNSHOWER In Business Are filing cabinets overtaking your office? Instead of buying another cabinet or storage box, it’s time to digitize. Digitizing is the scanning of documents or photographs for the purposes of storing and archiving on electronic media. Digitizing can be done on a flatbed scanner which many offices already have or through an outside contracted service that specializes in this field. Your business may be retaining time cards, personnel records, invoices, receipts, contracts and other assorted
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production and process documents. The task of digitizing these, depending on the volume of paperwork, may range from minimal to monumental — but is worth the effort in the end. Along with such an undertaking, one must have put some forethought into folder structure on the computer that houses that digital archive. A LOGICAL and intuitive system setup is essential for efficiency. Scanned files should be saved in non-proprietary formats that have been around for sometime and are not going to go away, such
About the author: Munshower is a systems technician at the Globe Gazette.
as JPG and PDF. Some documents may best be utilized by processing these in OCR (optical character recognition) softContinued on Page 25
Finance/From Page 22 any such activities to get a true picture of results. BACKLOGS Backlogs can be a leading indicator of declining financial performance. In the current market, sellers may try to avoid or may be slow in disclosing their current backlog, or may delay reflecting canceled orders. Backlogs also may not be in saleable condition. Be sure to look at comparative backlogs over time so you will know which way this indicator is trending. SALES/REVENUE In a declining market, effective due diligence not only of the amount of sales and revenue but also of their quality is vital. Take a close look at recent lost customers or at customers who have stated an intention to move their business, and find out what is driving those decisions. Credit is obviously a key concern for every business currently, so carefully evaluate the creditworthiness of the target’s client base. Is the target offering more generous warranty terms, discounts or other incentives to shore up sagging sales? GROSS MARGINS A target company may take a variety of steps in a declining market that could adversely affect margins. For example, companies often discontinue less profitable or unprofitable product lines in tight markets — but that could mean that
a higher percentage of overhead will be allocated to the remaining product lines, adversely affecting their margins. ACCOUNTS RECEIVABLE AND BAD DEBTS In an uncertain economy, an increase in bad debts is common. Look at the target’s receivables aging to see if collections are slowing. Are customers disputing invoices in an effort to defer payments or lower costs? Is the target tightening credit limits, which may lead to lower sales? Remember, deteriorations in receivables will affect the company’s borrowing base and loan structure. ACCOUNTS PAYABLE AND PURCHASING Targets in trouble may adjust their purchasing and accounts payable practices in ways that could affect their value. The target may be slowing payments to vendors and suppliers to conserve cash, or may be having more disputes with vendors as it tries to return merchandise in an effort to control inventories and preserve cash. Take a close look at the target’s purchase obligations — are volume guarantees and associated penalties likely to become an issue? Finally, even if the target itself is healthy, the failure of a key vendor could lead to interruptions and higher costs as the company scrambles to find a replacement, so you also must assess the health of the company’s key suppliers.
COMPENSATION AND STAFFING Payroll is usually the largest expense for an employer, so it’s no surprise that a troubled company make take steps to reduce its personnel costs. Has the company reduced, eliminated or deferred bonus payments, or has it forced salaried personnel to take unpaid leave? If so, be sure to consider the likely effects on morale and retention of key personnel as well as potential future costs to make up for skipped or delayed payments. If the company has laid off workers to save money, make sure that those cuts are sustainable. Effective due diligence in a poor economy raises other considerations as well. For example, can you differentiate between declining results due to economic conditions, which may turn around when the economy does, and poor results due to lost market share or other reasons, which may not. A close review of the target’s management team also is in order. Managers who built a company during a period of strong growth may not be the right team to lead it through a downturn or turnaround. Lending relationships need especially close examination during the current credit crunch. An economic downturn can present unique acquisition opportunities but also present very real due diligence challenges. More, and more effective, due diligence can be the difference between buying a troubled company and becoming one.
24 ■ IN BUSINESS
DECEMBER 2008
Q&A Gregg Gillman, North Iowa’s newest economic recruitment guru, talks about the challenges and opportunities awaiting our region By JOHN SKIPPER In Business
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As the first executive director of the North Central Iowa Growth Partnership, Gregg Gillman holds a position that has been talked about for years — the job of marketing and managing regional growth. The key word is regional. Mason City and Clear Lake each have had their own economic development teams for many years and often competed for businesses and industries looking to expand or relocate. When the decision was made to form the North Central Iowa Growth Partnership, it signaled that North Iowa communities, including those in rural Cerro Gordo County, were ready to work as a team. Gillman, 47, a native of Indiana, was hired to oversee the new direction in economic development. In Business talked to Gillman to learn what brought him to North Iowa and what he foresees for the area. Q. How did you get involved in economic development? It’s not something that kids dream about doing, is it? A. In high school, I thought I wanted to be a college basketball coach. My strategy was to play college basketball, then hopefully some pro ball, then I’d probably have to coach in high school first and then get a job as a college coach. I had it all planned out in my mind. Q. But that plan didn’t work out? A. No, that didn’t work out. When I was a kid in Indiana, our family would go to Cincinnati once in a while and I was fascinated with all the tall buildings. I’d ask myself, “Why did they put that building there?” or, “Why did they build that building that way?” So even though I loved basketball, I had an interest in economic development, too. I just didn’t realize it yet. Q. Tell me about your schooling and your professional background.
In Business file photo
“We have so much here. We just have to roll up our sleeves and let the rest of the world know.” — Gregg Gilman, executive director, North Iowa Growth Partnership
A. I went to Ball State University and got a degree in urban planning. I really didn’t want to be a city planner. I was more interested in the marketing side of it. I got an internship with an economic development consultant and then worked for the state of Indiana’s economic development department. Then I went to Jennings, Ind., which is a town of about 30,000, and was economic development there and then went to Hamilton, Ohio, as economic development director. I came back to Indiana to work in economic development in Indianapolis and then worked in the private sector for a little while. I got a job selling real estate and the market was tough. I realized my first love was economic development and I wanted to get back in it.
Q. And you learned of the job opening here? A. Jobs like this don’t just pop up every day. My wife and I both grew up in small towns and we wanted to stay close to family so we didn’t want to be more than 10 hours from Indianapolis. This job was a match. Q. People who have lived here for a long time sometimes take our assets for granted or maybe don’t think of them at all. As a relative newcomer, what excites you about this area? A. The airport, the railroads, the Avenue of the Saints, the fairgrounds, Frank Lloyd Wright, Meredith Willson, NIACC, Vision Iowa — are you kidding me? We have so much here. We just have to roll up our sleeves and let the rest of the world know.
IN BUSINESS ■ 25
DECEMBER 2008
TOOLBOX: YOUR WORK FORCE
Diversity is a goal that often isn’t met By ANDY SMITH The Providence Journal
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A lot of companies say the right thing when it comes to creating a diverse work force. But how many of them are actually doing the right thing? A recent survey by Adecco USA, a temporary staffing and recruitment company, found that 78 percent of workers who responded to the poll believed diversity was something companies publicized more than they actually achieved. Of the 47 percent who said they experienced some form of workplace discrimination, age was the most common type cited, at 52 percent, followed by gender (43 percent), race (32 percent), religion (9 percent) and disability (7 percent). Lois Cooper, vice president of employee relations and diversity at Adecco, said many corporate chief executives truly believe in the benefits of a diverse work force, but efforts to implement their ideas get bogged down in middle
management. Cooper said it’s important for chief executives to make sure that everyone in the company is on board with their diversity plans. “I have to say I was not surprised (at the survey),” she said. “There are some organizations that are still having problems.” She said lingering prejudice, worries about cost and inertia can all contribute to keeping companies from achieving diversity goals. Cooper said diversity is more than just a feel-good issue; it matters to the bottom line. Business is increasingly global in reach and customers and business partners are more varied. Companies with diverse work forces can gain a competitive advantage. That holds true even in a difficult economy, she said. Cooper said Adecco had some suggestions for employers and employees looking to strengthen work force diversity:
■ Get the commitment of senior management. Companies are still ruled from the top. Without the active endorsement and support of company leadership, any diversity initiative is going to fail. ■ Engage employees in the process. The best way to know how things are going is by asking the people who are affected. That requires open communication, in which employees can address concerns or problems without fear of adverse consequences. ■ Provide diversity training. Training can provide an important education, helping answer questions about what diversity is and how it can benefit a company. On a very practical level, diversity training — which should be consistent throughout all levels of the organization — can explain what laws apply when it comes to preventing discrimination. That knowledge can prevent a lot of problems, not to mention expense, in the future.
Digitize/From Page 23 ware to allow text searchable capabilities. There are other benefits to digitizing besides the reduction or elimination of space-consuming traditional filing cabinets. Electronic files are easy to copy. Sensitive documents can be encrypted to only grant access to certain authorized users. Non-sensitive documents can be placed in a common folder of your local area network so multiple users can access these easily. General productivity increases and downtime decreases by not having to hunt down hard copies of documents. Once all of your valuable documents are digitized, the next consideration is how to backup and store this data. The easiest way to backup data would be to CD or DVD. Virtually all computers of recent manufacture have a CD burner at minimum or a DVD burner. Blank CDs and DVDs are cheap and readily
available. Archival life is debatable, but with proper storage an approximate 10-year life is expected. For greater archival life, there is a step above average consumer grade discs, such as gold discs that some manufacturers offer that promise a much longer lifespan. Another easy way to backup your data would be to an external hard drive. External hard drives offer very large storage capacities for reasonable prices. One backup isn’t enough. Make at least one extra backup and keep it offsite from your business in case of fire, flood or some other disaster. For original documents that you no longer need, recycle or securely shred these when done. If you are uncertain about whether or not a document must be retained in its original form, seek legal advice from a qualified source.
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IN BUSINESS ■ 27
DECEMBER 2008
TOOLBOX: YOUR WORK FORCE
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Kim MacClurg, who works at the SAS Institute in Cary, N.C., participates in a class called S.T.O.P. (Save More, Track Spending, Organize Finances, Pay Down Debt).
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By ALAN M. WOLF Raleigh News & Observer As the economy slows, employers are boosting efforts to improve financial literacy among workers. And demand from anxious employees is surging as they take a bigger role in their own retirement planning. SAS Institute in Cary, N.C., is seeing about twice as many participants this year for seminars on budgeting, insurance, taxes and more. IBM’s “MoneySmart” coaches are assisting thousands with financial planning needs, from 401(k) investments to debt management. And Pepsi Bottling Ventures in Raleigh, N.C., soon will start a “Financial Peace” seminar series based on the work of financial guru Dave Ramsey. “It’s a matter of being committed to the total health and well being of your employees,” said Claire Niver, vice president of human resources for Pepsi Bottling. “We know people struggle with money. We know it
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stresses them out and makes them less productive. “We believe when people come to work, they need to be as healthy as possible — that’s physical, mental and financial,” she added. “Anything that distracts your employees pulls them away from you.” Financial education started gaining traction as employers began phasing out traditional pension plans in favor of 401(k) plans that require more ownership and effort by workers. In the past three decades, the percentage of private-sector workers who participate in only a pension plan has dropped below 10 percent. The Employee Benefit Research Institute reports that nearly two-thirds were enrolled in a 401(k)-type defined contribution plan in 2005, the latest figures available. BUT MANY employers have been reluctant to provide much comprehensive financial advice or assistance Continued on Page 29
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28 ■ IN BUSINESS
DECEMBER 2008
TOOLBOX: WORK FORCE
Bonuses: Economic casualty or incentive? By JOYCE M. ROSENBERG AP Business Writer The year-end bonuses or holiday gifts that many small business employees are hoping for may end up a casualty of the stumbling economy as owners decide they can’t afford them. But at some companies, bonuses are turning into incentives to help boost sales and profits. While some business owners budget early in the year for bonuses or gifts, many don’t start thinking about what or how much they’ll give their staffers until the fourth quarter. And with cash flow shaky at some firms, owners are probably thinking about forgoing what might now seem like a luxury. “We’re holding our own,” said Susan Solovic, chief executive of SBTV.COM, a small business Web portal, but she also said the company is running behind on its projections. In past years she gave employees small gifts as signs of appreciation, but “we’re not going to be doing that this year,” she said.
ALTHOUGH SOME companies don’t differentiate between bonuses or holiday gifts, many owners believe bonuses should be based on criteria such as performance or how long a staffer has been with the business. A gift tends to be something employees receive as a sign of appreciation, or they’re given as morale boosters. Tellem gives bonuses based on how big a contribution employees have made during the year. She said her business is actually doing well this year, so there won’t be a problem giving cash to her staff.
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STAFFERS AT Solovic’s St. Louis-based firm will get something else instead — time off. The company will be closed during the week between Christmas and New Year’s Day. Solovic believes most employees would rather have time than a gift from the boss. “A lot of times you end up giving something that isn’t wanted,” she said. But just about every worker loves having even one extra day off, she said. Susan Tellem believes that forgoing bonuses isn’t an option at her business. Last year was difficult for her Century City, Calif.-based public relations firm, Tellem Worldwide Inc., but she still gave bonuses to her staff, although the amounts were smaller than in in the past. “When your staff gives it their all and participates and is there when you need them and has been a really strong part of the team, it’s really critical to thank them in some way,”
Tellem said. Tellem recalled the reaction of a free-lancer who was having a hard time financially: When he received his bonus, he started to cry. “It’s the kind of behavior that makes you say, ‘Let’s give less to me and to my partners in the business and make sure everybody shares in some way, even if it’s a small amount of money,’ ” Tellem said.
WHEN VANESSA Horwell did the quarterly planning for her Miami-based public relations firm four weeks ago, she found her cash flow wasn’t where she wanted it to be. Horwell said there were “question marks about receivables — everyone is slowing down.” Bonuses were suddenly in question, too. At the same time, “I didn’t want to be in a position of saying, ‘I’m sorry, I’m Scrooge this year,’ ” said Horwell, president of ThinkInk. So she told her staff that they could get bonuses but that they have to meet certain goals to receive them. “I wanted them to be accountable and feel like they were responsible for the growing of the company as well by tapping into their networks and seeing where opportunities for new business were available.” Horwell has devised a two-tier system of rewards for employees. Those who bring in the most business get a cash bonus. Those in the second tier get a vacation to the Bahamas. Horwell does plan a gift for all employees, whether or not they get a bonus. She’s giving them allowances to be spent on wellness items such as gym memberships or for health insurance. And if gas prices return to extremely high levels, she’ll consider a fuel allowance as well.
DECEMBER 2008
IN BUSINESS ■ 29
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Mark Cowell, financial resource consultant at SAS in North Carolina, leads a group in a S.T.O.P. (Save More, Track Spending, Organize Finances, Pay Down Debt) class.
Money/From Page 27 for workers. There was the added cost, an unwillingness to meddle in workers’ personal affairs and, in some cases, fear of liability if investments soured. The recent stock-market slump, coupled with surging prices that are putting more strain on household budgets, is fueling interest in sophisticated and personalized financial services. IBM STARTED its MoneySmart program last year, partly in anticipation of freezing its pension fund in January and shifting workers to 401(k) plans. The program, which IBM expects will cost $50 million over five years, provides seminars, online planning and one-on-one financial help, all free for employees. The program has about 15,000 workers using one-on-one coaching sessions and fields about 4,500 calls a month. Peter Orton, a media designer in IBM’s Center for Advanced Learning, consulted with a MoneySmart coach recently as his wife prepared to retire and begin collecting Social Security benefits. “They didn’t say ‘we know the answers,’ but they found us some experts who knew the answers,” said Orton. “I’m a pretty critical guy when it comes to services, but I’m really hot” on the program. THERE ARE limits to how much help a company-sponsored seminar can provide. In some cases, workers might require a fee-based adviser for issues such as how to allocate retirement fund assets.
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But in most cases, employers are trying to offer at least a foundation of education, and then give referrals and recommendations for additional help. “We provide answers so employees can be better prepared,” said Mark Cowell, a financial education resource consultant for SAS. “With what’s happening with banks, Wall Street, people are worried. “There’s only so much you control what Wall Street is doing,” Cowell said. “We focus on what you can control.” MARY LONGMIRE, a recruiting coordinator at SAS, recently took a class during lunch on financial budgeting. The course focused on creating a budget, controlling spending and finding ways to save more of your paycheck. Now she’s clipping more coupons, sticking to her grocery list — instead of buying things she doesn’t need — and buying clothes for her 6-year-old son at consignment stores. For Katrina Brown, the eight-week class was a reminder of the importance of cutting back to save more. Brown, 27, who helps handle benefits claims at SAS, said she’s now saving about $80 a month with a goal of reaching $200 a month. She’s doing it partly by reducing unnecessary purchases: clothes, shoes and purses. “If anything were to happen, if I were to lose my job, I don’t have six months’ (expenses) saved,” Brown said. “I have to think about whether that bag is going to help me pay my bills if something were to happen. That kind of stops me.”
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30 ■ IN BUSINESS
DECEMBER 2008
TOOLBOX: WORK FORCE
The great holiday juggling act Bad economy, holidays can make handling employee issues difficult By JOYCE M. ROSENBERG AP Business Writer Managing employees during a bad economy is difficult, and managing them through the holidays can also be a challenge. Small business owners may find that doing both is particularly rough this holiday season. The employee issues that tend to come up during the holidays, such as productivity dips and time off, can create more tension when business is down and the boss is hoping to get as much work done as possible. There’s also the sad fact that layoffs often happen during the holiday season, and employees may be hoping for raises or bonuses that companies just can’t afford. Owners who are worried about receivables and cash flow understandably may not be feeling in a holiday mood. Human resources and management consultants say it’s a good idea for owners to keep their nervousness to themselves — bad behavior can look even worse when it happens during the holidays. “If they are experiencing anxiety, that’s going to be replicated faster than they can imagine across their staff,” said Lisa Aldisert, president of Pharos Alliance, a New York-based consulting firm. “Since every owner has some anxiety, they have to be additionally mindful and careful of their tone of voice, their facial expressions, their body language so that they’re not saying one thing and meaning another.”
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ALDISERT SAID employers who treat staffers with disrespect or who are unpleasant stand to lose their most talented and valued workers. “When the economy turns, those people are going to be the first ones out the door,” she said. “If anything, this is a time when employers should do anything they can to express their appreciations and recognize the talent they want to have in
the company going forward.” Owners can make a mistake out of fear or uncertainty, and it can register as a hostile act with workers. This certainly applies where layoffs, or the possibility of layoffs, are concerned. Many HR professionals agree that it’s a bad move to shock employees by abruptly telling them that they or their co-workers are being laid off — something that happens when a boss keeps putting off what’s understandably an unpleasant task. It’s hard enough for workers to deal with that kind of surprise at other times of the year, but during the holiday season it will enrage everyone, including the staffers who still have jobs. MOST CONSULTANTS advise owners to let the staff know the company’s situation long before it gets to the crisis point, which might even help avert layoffs. Employees can help turn things around; they often have ideas about how to get the work done better and cheaper, and, since they realize their jobs may be at stake, they can be motivated to help the company. “They should get all hands on deck as far as discussing the environment, which can help the business and help the employees in the business understand,” said Rick Gibbs, a senior human resources specialist with Administaff, a Houston-based company that provides human resources outsourcing. HR professionals differ over how much notice to give employees about being laid off — in some companies, employees are told to clean out their desks immediately. Patty Hilger, vice president of human resources and operations for Genesis Consolidated Services Inc., a Burlington, Mass.-based HR outsourcing provider, believes the current environment calls for an extra dose of humaneness.
“The job market isn’t what it used to be — people may not have savings to fall back on,” she said. “I would rather err on the side of giving people notice.” It’s also a good idea to let employees know soon that they’re not getting yearend bonuses, although many workers are likely expecting that to be the case. But Gibbs said companies that can’t afford the cash can nonetheless reward staffers for their hard work. “They might want to consider more flexible hours, allowing people more time with their families,” he said. PRODUCTIVITY CAN be an issue during the holidays because employees are often distracted, thinking about buying gifts, juggling family visits and trying to get away from work to attend holiday events at school. Many hope to take a few minutes out of the work day to do some online shopping. That can rankle an owner in the best of times; now, it may be maddening to a boss who needs staffers to focus on bringing in more revenue. Gibbs argues that a little flexibility and tolerance at holiday time will help a company in the long run. For example, giving workers a break during the day to do their shopping or run an errand is likely to make them more, not less, productive. And there’s the issue of days off — most workers want time off during the holidays while an owner may feel this is just not a good time for that. Hilger suggests some compromise and creativity. She suggests asking a staffer, “Is there a way you can use half a day instead of a full day? I’ll feel better and you’ll have the afternoon.” “If you want to invest in your staff and their satisfaction, it’s helpful to give a little in terms of flexibility and time off,” she said.
IN BUSINESS ■ 31
DECEMBER 2008
TOOLBOX: BOOKWORK
Year-end planning more complex Annual checkup of your company’s financial health is even more important with the economic downturn By JOYCE M. ROSENBERG AP Business Writer One of the most important tasks for small business owners is a year-end checkup of their companies’ financial health. It’s even more critical now as the economic downturn persists. Revenue and tax projections are still a focus when owners meet with their accountants or other tax professionals, but credit and cash flow may now be even more crucial considerations. And owners may find they need to look deeper into the way their companies operate, pay bills and receive payment than they’ve had to do in the past. As many banks tighten their lending, small businesses “have to revisit their entire credit strategy,” said Gordon Spoor, a certified public accountant in St. Petersburg, Fla. Many companies might be tempted to take whatever cash they have and pay down any outstanding credit lines, leaving themselves debt-free. But Spoor advises against that move — if a bank freezes or cuts back a company’s line of credit after the cash has gone to pay down debt, then the business will suddenly find itself with fewer options. “They should hoard some cash right now,” Spoor said.
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CREDIT STRATEGY also applies to how businesses extend credit to customers — owners may need to start thinking and acting in a fashion similar to bankers in order to protect themselves from losses. For example, they may need to see more documentation from a customer before extending credit. “They have to revisit their risk and see what they’re willing to take,” Spoor said of owners. “They may have to work out different terms.” Spoor noted that a popular form of business credit, the letter of credit, may be harder to come by. In a letter of credit, a bank or other lender agrees to guarantee full and timely payment; manufacturers often ask for letters of credit before ship-
ping goods. If a bank won’t issue a letter of credit, or will only issue one with a number of conditions, then an owner needs to decide how much risk he or she is willing to take, Spoor said. But that can be tricky if the customer represents a very large part of a company’s revenue — an owner needs to walk a line between protecting Don’t assume the business because you from loss and not haven’t been hit alienating a already that you’re good cusnot going to be.” tomer. — Gordon Spoor, certified pubOwners lic accountant in Florida and their accountants should also discuss receivables, the money owed by customers for goods or services. In this climate, many companies are finding it’s taking longer to be paid and that they need to rethink their payment policies.
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BARBARA WELTMAN, a tax attorney in Millwood, N.Y., and author of “J.K. Lasser’s Small Business Taxes,” suggests companies “get payment upfront or by credit cards. ... Stop being a banker for your customers.” She noted that many owners might balk at having to pay banks’ merchant fees when they take payment by credit cards, but they’re probably better off having the cash in their checking accounts and let the banks worry about collecting from customers. A more aggressive payment policy can save businesses from losing money when customers can’t or won’t pay. Weltman noted that companies that operate under the cash-basis method of accounting, traditionally used by service providers and professionals like doctors and lawyers, cannot under IRS rules write off unpaid invoices as bad debts. They’re out the full amount of money they weren’t paid. SPOOR NOTED that companies can use their own payment strategies to help their cash flow as well. For example, if a small business is a high-volume purchaser of goods from a vendor, and under the purchase agree-
ment can take up to 90 days to pay, then taking a little longer to write out a check might give the company some more flexibility with its cash flow. Of course, if the vendor then decides to tighten payment terms, there goes that option. Some very fortunate business owners are going into their year-end financial checkups having weathered the downturn well — their products or services remain in demand and their cash flow is strong. Spoor has a caveat for these owners — this still looks to be a long and difficult economic downturn. “Don’t assume because you haven’t been hit already that you’re not going to be,” he said.
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IN BUSINESS ■ 33
DECEMBER 2008
TOOLBOX: MAKING THE SALE
Resurrecting ‘the Dead’ Five steps to sales recovery By LINDA BISHOP For In Business For many years, one of Mike’s best customers was a large bank. He loved them and thought they loved him, too. Then, sales began to slip. The bank didn’t call quite as often as they once had. Mike still got orders but they weren’t as frequent or as large. He noticed, but didn’t react. He didn’t ask what was going on, or why the situation had changed. No one complained about quality or price, so Mike assumed the situation would turn around. One day he woke up realizing it had been a very long time since he talked to anyone at the bank. A queasy feeling gripped him as he counted backward and realized how many months had gone by without a single order. His blinders fell away. For the first time, Mike recognized this customer was dead. Worse yet, he had probably killed it with neglect and indifference. This story has a happy ending. Mike worked hard and resurrected his dead client. He continued to do business with them for the next decade. ••• EVERYONE HAS DEAD customers and resurrecting them can be the shortest route to new sales. Dead customers represent qualified leads. You already know they buy what you sell. Often enough, they will buy it from you a second time if you go out and re-sell them. Learn from Mike’s mistake. Follow this easy five-step plan and bring dead customers back to life.
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• Step One: List Dead Accounts. Make a list of dead accounts and jot down notes on what you know. Why did the account die? Was there a problem with quality, pricing or personnel? Was neglect the cause? For the moment don’t expend any energy worrying about the probability of a successful resurrection. Just make the list, read it once and then put it
About the author: Linda Bishop is an author, speaker and president of Thought Transformation, which offers training in industries and focuses on the tools and marketing tactics for individuals and enterprises looking for strategic resources to increase their sales. She had a 20-year career in the printing industry. Bishop can be reached at 770-8463510 or lindabishop @thoughttransformation.com. aside for 24 hours. Let your brilliant subconscious mind take over and work on the problem. • Step Two: Find Out if the Contact Is Current. A couple of days later get out the list and make calls. Talk to receptionists. Tell him/her you’re updating files — which is the truth — and you want to make sure information is current. Get the name of the buyer and his or her title. Confirm phone numbers and email addresses are correct. Be friendly. Be upbeat. Be positive. Often enough, you discover the old buyer is gone. The slate has been wiped clean and you’re selling to someone new. • Step Three: Send the Buyer a Letter. Whether you know the buyer or not, write a letter consisting of three paragraphs. Paragraph 1 explains why you’re contacting the buyer. Paragraph 2 explains how you can help. Paragraph 3 thanks the reader for his or her consideration, and tells the reader when to expect a follow-up call. Include your business card and mail the letter. Here’s why a letter is better than email or a phone call for initial contact. Customers get lots of phone calls and emails. They don’t get a lot of letters. Everyone knows it takes effort to write and mail a letter — more effort than it takes to dial the phone or send an e-
mail. People respect effort and they appreciate it when it’s directed at them. For these reasons, letters stand out. • Step Four: Follow Up. Figure out when the letter will land on the ex-customer’s desk. Call within 48 hours of the anticipated arrival time. If your target picks up the phone, great. Talk to them. Treat them as you would any new prospect and try to get an appointment. If you get voicemail, leave a message. Briefly repeat what you said in the letter. Keep calling. After you have called seven or eight times, tell them if they would like you to stop calling all they have to do is pick up the phone and let you know they’re not interested. • Step Five: Go on Appointments. If they agree to see you, do what you normally do during a sales call with a new prospect. Tell them about your company. Explain how you can help them. At the end of the call, smile and say, “We have worked with you in the past, and would love to work with you again. How can we make that happen?” See what they say. This plan gets results. It’s worth the effort to resurrect dead customers because plenty of them are perfectly willing to come back to life with a little nudging from you. Often, reviving them is quicker and easier than expected. ••• AN EXPERIENCED sales rep named Chris followed the plan. He put together a long list of dead customers and made calls to update his contacts. At one old account, the busy receptionist mistakenly connected him directly to the buyer. The buyer was happy to hear from Chris and immediately agreed to see him. Chris learned a lesson that day. Some dead customers aren’t even dead. They’re just hibernating and one phone call is all it takes to awaken them.
34 ■ IN BUSINESS
DECEMBER 2008
Think of your image in picking meeting sites
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Dear Professor Bruce: I’m tired of having meetings in coffee shops and my clients are starting to wonder if I’m operating a fly-by-night operation. I can’t afford to rent an office, so what can I do? Answer: Here are four places you may want to reconsider with respect to holding meetings with potential clients. 1. Coffee houses. Do you want to meet your clients at tiny, coffee-stained tables surrounded by folks in mostly casual conversation? No, you want to have a business conversation and make strong points without worrying about bothering the folks at the table six inches from you. 2. Public libraries. No matter how practical, the message that you send is that you have no resources. You are basically telling your clients that the best you can do is muster up an ill-equipped room in a public library. 3. Hotel/motel lobbies. Hotel/motel lobbies can be beautiful and on the outside might seem like a great space to meet. But they are also
extremely busy. There is a lot of foot traffic, including large groups of tourists. Hotel guests on vacation do not care if you make a good impression with your client. You cannot control your environment here. 4. Fast-food restaurants. You are trying to sell yourself as high-end, something special, a cut BRUCE above the competition. FREEMAN So now that you know The Business where not to meet, Professor where should you go when you need to meet with a client? According to Jeff Landers author of “The Home Office From Hell Cure” (Entrepreneur Press), “small business professionals should get virtual office space. This way they can work from home while giving the appearance that their businesses are much larger and more impressive. This is absolutely
essential if you want to attract and catch bigger clients.” Here’s how it works: For a reasonable monthly fee you can rent the services of an office suite without actually renting the office itself. Imagine working from your suburban house outside New York City but coming into Manhattan and having your client meetings in a fully equipped, stateof-the-art conference room in a luxury office building. That means you can finish up the client presentation at home and go to your very own conference room in a highend office suite. Your clients can sip a cup of freshly brewed coffee while you impress them with your professionalism. It only costs you a few dollars each month and is available to you on an “as needed” basis. Stay at home but get all the advantages of being in a “real” office. — For further information, visit www. homeofficesuccess.com. Bruce Freeman is president of ProLine Communications, a marketing and public relations firm in Livingston, N.J. He can be reached at Bruce@SmallBusinessProf.com.
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IN BUSINESS ■ 35
DECEMBER 2008
Strengthen your work force ...
Mine those diamonds for impressive results By RON PRICE For In Business There is an old story about a fellow in the ancient world who, upon learning about diamonds, sold his successful farm and spent his fortune traveling the world in search of the gems. Several years after he died having never found the diamonds he sought, others discovered the largest diamond mine ever found in Africa — on the farm he sold to begin his quest. Just for a moment, let’s pretend there was a special machine that took a retina scan of every employee in your business and based on this scan it could tell you exactly what each employee was capable of becoming in the future. You could then create a customized development program that resulted in the most profitable and fulfilling use of every employee in your business. Would you use such a machine, if it were available? Business leaders often discover an internal conflict between taking care of the immediate concerns of the business and a longing to “do it right” and manage more strategically for long term success. Beleaguered executives often confess that even if they did have a perfectly clear picture of the best way to develop and manage their people, current circumstances wouldn’t allow it.
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RESEARCH HAS REVEALED that mediocre supervisors work under the assumptions that: • Everyone should be able to learn how to do a job with training. • The greatest employee growth is realized by focusing the employee’s areas of weakness. In contrast, exceptional supervisors assume that: • Everyone has unique and enduring talents and, • A person’s greatest potential lies in developing their areas of strength. Great managers constantly look for ways to develop and leverage each employee’s strengths rather than getting
trapped in trying to fix weaknesses. Business leaders serious about identifying, developing and deploying talent understand that in today’s world getting the right people doing the right things is the most important differentiator in any successful business. How they understand and manage people should come before thinking about how they will effectively compete in the marketplace.
This picture of what the job wants can be used to improve the hiring process, create highly customized training and development strategies and pinpoint the most important performance management issues for continuous improvement. 2. What natural talent patterns does this person bring to the job and how should we leverage this talent? FOR MOST business leaders, this is a Every individual brings a unique comdifficult shift in mindset to make. After bination of behavioral tendencies, motivaall, business leaders are normally meastional biases and evaluative judgment ured by annual revenue, stock value, inclinations to their work. When these earnings or the organization’s credit ratfall in relative alignment with what the job is asking for, superior performance is ing — all “hard” financial measures of practically inevitable (we call them “a success. natural for the position”). These “hard metrics” are easy for busiWhen there is misalignment between ness leaders to think they can control and manipulate through decision-making and these talent patterns and what the job is asking for, it doesn’t matter what educathe priorities they establish for their tion or past experience the employee organizations. brings, there will always be a struggle to On the other hand, understanding and perform at a superior level. This is the deploying talent is much more difficult and it requires more humility — it doesn’t hard work of managing others — to fit the “alpha male” concept of many lead- understand and leverage the strengths ers. How can we balance the scales by cre- and to work around or neutralize the weaknesses. ating equally compelling measurements 3. What is the most effective way to for identifying, hiring, developing and develop and focus each person’s talent for optimizing talent? There isn’t a retina scan that measures success based on the alignment between the job and the person? potential and illuminates the most effecDiagnosis is 90 percent of the cure. If tive pathway to success. But it’s getting business leaders can develop a laser-like closer. The convergence of psychometrics with job benchmarking is opening up new focus of what a job is asking for and how natural talent patterns relate to the job, methods to identify deeper reservoirs of then learn how to apply this knowledge to potential in people. leveraging strengths and neutralizing weaknesses, they will begin to underEXCEPTIONAL LEADERS have stand that their people represent one of experienced breakthroughs in performthe greatest underutilized resources in ance by asking three simple questions: the organization. 1. What talent patterns is this job ask— The author is the founder and CEO ing for in order to achieve superior perof Price Associates, a company dedicated formance? There are specific activities, to helping business leaders and entreprerewards and evaluative judgment patterns that result in superior performance neurs solve problems, identify solutions and implement change in strategy and for every job. performance. For more information, visit By defining these in detail, business www.Price-Associates.com or call 866leaders can develop a profound clarity 442-0556. that will lead to superior performance.