WINTER 2008
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what’s inside
BGS Corporate Contributors and Affiliates 2008 Beta Gamma Sigma thanks those organizations that generously support the Society’s programs and services
2
A Message from the BGS President
3
Letters to the Editor
4
Small Business and the Economic Downturn
($50,000+) BusinessWeek
10
Small Business Financing
10
Growing, On-Going, Not Gone: How Entrepreneurial Firms Prosper While Larger Firms Crumble
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bgs international exchange WINTER 2008 www.betagammasigma.org 1
A Message from the BGS President
T
here is more than enough bad news out there for all of us to digest. In fact, if you’re looking for uplifting headlines and feel-good, fuzzy-warm stories, the national and international business headlines should be ignored altogether. You would probably find more uplifting news in the daily obituaries than on the business pages. At times like these it’s tough to find the silver lining. Americans and many others around the globe are feeling the pinch – or the punch in the gut – that comes with tough economic times. As I sit here today, I read that Citibank will lay off another 53,000 workers, following up on the 22,000 let go just a few weeks earlier. And they are certainly not alone. Almost every major bank and financial institution is facing similar George E. Stevens pressures, and workers are getting President of Beta Gamma Sigma the axe. At the same time, squabbles continue over how to best utilize the $700 billion federal bailout money, designed to get the credit markets back up and running and the economy moving again. But no one is able to say how, or why, or even if the bailout will work. In fact, every industry is dealing with its own set of troubles. The American auto industry is currently begging the U.S. Congress for a bailout, and it’s anyone’s guess how that will turn out. The airlines have struggled for some time, and one can be sure they will be close behind with their hands out if the auto industry gets help. The housing market has collapsed, causing housing values to drop 50 percent or more in some of the hardest hit areas around the country. It is with all this as a backdrop that Beta Gamma Sigma put together this issue of the BGS International Exchange, examining how the current economic environment affects everyday small businesses. The stories are inspiring and heartbreaking at the same time. Jeremy Litchfield, for instance, wanted to make a small difference in the world and build a business at the same time. He recognized a need for a more environmentally friendly line of running apparel, and he set out to establish his company, Atayne. The company’s motto is, “Put people and the planet first, and profits will follow.” After a fast start, Jeremy is struggling to find financing and grow his promising business. To see the whole profile, go to page 6. There are many other stories within the pages of this issue and I encourage you to read them all. This is a great reminder that when we hear and read about the multinational organizations and their struggles, the trickle down will be felt by many more in the small business community. And these are the true lifeblood of our economy. This is where the entrepreneurial spirit merges with the innovative mind to create the great companies of tomorrow. This is where most job creation takes place, at least during times of progress and growth. And I guess this is why, through all the gloom and doom, and with all the suffering that has and will take place, there is a silver lining to be found. Those with the true entrepreneurial spirit – and there are many BGS members among this group – will find ways to rise from the current down conditions 2 bgs international exchange WINTER 2008 www.betagammasigma.org
and spring back when things get better. They will develop innovative ways to tackle the problems that face them and their organizations. They will re-emerge with streamlined, more efficient programs ready to move forward when conditions improve. That’s how it always works. To invert a famous phrase, “What goes down must come up,” and the belief in that simple truth is what drives the entrepreneurial spirit. I want to wish all lifetime members of Beta Gamma Sigma well as they navigate these difficult waters over the next weeks and months. Some will get bad news; some will struggle; others will tread water, waiting for things to calm down a bit. But remember that your lifetime membership is still a valuable commodity. Register for the BGS LinkedIn Group and participate in local Beta Gamma Sigma alumni chapter events to expand your professional network. Plan to take part in the second BGS Virtual Career Fair and/or Virtual Graduate School Fair, scheduled for February 16 through March 1, 2009. Upload your resume onto the BGS CareerCentral Job Board and check regularly for great opportunities there, or apply for one of the open positions advertised. And if you’re lucky enough to be in a position to hire for your company, consider hiring a fellow BGS lifetime member. You know what the honor means, and it’s a great place to start when looking for the best candidates. Keep your ears and eyes open, and if you hear about opportunities that are out there, let other members know at the BGS LinkedIn Group site or through your local alumni chapter. After all, you’ve earned the right to be called “the best in business” through your induction into Beta Gamma Sigma. Now is a great time to help others who earned the same distinction.
Attention BGS Members: Don’t miss a single issue! Because of increases in postage costs, print editions of the BGS International Exchange will no longer be mailed to our entire membership.
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Changing Directions Mid-Career Fall 2008 BGS International Exchange I enjoyed your latest Exchange issue about changing directions mid-career. I am in the middle of a career change and have held on to my latest copy as a reference and for inspiration. David Dyrek (BGS 2000, Western Illinois U.)
The subject of business ethics is important and I’m thankful you all are considering this issue. However, I firmly believe that ethics, truth, right and wrong are defined by the Lord. If one doesn’t consider the truths of our God and Creator then any discussion of ethics is relative. It is changing, and is based upon what a society considers right and appropriate for its time and place. Using such logic, one must conclude that previously: the Inquisition was right, Aztec sacrifices appropriate, slavery the right condition for mankind, the stock market practices up to 1929 were ethical, and etc. I’m sorry, without a firm basis of what is truth and from whom it comes, ultimately the discussion is meaningless. Edward Allegretti (BGS 1984, San Jose State U.)
Economic Stimulus-Take Two October 2008 B-Zine You want my opinion on the proposed second economic stimulus? It seems the Democratic Party is attempting to buy votes by floating the idea of an economic stimulus package should the “right” people get elected. Further, I don’t think the first stimulus was a good idea nor did it have the desired effect in stimulating the economy. Also, lasting economic growth is not created by giving consumers more money to (over)spend. It seems that is part of what got us into this mess. Eliyah Tashiro (BGS 2008, Indiana U. Southeast) No stimulus. More intervention into the economy will only exaggerate the natural cycles in the economy with higher highs and lower lows. This economic recession is as severe as it is partly due to the community reinvestment act (CRA) laws passed in the 70’s and 90’s. Of course, it is more complex than that, but there are always unintended consequences in government intervention. Inflation is not on the short-term horizon, but with stimulus happening in Australia and taking root in other countries, it is not unthinkable that we could be fueling inflation. Let the economy take its course and let the cycles naturally flatten. Nicholas J. Markette (BGS 1986, Arizona State U.) I think the country needs the passage of a second stimulus to help stimulate the economy. Currently, consumers cannot afford to spend money because of the dire economic situation. Even those who have money are afraid to spend it. The passage of a second stimulus is a great idea. Mohamed Ismail (BGS 2008, St. Cloud State U.)
Either way this election goes, the USA is in trouble for (the) bad and unethical business practices of a few greedy CEO’s and their board of directors, who all should be held accountable for their actions, or in many cases for their inaction. My added concern is that if all three houses of (government) end up in the control of only one political party, our depression will last twice as long due to a lack of a second political party to help control out-of-bounds legislation. Walter Greene Retired professor of International Business UTPA and now owner of Greene & Associates (BGS 1980, U. of Arkansas) I feel like there has already been enough government money thrown at the situation. As hard as the downturn in the economy is, I feel like we need to take the medicine and let the free market heal itself instead of trying to hold off the inevitable. Some of the blame needs to be awarded to persons that took on too much mortgage debt and the banks that allowed such loans. It’s just a very hard lesson to learn, but it’s my hope that the lesson learned will last a few generations. Therefore I do not feel like an additional stimulus package is warranted. Jerry Cunningham (BGS 2008, Mississippi State U.) A second Stimulus Package will only help when we have our financial system regulated and in particular the housing market. We need to go back to the days of requiring a down payment for a house to have consumers view houses as a responsibility and not only as an investment. Also we must penalize or raise taxes against corporations that ship jobs overseas in order to keep the value of goods that Americans produce on an even playing field with the rest of the world. Chris Wherry (BGS 2005, North Carolina A&T State U.)
What do you think about this issue of the International Exchange? Send your letters and comments to the editor: exchange@betagammasigma.org bgs international exchange WINTER 2008 www.betagammasigma.org 3
Small Business
and the Economic Downturn
I
t’s common knowledge (and often repeated) that small business drives job creation and supports the middle class in America and many other countries. As small business goes, it seems, so go our national and international economies. The financial crisis, the credit crisis and the housing crisis have combined to make this a very tough time for small business. Workers around the world fret about negative economic issues near and far. Perhaps more than any other time in world history, workers understand the dangers of failing economies outside their national borders, and recognize the all-too-familiar dangers of unemployment in their cities and neighborhoods. The far-reaching global economy means that what happens in Taiwan will impact workers in Ohio. Conversely, dire housing news in the United States has taken its toll on European, Asian and other markets. Recent employment numbers released by the U.S. Department of Labor indicate that American employers have shed workers at an alarming rate. Just a year ago, the unemployment rate in the U.S. stood at 4.8 percent. In October 2008, that percentage had jumped to 6.5, with more than 1.2 million jobs lost in the first 10 months of the year. Many economic experts are predicting that unemployment will jump to 8 percent or higher next year, meaning hundreds of thousands more will be looking for work in a very weak environment. In the 1980-82 recession the unemployment rate jumped to 10.8 percent before slowly turning around. The bad employment news didn’t stop in October. At the time this publication went to print, Citibank, one of the four largest banks in America, announced 53,000 additional layoffs. These are scheduled to take effect in January 2009. Many more will probably follow, and the uncertainty has given rise to fear and a general slowdown in consumer spending, as consumer confidence surveys show levels at all-time lows. A recent ABC News article reported that healthcare, mining and certain parts of education are the only sectors that continue to add employees. Everywhere else, the news is grim and cuts continue. Just today, November 19, 2008, the bad news continued. According to the U.S. Department of Commerce, construction of new homes and
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apartments fell 4.5 percent in October, the fourth straight monthly decline. The results were the lowest on government records going back to January 1959. The declines in construction last month were felt particularly hard in the Northeast, where there was a 31 percent drop and construction of single family homes fell to a new record low. New home construction dropped 13.7 percent in the Midwest, while there were slight increases in the West and South. So how has this recent downturn affected those individuals who run and work for small businesses? A recent Wall Street Journal article highlighted much of the problem when it profiled Daniel Ariens and Ariens Co., maker of mowers and snowblowers. While Ariens Co. continues to sell its products – it has seen a reduction in sales, but had contingency plans in place to ride out the storm – its suppliers have not been so lucky. In fact, the rapid decline of his suppliers has made it very difficult for Ariens to keep his business afloat, and it’s completely outside his control. Journal writer Timothy Aeppel wrote: “This highlights a grim reality now dawning across the U.S. economy. Deep problems existed long before the meltdown on Wall Street and won’t be fixed by the government’s injection of taxpayer money into the nation’s banks. Even if the credit crunch eases, as now appears to be happening, companies such as Ariens are bracing for a painful recession and taking steps to survive it.” The BGS International Exchange profiles several small businesses below, many of which are owned and/or operated by lifetime members of the Society. Much like the Ariens Co., they now face realities that didn’t exist just a short time ago. Will they survive? Most of those interviewed cling to the entrepreneur’s optimism that things will turn around in time. Some will be able to ride out the current crises while others will not. We thank the following members and their companies for sharing their stories with us. In addition, Beta Gamma Sigma would like to thank all those that offered to help but did not get chosen. There simply wasn’t space to tell all the stories.
Stephanie Carroll Owner, John Hyatt (men’s clothing store) Stephanie Carroll, a BGS member running a higher end men’s retail clothing store in her hometown of Summit, N.J., understands the cyclical nature of the retail business. Along with her husband Robert Carroll, who has worked in retail for more than 20 years, they operate John Hyatt, a clothier featuring upscale brands such as Vineyard Vines, Barbour, Bills Khakis, Peter Millar and others. While the up-and-down nature of retail hasn’t caught them off guard, the complete shock of an abrupt sales decline this fall has left the six-year-old company scrambling. Robert opened John Hyatt – named after his father John Hyatt Carroll and created in the image of great clothing stores of the past that his father had told him about – in 2002. Like many entrepreneurs, Carroll sought out angel investors and others to help him get started, and began building the company from the ground up. Stephanie joined him two years ago after a successful corporate career, and things had progressed to the point that investors were paid off early this year and the couple could look to the future with great enthusiasm. Then the perfect economic storm hit and sales simply plummeted. The company went from posting a reasonably good summer to a very bleak August. With the expected back-to-school sales all but absent, it became clear this was not just your average downturn. “We saw the drop off when this all started in mid-August,” said Stephanie (BGS 2004, Fairleigh Dickinson University). “Back-to-school sales should have been going well, but nothing picked up. We thought, ‘Okay, well, maybe they’re going to shop after Labor Day.’ Then I think things looked okay, because some people shopped in September. But October was just dead. Things (with the NYC economy) started unraveling in September and the more they unraveled – Goldman Sachs, Lehman Brothers – it just died. I mean, people just stopped shopping.” Unfortunately, bad timing has also hurt the Carrolls. This year they added a boys’ clothing line to go along with their men’s line. They had gotten requests from frequent customers that they couldn’t find quality boys’ clothes, so it made sense to pursue that option. They kicked it off this year and expected the back-to-school period to really boost that part of the business. But the downturn changed people’s thinking. “When you can go to Target and get a pair of chords for $10, are you going to spend $45 (at John Hyatt’s)?” Stephanie asked. “No. You might have the grandparents make a purchase
for the kids, but most of the moms are like, ‘I can’t buy a sweater for $50.’ And I understand that.” In fact, Stephanie said over a six-week period ending in late September, the store did not sell a single piece of boys’ clothing. “That’s when we knew we were in real trouble.” Summit is a 45-minute train ride from New York City, and Stephanie said many of its residents are professionals making very good salaries. She said she knows of several customers who have lost executive positions this year at companies like Bear Stearns and Lehman Brothers, and many others who are wary about their future prospects. While many of these people have some reserves and aren’t hurting in the short term, they have significantly cut back because of the uncertainty. “What we are seeing is that people are saying, ‘I want three pairs of pants but I need one,’” Stephanie explained. “So they are just buying the one. We’re not at too high a price point that people will completely pull back,” but it has made a significant difference. “Eighty percent of our customers are wives (buying for their husbands),” she said. “The husbands are telling them, ‘If I can’t eat it, don’t buy it.’ Restaurants in the area don’t seem to be hurting, but there is definitely a pullback when it comes to, ‘Hey, I don’t need another pair of pants. I don’t need another jacket right now.’ “And before, you would see that they would spend pretty well on birthday gifts. Now? Nothing.” Stephanie said it seems that the fear of the unknown is driving the cutback among her customers more than reality. “The fear seems to be driving 75 percent of it,” she said. While there are some who have very high monthly expenses – private school, tutors, etc. – there are many more that just don’t know when the downturn will end. “It’s interesting because some of these people say they are in good shape; they are not going to be starving,” she said. But others are upset because a high-six-figure salary has been cut by 40 percent in the short term. The Carrolls must now focus on the future. In the near term, Stephanie said they are counting on the fact that people will shop for Christmas. But the troubling sign, even for the holiday season, is that the store is down 50 percent through the first three weeks of November. While the Carrolls expected a slow November, with shoppers waiting until the last minute to make purchases, they didn’t expect what has happened so far. She said they are now focusing on the last nine days before Christmas – December 16th through 24th – for sales to pick up significantly. Continued on Next Page
“Eighty percent of our customers are wives (buying for their husbands). The husbands are telling them, ‘If I can’t eat it, don’t buy it.’ Restaurants in the area don’t seem to be hurting, but there is definitely a pullback when it comes to, ‘Hey, I don’t need another pair of pants. I don’t need another jacket right now.’” Stephanie Carroll Owner, John Hyatt (men’s clothing store) bgs international exchange WINTER 2008 www.betagammasigma.org 5
Small Business and the Economic Downturn (Cont. from Page 5)
“Because they’ll want to get a gift, but they’ll wait to see what’s going on,” she said. On the other hand, she admits this situation has led to some sleepless nights. “It’s very, very frightening from a cash-flow perspective.” Retail is an industry where significant capital is needed to order new stock and prepare for the next season. Stephanie said they are currently trying to renegotiate terms with creditors – whether it’s adjusting 30-day payments into 60-day payments, or working some other things out – but even that is scary when they can’t be sure how the holiday numbers will end up. Making matters worse, she said, is that everyone expects the downturn to continue through the spring and into summer, and additional slow months will lead to the store falling even further behind. Stephanie said an antiques dealer in town, who has sold high-end antiques for decades, says this is the worst economic condition he’s seen since the mid-1980s. She said the general mood is pretty bleak among other small business owners in the area. And now, the real scary question: What happens next? “The fear is, if this lasts 18 months, how can you possibly ride it out and come back? The fear is that this is going to last longer,” she said. “This time – the tremendous drop off – it was so quick, such a precipitous drop in shopping. That seems to be what’s different this time. We’ll know after Christmas how different. If Christmas sales stay as low as they’ve been, that will show how truly different this is.” Jeremy Litchfield Chief Pace Setter, Atayne Passion and optimism seem to be key ingredients in a successful entrepreneurial venture. With the current economic downturn, however, even a great idea combined with those ingredients doesn’t guarantee success. But don’t count out one BGS member, who is trying to change the way runners think about the shirts on their backs. Webster defines an entrepreneur as “one who organizes, manages, and assumes the risks of a business or enterprise.” While that definition describes Jeremy Litchfield (BGS 2005, American University), it also falls significantly short. He is busy navigating his company, Atayne, through a hostile economic environment while trying to make the world a better place and make some money at the same time. Since college, he knew he wanted to start his own socially responsible company, but he worked eight years in marketing and brand development in the corporate world first. As an athlete and dedicated runner, he found his calling through the routine purchase and use of what he thought was a quality running top. Instead, after a bit of investigation, he found the shirt was made from virgin materials, would undoubtedly wind up in a landfill, and was colored with a red dye made from many known carcinogens. This didn’t sit well with his view of himself as an “eco-runner.” So he created a line of performance apparel made from recycled polyester (from plastic bottles) and Cocona (activated carbon from coconut shells). “Our competitors might call that trash,” says the company’s website (www.atayne.com). “We call it a treasure.” Everything was going very well since the first product launch in August of this year, including a great deal of positive media attention. Sales “have been extremely positive,” Litchfield said, and all looked rosy. “We are getting a lot of unsolicited email of people raving about, not only the product 6 bgs international exchange WINTER 2008 www.betagammasigma.org
and the performance of it, but also what we’re doing; trying to create a better model for the industry.” However, apparel is an industry where a great deal of cash is needed up front to pay suppliers and manufacturers, and much of Litchfield’s available cash has dried up. He says his initial group of investors is still interested, but they’re waiting for other deals to take place before investing more money in Atayne. It’s another case where the faltering economy has knocked a good business plan off track. Currently, Atayne has only a couple options in its product line – a short-sleeve shirt and long-sleeve shirt for both men and women. Although he has plans in place for much more, those may be put on hold because of a lack of funding for any new product launches. “If we can’t get the financing, we won’t be able to grow the line,” Litchfield said. “That is the harsh reality.” He said the company would continue selling its current shirts online until the economic situation improves, then restart the process of growth. They are finishing up a “spring design” for an expanded line of men’s and women’s tops and bottoms, but those may not be produced for 2009. “Unless we get a significant amount of money in the next three to four weeks, we’re going to have to delay that line,” he said. “That brings a lot of other challenges.” He said the company was getting mentioned in many niche publications – including a profile in Trail Runner magazine – and while that was a great thing, it also meant that they should be taking advantage of the momentum. Without cash that can’t happen. “How do we keep that momentum going? It’s a huge frustration for us internally to say, ‘Okay, we’re getting a great response from consumers; we’re getting great media hits.’ Now we need to be able to follow up with a more substantial line or we get pegged as a t-shirt company. But we can’t do that without funding, and obviously everyone is very tight with their wallets right now.” While Litchfield is confident he will raise the money necessary, he’s not sure it can be done on time to set the needed production schedule. He said his strategy for raising capital often changes by the day or the week, and the current economy has made flexibility a necessity. “This is absolutely a work in progress, a fluid type thing,” he said. “I’m in the middle of this, and when I start to see that things aren’t going well in certain areas I need to find other things to fall back on. We need to raise that money to ensure that we keep moving forward, or we’re looking at delaying our expanded line until fall. And who knows what will happen between now and then and whether we will be able to continue on with the momentum we’ve got now.”
Vrajesh Badruka Director, Viz Technologies Private Limited As we know from the Wall Street Journal and other business media sources, the current condition is a global phenomenon. Vrajesh Badruka (BGS 2001, Arizona State University) runs a small manufacturing business in Hyderabad, India, which manufactures capacitors used in fans, motors, lighting and many other items. In his case, the current downturn has only made things more complicated, as the last couple years had been challenging even before the global economic downturn. “We have been suffering due to the huge increase in prices of all our raw materials for the last three years, without being able to correspondingly increase the price of our capacitors,” Badruka said. “Now that raw material prices are easing due to the meltdown, we are facing tremendous pricing pressure from the market to pass on the reductions, even though we were unable to increase our price when the raw materials prices were sky high.” He said another problem has been “the devaluation of the Indian Rupee vis-à-vis the U.S. dollar.” He said this has resulted in raw material costs that have not dropped as much in India as they have around the globe. Viz Technologies has been lucky in one respect, however, as cash flow has not been a problem so far. In fact, Badruka said the positive relationship he has developed with his bank has been one of the advantages he has over his competition. His day-to-day business has not suffered because “the bank is still supporting us.”
“Now that raw material prices are easing due to the meltdown, we are facing tremendous pricing pressure from the market to pass on the reductions, even though we were unable to increase our price when the raw materials prices were sky high.” Vrajesh Badruka Director, Viz Technologies Private Limited Another promising aspect of his business involves working on a very large energy efficiency project with his local government under the clean development mechanism of the UNFCCC (United Nations Framework Convention for Climate Change) to generate carbon credits (or CERs). “We are in the process of implementing an energy efficiency project whereby we will save up to 2 billion units of electricity per annum, generating about 1.75 million carbon credits,” he said. Badruka explained that the value of these CERs peaked at 22 Euro and hovered around 20 Euro for quite some time, but have recently plummeted to about 15 Euro. “Due to (this) we have lost our leverage for bargaining with our financiers,” he said. It’s just another hit at a time when good luck seems a thing of the past. Badruka remains optimistic that his company will succeed long-term, but that doesn’t mean he hasn’t been affected personally by the downturn. “I have been very stressed for the last year or so, as I was Continued on Next Page bgs international exchange WINTER 2008 www.betagammasigma.org 7
Small Business and the Economic Downturn (Cont. from Page 7)
finding it difficult to meet our basic bills, such as salaries, wages, electricity (and so on),” he said. “I took a cut in my personal expenses to stay afloat. Now that the raw material prices have eased (somewhat), I am hoping that things will turn around quickly.” Jack Freedman Member of the Senior Executive Committee, iconic men’s retail clothing business (unnamed) By “iconic men’s retail clothing business,” Jack Freedman (BGS 1953, University of Pennsylvania) means a business that is more than 70 years old and very upscale. He says the company, with more than 150 employees, has operated successfully as its own brand, and competes “less with other stores than with the brands these stores sell.” “We have been in business for 70 years at the same location and have developed an intimate relationship with our base clientele,” Freedman said. “This closeness to the customer provides us with an advantage vis-à-vis our real competition, which is the brands that are carried in other stores.” It also means that when times are tough, however, the company has to work extra hard to keep its base clients and be ready to deliver products and services to them whenever things turn around. In this struggle, salesmen contact their most important clients – by phone, mail and email – during the down times so they know they can count on service during the good times. In addition, Freedman said they have to constantly “remind ourselves of the importance of an upscale image to our client base.” In other words, just because times are bad and those clients may not purchase as much as before, it is imperative that they know the clothier is there whenever they need them, and they’ll do whatever it takes to satisfy. While many retail establishments are preparing for the worst in the near future, Freedman says about his company, “The future is now. Since September our sales have decreased by more than 30 percent. This drop has been across the board in all departments and all classes. Store traffic is visibly down and this is in the face of an increased advertising and marketing budget,” which has since been reduced. He said that online and direct mail sales haven’t been hit quite as hard, but each has seen double-digit losses. His company, however, is indeed looking forward. In spite of salary reductions and layoffs, the management and staff have their eyes toward the future. Freedman himself distributed an internal memo titled, “Strategy in an Economic Downturn” that included ideas on price strategy, marketing, merchandising, innovation and excess inventory.
In addition, the company is positioning itself to take advantage of the turnaround by thinking about what the client really wants and needs. The company’s flagship store is approximately 30,000 feet, but they are preparing a new concept of smaller, more efficient 6,000-foot stores with the same level of customer service. “We believe going forward as the population continues to be segmented, we can make viable merchandise presentations with a smaller store concept that would also lower capital requirements for any projected expansion,” Freedman said. In other words, they will be ready to hit the ground running when that economic arrow inevitably starts to turn upward. Lee Hardeman Founder, Lee Hardeman Customs Broker, Inc. Lee Hardeman worked in the transportation and logistics industry after graduate school. After several years working for someone else, Hardeman (BGS 1982, University of Tennessee at Knoxville) got the entrepreneurial itch and started his own firm. Twenty-two years later, Lee Hardeman Customs Broker, Inc. has annual revenues of more than $10 million. With his MBA focusing on transportation and logistics management, Hardeman founded his firm in 1986. He hired his first employee within six months, and a second within 12, and the company has grown steadily ever since. During his career, he was proud that he never had to lay off an employee. That changed this year with the most recent economic downturn. “I have laid off five since October 1,” he said. “We were at 16 to 17 employees over the last couple years while we were trying to grow our transportation business. Two transporters were the first to go.” Similar to others interviewed for this story, Hardeman was caught off guard by the quickness of the decline this year. In fact, 2008 was going reasonably well until sales just hit the wall. “As of June 30, we were within 2 percent of the first half of 2007, which was a record year,” he said. “(However) July was the worst month in history for us.” And he said that the third quarter was the first time they had ever had a decline in the company’s history. Hardeman said his industry has been hard hit by the downturn. He indicated that those who are freight forwarders, or exporters, “have more than they can handle. Almost all other sectors are way down. “We are down about 30 percent, which matches exactly another customs broker my size,” he said. He has also heard stories that indicate that smaller companies – those with only one or two employees – are hurting worse than him.
“The future is now. Since September our sales have decreased by more than 30 percent. This drop has been across the board in all departments and all classes. Store traffic is visibly down and this is in the face of an increased advertising and marketing budget.” Jack Freedman Member of the Senior Executive Committee, iconic men’s retail clothing business (unnamed) 8 bgs international exchange WINTER 2008 www.betagammasigma.org
Small businesses are often more like families than groups of employees. Because of that, job cuts can be especially painful – for those losing their jobs and for those doing the cutting. Hardeman said it was necessary but not something he enjoyed. He said they did need to “cut some fat,” but the last two employees let go were valuable contributors. “I actually cried when I told the last two (they were let go),” he said. “While I didn’t on the first round, I was so visibly upset that one of them pulled me back in his office and openly prayed for me. I needed it!” Hardeman has much to worry about in the current economic environment. He knows this downturn could be long and even more painful than it’s been so far. But he is keeping his sense of humor. “As my uncle says, when you own your own business, you are just one phone call away from bankruptcy,” he said. “I obviously haven’t had that call yet.” Cherry Lake Tree Farm While the sub-prime lending mess and the subsequent decline of the housing market has been blamed for initiating much of the current economic climate, the profiles above didn’t deal much with housing. In the case of the Cherry Lake Tree Farm in Groveland, Fla., however, the housing crash has been the leading cause of the company’s troubles. Timothée Sallin, Director of Marketing and Organizational Development with IMG Enterprises (the parent company of Cherry Lake Tree Farms), said that while the company has withstood other downturns, this one appears to be a bit different. “It’s deeper, and right now there’s a lot of uncertainty with regard to the duration of the recession and specifically the construction (decline),” he said. “Construction demand has fallen off steeply. So in that sense it’s probably deeper and we don’t know how long it’s going to last, but I don’t know that this recession is fundamentally or structurally different than others.” The residential construction market in Florida has been particularly hard hit, and Cherry Lake does about 60 percent of its business in that state. Sallin estimates that 90 percent of the company’s product is used in new construction projects, and demand has dropped more than 50 percent since its peak in 2006. One of the many challenges facing the tree farm is the difficulty managing inventory in this environment. In a retail operation, one can reduce excess inventory by having a clearance sale or in some other way creating an immediate demand. With a live, slow-growing, plan-ahead product like a tree, Sallin said it is much more difficult to move inventory when the demand is low. “We can’t do a wholesale clearance,” he said. “The demand has to be there. You can’t artificially create a demand for a tree with a sale, because if there isn’t a project where that tree is needed, there’s no real incentive that works. We have to sell our trees faster and before our competitors sell theirs.” Knowing the company faces an uncertain year, at least, Sallin said Cherry Lake Tree Farm is focusing on two main strategies moving forward. The first involves finding ways to cut costs while improving efficiencies. He said the company is
focusing on “Task on Time” (or zero-based budgeting) to find out how much time and resources are necessary for every task they perform. He acknowledged that part of cutting costs was laying off workers, and the company underwent “significant cuts” just a couple months ago. The other strategy involves carefully selecting price points that attract the builders who are still looking for trees. This measure seeks to accomplish the goal of “selling our trees faster and before our competitors sell theirs.” “Our pricing strategy is much more aggressive” than it had been previously, Sallin said. This, the company hopes, will move it from being an “order-taking organization” that didn’t enjoy much loyalty among its customer base, to an organization that works with its customers to find solutions for all of their tree and other needs. “Our strategy going forward is to build value-added strategic partnerships with key customers who are going to give us a higher share of their business, because they can work with us to source all of the materials for their projects,” he said. Sallin said his company was better positioned to deal with this slowdown than some of its competitors because they entered the slowdown “with a very strong balance sheet.” This enabled them to find creditors willing to lend them money, which is critical to their business. He said it can take two to 10 years for a tree to be ready, so it’s imperative that they are constantly replenishing their inventory. But of course, that takes money now. He said being a part of IMG Enterprises is an advantage as well, because the company is diversified. While the tree market is down, for instance, the company’s fruit business is doing very well, which enables them to make the necessary investment in new trees now. “Most other nurseries are not replenishing their inventory. They simply can’t afford to,” he said. “They’ve taken the position that, ‘We’ll sell what we have now and when things get better we’ll start planting again.’ What that sets up is a huge gap or shortage of supply” down the road. “So our position is, we’re going to continue to replenish the inventory so that when (there is a supply shortage), we should be able to recoup some of the money that we’ve given away now in price because we’ll have the inventory when others don’t.” With each of these company profiles, there is a great deal of fear and uncertainty among those running the organizations. It’s impossible to know when and how this will turn around, and many wonder whether they can continue to grow, meet their future projections, or simply hang on. While the Cherry Lake Tree Farm faces many challenges, Sallin believes the moves they are making today will make them more competitive and successful in the future. “It’s very challenging right now. There’s no doubt about it,” he acknowledged. “We have to be able to have cash-neutral operations during this recession, which is difficult. “But if we’re able to do that, then we feel we’ll come out not only with strengthened alliances and partnerships with our customers, but a much larger market share and much weaker competition. We see there will be an opportunity for higher prices and higher margins when you round the corner.” bgs international exchange WINTER 2008 www.betagammasigma.org 9
Small Business Financing The small business profiles starting on page 4 show the level of fear and uncertainty that exists today. Those on the front lines are trying a number of different techniques to help their companies survive the current economic downturn. So when will this end, and when will the arrow start moving upward again? That’s really anyone’s guess. But for another perspective, the BGS International Exchange spoke to Paul Lebo, Business Branding Underwriter for Key Bank in Cleveland. He works on Key Bank’s Small Business Administration (SBA) Group Portfolio Administration Team as an underwriter. Lebo (BGS 2003, University of San Francisco), who also serves as the president of the BGS Cleveland Area Alumni Chapter, works with small businesses across the country. Key Bank has a presence in all of the Northern states from Portland, Maine, to Portland, Ore. Much of his work involves helping small businesses find ways to stay in business during the tough times, and find creative ways to grow their businesses during all economic climates. Note: Mr. Lebo’s comments reflect his personal opinions, and do not necessarily reflect the views of Key Bank.
BGS International Exchange: Have you seen an increase in deferment requests and other “restructuring” of terms in the last several months? Paul Lebo: Banks have seen a slight increase in deferment requests. What I like to tell people is that it’s really important for small businesses to view the bank as a business partner. If they find there is a cash flow problem, if they are struggling, I would say the bank where you have your loan is the first place you should go. Banks have a vested interest in seeing their customers succeed. If you approach your bank and say, ‘We’re not doing so well. Here are our financial statements. Is there anything you can do for us?’ a lot of times the bank is happy to look at a restructure, a principle deferment, even increasing the loan terms is an option. The sooner the customer goes to the bank, the better the bank can deal with this type of inquiry. BGSIE: Do you find that customers contact their banks early when they have problems, or do they wait too long for whatever reason? PL: I think it comes down to the relationship they’ve developed with their bank representatives. If they feel they have a strong bond or connection with their bank representative, then they are more likely to approach the bank early on.
Growing, On-Going, Not Gone: How Entrepreneurial Firms Prosper While Larger Firms Crumble By P. K. Shukla As I sit in my office reading business journals mid-November, economy as half empty, but instead as half full, and that gap I see headlines of great concern about our financial difficulties can partially be filled by their creativity and innovativeness. and distress as several large, decades-old established firms have BusinessWeek, in the April 17, 2008 issue, published an article been unable to survive the recent national and global economic titled “The World’s Most Innovative Companies.” Not surprisingly, downturn. Many larger firms have implemented hiring freezes and the top-three most innovative included Apple, Google and Toyota. expenditures are more carefully reviewed for approval. Despite the The difficulties with several larger firms is the failure of doom and gloom of a real recession, I get phone calls and visits their own past success – as they gained larger market share from aspiring entrepreneurs who see a and efficiencies from higher volume market niche unfulfilled and are ready with and economies of scale, they lost an business plans in hand to capture these entrepreneurial spark to constantly Top Ten World’s Most market opportunities. I also get phone pursue new opportunities. We have Innovative Companies 2008 calls from Chapman University alumni seen countless examples of larger firms, BusinessWeek August 17, 2008 entrepreneurs with mid-size sales firms with more financial resources and larger (over $5 million in annual revenue) who staffing, beaten in the market by smaller 1. Apple Inc. speak about growth prospects for their capitalized startups. 2. Google Inc. firms and the need to add our graduates Albert Einstein said imagination is to their staffs. more important than knowledge. In today’s 3. Toyota Motor Corp. These sharply contrasting views business market, perhaps imagination is 4. General Electric Co. of the business world remind me of a more important than larger financing. Even 5. Microsoft Corporation passage from A Tale of Two Cities (1859) Chapman University’s Leatherby Center for 6. Tata Motors Ltd. by Charles Dickens, set in London and Entrepreneurship and Business Ethics has Paris: faced a similar struggle competing against 7. Nintendo Co. Ltd. “It was the best of times, it was the more endowed entrepreneurship programs 8. Proctor & Gamble Co. worst of times; it was the age of wisdom, at larger campuses. With the Center’s 9. Sony Corp. it was the age of foolishness; it was limited staff, we have relied upon being 10. Nokia the epoch of belief, it was the epoch of entrepreneurial, creative and innovative. incredulity; it was the season of Light, it The Center would be hypocritical if it didn’t was the season of Darkness; it was the practice what it taught. spring of hope, it was the winter of despair; we had everything As the winter of despair for some is going to turn to the before us, we had nothing before us.” spring of hope for others, we will see a shake-out in the market A fast-growing segment of the Southern California economy of some firms that were too low in their frequency and degree of is the growing number of established entrepreneurial firms. These entrepreneurship. For the remaining firms, they should see better firms, with annual revenues of $5 million to $20 million, are looking times. at economic conditions more favorably than larger firms in their industry. In fact, as established firms fail, they see opportunities to P. K. Shukla (BGS 1978, California State U., Long Beach) is capture some percentage of customers now willing to switch to a Director of the Leatherby Center for Entrepreneurship and Business new service provider. Ethics and Associate Professor of Management at the Argyros Entrepreneurial individuals and firms do not look at the School of Business and Economics, Chapman University. 10 bgs international exchange WINTER 2008 www.betagammasigma.org
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BGSIE: Are different areas of the country affected by this differently? PL: Banks have seen a bit more delinquency in the Midwest. I think it comes down to the current economic environment, where some areas of the country are harder hit. One thing that I find interesting is that SBA lending usually does very well in an economic downturn. The reason is that banks do SBA lending when the customer has some kind of risk that the bank wants to mitigate – for example, collateral shortfall. If the customer didn’t have any additional risk, the bank would just do a conventional loan. The SBA guarantee allows the bank to make these loans to start-up businesses, for example. BGSIE: Are SBA loan applications on the rise? PL: So far banks haven’t seen much of an increase in new loan requests. It may seem unusual for an economic downturn, but I would also say that many businesses are looking toward the future. As soon as they see that we are turning the corner – the recession is almost over – that’s when they are going to return to the banks and ask for more money. Right now they don’t see an end to the recession so they are kind of holding back. BGSIE: When small business owners fall behind, what will the bank do to help them stay afloat?
PL: For companies just starting out or those looking to expand, when you write your projections, it’s really important to know your industry. So, for example, if you forecast a net income of 10 percent, but the industry average is 2 percent, your bank is going to immediately question the viability of the plan. I would recommend that individuals approach groups like the chamber of commerce, for example – groups that have a vested interest in helping small businesses – and they can help you prepare projections and business plans. There are also industry organizations that can help you obtain knowledge of the industry.
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BGSIE: Any advice to those small businesses that may need help?
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If a company falls behind on an SBA loan, there are procedures that must be followed and some additional government approval is sometimes necessary. For instance, banks have unilateral authority to grant three-month principal deferments. If they are going to a six-month principal deferment, they have to obtain the approval of the SBA. And the SBA also has an interest in seeing that these companies succeed. If the company fails the government has to reimburse the bank, so the SBA would rather see some kind of restructure than the business going under.
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PL: Banks do everything they can to keep companies out of the asset recovery group. I work with the Portfolio Administration Team and we are dealing with companies that have increased risk of default, but we still keep them on the line, which means they haven’t gone to asset recovery.
BGSIE: Any other advice? PL: It’s important to look into SBA lending. A lot of companies may not know about the advantages – they may think they don’t have enough collateral, or they fear they might not qualify for a loan. Well, SBA lending is designed to mitigate these shortfalls. SBA lending is not sub-prime lending. If you have a lower equity injection – you only want to put 15-20 percent into the business – that might be a place where SBA lending can come into play. Approach your bank and see what kind of opportunities they have for SBA lending.
865-974-5033 E-mail: mba@utk.edu • mba.utk.edu bgs international exchange WINTER 2008 www.betagammasigma.org 11
Beta Gamma Sigma would like to thank the following organizations for their participation in the Society’s Fall 2008
and
Virtual Career Fair Virtual Graduate School Fair
Mark your calendars: The next Virtual Career Fair and Virtual Graduate School Fair
will be held February 16 - March 1, 2009.
Attention Job / Graduate School Seekers: As a lifetime member of Beta Gamma Sigma, participation in these Virtual Fairs is 100% free of charge Attention Employers / Graduate Recruiters: Register now to participate. Contact Robin Bueler at rbueler@betagammasigma.org for more information.
14 bgs international exchange WINTER 2008 www.betagammasigma.org
Networking with the “Best in Business” Connect with other BGS Lifetime Members online through LinkedIn In what ways have you built your professional network? Do you attend alumni events held by your alma mater? Do you go to professional networking meetings specifically to meet others in your industry? Do you use online tools, like LinkedIn, to broaden your base of professional contacts. You may not know that Beta Gamma Sigma has established an official group on LinkedIn. As a lifetime member, you are invited to join the group of other members – already totaling more than 8,900 – that have joined and are actively using the network. Each day more members join, and each day networks are established and expanded. But what type of person joins an online network like LinkedIn? Results from a new survey by Anderson Analytics and LinkedIn.com suggest there are four distinct types of people who currently use the site: Savvy Networkers (est. 9 million) Are likely to have started using social networking earlier than others, are more tech savvy, and more likely to be active on other social networking sites (SNS) like Facebook. Savvy Networkers have the most connections (61 on average) and are more likely than other segments to use LinkedIn for a wide variety of purposes other than job searching. Savvy Networkers have the second highest average personal income ($93,500) and may often have the word “Consultant” in their job description. Senior Executives (est. 8.4 million) Are somewhat less tech savvy and are using LinkedIn to connect to their existing corporate networks. They have power jobs which they are quite content with, and are likely to have been invited by a colleague and then realized how many key contacts were on the site and started building connections (32 on average). Senior Executives have the highest average personal income ($104,000) and have titles such as Owner, Partner, Executive or Associate.
To find out which type you are most like, you may use the predictive tool available at Anderson Analytics: http://www.andersonanalytics.com/litype/index.php. The survey found some other interesting information about LinkedIn users, including: • Most users connect to people they know, including those they’ve “met” only over the phone. • Users like the professional and business oriented look and feel of LinkedIn compared to other social networking sites. • Users tend to be more senior (56 percent are “individual contributors,” 16 percent are management level, and 28 percent are director/VP level or above). • The majority (68 percent) of users are decision makers or have influence in the purchase decisions at their companies. Decision makers also tend to be more active on LinkedIn. • The greater the number of connections the greater the likelihood of higher personal income. Those with personal incomes between $200,000 and $350,000 were seven times more likely than others to have over 150 connections. So Beta Gamma Sigma would like to know how you use LinkedIn. Send us an email at linkedin@ betagammasigma.org and let us know. Are you part of the BGS LinkedIn Group? If not, go to www.linkedin.com and click on the “Groups” link. Click on the “Groups Directory” tab and search for the BGS Group. We will verify that you are a member of Beta Gamma Sigma and approve your membership in the group, and you will be free to start networking with other members. Why not give it a try?
Late Adopters (est. 6.6 million) Are likely to have received numerous requests from friends and co-workers before deciding to join. They are somewhat less tech savvy and are careful in how they use LinkedIn, tending to connect only to close friends and colleagues and have the fewest number of connections (23 on average). Late Adopters have the second lowest average personal income ($88,000) and have titles such as Teacher, Medical Professional, Lawyer, or the word “Account” or “Assistant” in their job description. Exploring Options (est. 6.1 million) May be working, but are open and looking for other job options often on CareerBuilder.com, perhaps in part because they have the lowest average personal income ($87,500). They are fairly tech savvy and use SNS for both corporate and personal interests.
bgs international exchange WINTER 2008 www.betagammasigma.org 13
Companies make mistakes, and sometimes even the best companies find themselves in the midst of a crisis. While many companies are unable to rebound from such disasters, others are able to regroup, learn from their mistakes, and return to prosperity. One company that has done just that is Xerox. In 2000, Xerox was on the brink of bankruptcy and was the target of an expanding SEC investigation. Just eight years later, the company has returned to the forefront of the document industry, reporting revenues of $17.2 billion in 2007. Recently, David H. Blake, Chairman of the Beta Gamma Sigma Center for Ethical Business Leadership, sat down with Anne M. Mulcahy, Chairman and CEO, Xerox, and discussed the role that Ethical Business Leadership played in the company’s turnaround. David H. Blake: You’ve done a remarkable job at Xerox since taking over under some very difficult circumstances, both in terms of business and some other issues. I wonder if you can tell us how you went about establishing – or re-establishing – the culture that you wanted to have as far as ethics in business? Anne M. Mulcahy: Well I would begin by saying that big companies are always about teams and leadership cultures, not about individuals. So there’s no misunderstanding about what turned Xerox around, it was Xerox people who inherently had a very good culture; very values based. I think that companies can lose their way. Xerox certainly did from a business perspective and had significant challenges – liquidity challenges, business model challenges and regulatory challenges. I think that as you are changing so much in the business, it’s hugely important that people understand there are a set of principles and values that you’re going to run the business by. There’s nothing quite as painful as reputational damage. As much as people focus on balance sheet issues, I would say that the bigger problem for us is the reputational damage that a company can suffer. And it’s the people who put it back together, who want to have pride in a company, who want to work for a company that certainly is a good business and a profitable business, but a company that they can feel proud to be a part of. I think it was inherently very much what Xerox people wanted – to have a company that was known for values and integrity. It was clearly leading them in a direction they were already very much on and wanted to be on. DHB: How did you bring that to the surface? AMM: When you’re leading a company in a state of crisis, it’s hugely important to create a vision for why people should stay; why it’s worth it. A big part of that story is really the kind of company you want to be a part of. That’s a description of what you want to be known for, and as much as you can talk about it and describe it, it’s far more important that you actually demonstrate it and live it. For the leadership at Xerox, this was a time when they had to make the kind of choices that demonstrated to people that they weren’t compromising the values of the company as we made tough business decisions about what had to happen in the company. That we very much stayed aligned in terms of things that we care a lot about. Things like diversity, sustainability and respect for individuals, and that good business should be about being a good company. That these things aren’t in conflict, they’re actually synergistic. I think people began to see that you didn’t have to make those trade offs.
14 bgs international exchange WINTER 2008 www.betagammasigma.org
DHB: Did a group of you sit around and say, “What are the values we want to come up with?” AMM: We actually didn’t have to come up with a set of values. The company had been founded very much on a values system and it had been very much a part of the history and the legacy of the company. I think it was very comforting that we actually embraced those values and a little bit of the return to the past and said these are the values that served this company so well over decades. We’re going to make sure that we live them, that they’re real, that everybody identifies with them in terms of the way they conduct business. I think it was more of a restoration of an existing culture and values system that was very much part of the company’s heritage. DHB: We return to the past and people are feeling good about that. Now of course it has to get infused throughout the organization. I’m sure that you want everybody to abide by those principles and understand those values. How was that brought about? Xerox is a very large company and is spread out all over the world. It’s not an easy thing to do. AMM: It’s very challenging. We’re on the ground in 160 countries. You recognize that your risk is extraordinary when you’re that global, that distributed in terms of the way you conduct business. But it actually comes back to the basics. It’s process and it’s people. I begin with people. As you think about integrating all of the good principles for conducting business through all of the business processes, the most important elements are the right leadership and making sure you have the right people on the ground. As much as the senior leadership team needs to set the tone at the top and conduct themselves very much aligned…the reality is that leader in Egypt really represents the brand, and that you have to make sure that your leadership really emulates the kind of value system that the company expects. In a company that certainly cares about performance, you have to give equal, if not more, attention to the quality and caliber of the leadership. Then you do have to make sure that it permeates – that the messages and the approach permeate – everything you do. If they are words sitting in a file drawer, clearly they will not be meaningful. They will not be what people turn to. It has to be real. It has to be integrated into the business process. It has to be on that checklist of how people get promoted, about how we reward people. It has to be consistent. If there’s one thing I’ve learned, it’s that the one thing worse than not having a really strong code of conduct and value system is to have one and not act consistently with it. Because then people truly dismiss it as not having integrity and not being really meaningful in the environment they work in.
DHB: Is this woven into the evaluation process? AMM: We heard from people early on that there needed to be consequences; that people needed to see not just the positive side, but that when there was a violation of business policy or business ethics, that people had to see that there was really clear accountability for that. Although you cannot publicize that by situation, you can give people kind of what we call “sanitized examples” of how we create accountability around any kind of serious breach of business ethics. We try to do both, clearly modeling it on the reward and recognition side, but as importantly, create accountability so that there is no confusion about how you get hired, promoted and fired. DHB: So people know that each year this is part of the evaluation and reward system? AMM: Absolutely, and over time people get it. Word travels quickly – the good and the bad. I think if you are consistent in the application, people understand the kind of people that are getting promoted and the kind of people that don’t make the cut in this culture and environment. DHB: We all know hiring is an art at best and it certainly is not a science. Are there special things that you do to try to understand the character of the person as it fits within the Xerox culture, and the Xerox commitment to business ethics?
excuses or trade offs that get made, and certainly there are people that can be helped and coached, and certainly adapt their style. If people can be trained and shaped, that’s great. If they can’t, we don’t want them at Xerox. DHB: Every now and then, things do go wrong. This is just a fact of life. What happens when things go wrong? What causes you to fall off the track, so to speak? AMM: If things aren’t going wrong, then you just don’t know that they’re going wrong. Part of this is having a company where you’re surfacing things that are going wrong. We do audits throughout the company on a global basis. We report to our audit committee whether they’re satisfactory or not satisfactory, and some of these involve code-of-conduct issues. Lots of them just involve business failures – we were setting targets, we wanted 95 percent satisfactory, 98 percent trying to get better every year. Finally I said, “What I think we need to do is actually take on the tougher problems and not be targeting perfection here.” What we ought to be doing is actually enabling people to bring forward the problems in the business. We have to take the burden of making sure that people are educated and they have the tools that they need to do their job; that they have the decision criteria that they need to make the right decisions. We try to enable an environment where mistakes can be made and corrected.
AMM: Well it’s not a science. I “If there’s one thing I’ve learned, it’s that the one think we have a very robust hiring thing worse than not having a really strong code of process in terms of the qualities that we’re looking for, and the conduct and value system is to have one and not kinds of questions and tests that act consistently with it. Because then people truly we use to make sure we screen the best possible candidates. We dismiss it as not having integrity and not being clearly do (rigorous) background checks on everybody…but at the really meaningful in the environment they work in.” end of the day a lot of it does Anne M. Mulcahy come down to good judgment, Chairman and CEO, Xerox and you will make mistakes. I think as important as screening the right people and hiring them, is making quick assessments about who is going to make it and I think one of the big lessons that came out of the crisis that we who is not. went through was that problems are generally known somewhere in the organization. The longer they stay undiscovered by the It’s interesting at Xerox, we found that people do self-select to some people who can solve them, the bigger they get and the uglier degree because we are a company that’s known for diversity; very the issues become. One of the things that you have to have in a focused on community engagement. We’re not the highest paying company like Xerox is people who have courage to give you the company, but we do find that people come to us because they bad news, to be honest critics, to put problems on the table because know us by reputation. There’s nothing quite as powerful as that they are there. If you’re not hearing about them, they’re just getting self-selection process that happens when people knock on your bigger and tougher to fix. door and say, “This is the kind of company that I’d like to work for.” It’s (also) pretty clear in a short period of time if you don’t fit here culturally. They actually choose to leave because if you’re not comfortable in an environment that is very team oriented – that’s very much about respecting diversity in all aspects, respect for the individual – then this is not going to be the kind of place that you’re going to feel comfortable in.
DHB: What about the person who really is good at performance – meets the numbers, succeeds at the numbers, is just a crackerjack, as my father would say – in every sense, but needs some real help on ethical principles? What happens then? AMM: That is the most important and common moment of truth for a company. The minute you trade off and say, “Great performer, I’m going to let it slide,” you have just defeated all the work you have done to communicate the priority of values and ethics in the company. This really is the most important example and we have a very, very clear approach there. That is, we pay for performance, but we hire, we promote, and we fire on behavior. There are no
DHB: Is there any concern that some people are getting too far away from that crisis sense? AMM: I think we all worry about losing a little bit of the intensity and the focus that you have in a crisis. It’s hugely important, particularly in the competitive world that we operate in, that we don’t lose some of those lessons going forward. That’s why we really try to ensure that we’re always focused on communicating what we represent as a company, not taking for granted the asset of a good brand; ensuring that people take this franchise very, very seriously. So I think it takes reinforcement and you can never take it for granted. It takes work. We have a heritage for being really good at things, but it doesn’t mean that you can take them for granted. You constantly have to invest in making sure that you stay on top of your game, whether the topic is innovation or whether it’s diversity or sustainability. It is something that constantly has to be re-learned and focused on, or else you do lose your way.
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Gifts from Friends Beta Gamma Sigma gratefully acknowledges the support of the following individuals, as well as the organizations listed on page one. Without this assistance, the Society would be unable to continue adding value to the lifetime membership.
Chairman’s Board $2,000 - $4,999 Business Achievement Award Joseph W. Moeller Columbia University Mace Siegel North Carolina A&T State University Bernard J. Milano Oklahoma State University Sara M. Freedman University of Rhode Island James A. Viehland Director’s Table $1,000 - $1,999 University of California, Irvine David H. Blake University of Georgia Ogden O. Allsbrook Carl W. Gooding Instituto Tecnologico Autonomo de Mexico Carlos A. Monroy University of Iowa Margaret M. Wendt Loyola Marymount University John T. Wholihan The University of North Carolina at Greensboro James K. Weeks Oregon State University Donald F. Parker University of Pennsylvania John C. Hanson University of Pittsburgh Donald R. Beall Purdue University Jerry S. Rawls Tulane University Darwin C. Fenner Valdosta State University Kenneth L. Stanley Friends of Beta Gamma Sigma AACSB International President’s Cabinet $500 - $999 University of Alabama Marinda J.C. Wood Baruch College–CUNY William H. Shron Baylor University Tim D. Brewer University at Buffalo, SUNY Paul F. Eckel California State University, Chico Henry W. Wright College of Charleston Guy E. Beatty Duquesne University James M. Zillian Eastern Illinois University Jack Schultz Indiana University Christopher T. Winkler University of Iowa William C. Hunter University of Kansas Larry D. Horner Kent State University George E. Stevens Michigan State University Bruce D. Bottomley Northwestern University Ernest C. Styberg Purdue University Dennis J. Weidenaar San Diego State University Monty W. Dickinson Seattle University Gary P. Brinson Washington University Robert E. Markland Western Carolina University James A. Valkenaar, Jr. Willamette University James W. Bernau Dean’s Club $250 - $499 Appalachian State University Betty S. Carreiro University of Baltimore Barry A. Benz Baruch College, CUNY Murray H. Neidorf Boston College Bennett Soo Yee Bowling Green State University Michael W. Hoffman University of CaliforniaBerkeley Marc J. Desoer Herbert G. Meyer California State University, Long Beach Susan L. Volmer Clemson University John Patrick Harman University of Connecticut George G. Roller
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GENEROUS DONORS SUPPORTING BETA GAMMA SIGMA October 16, 2007 to October 15, 2008 University of Rhode Island Louise A. H. Bookman University of Rochester Ramachandra Bhagavatula Gary P. Johnson Rochester Institute of Technology Edwin J. Carroll III Roosevelt University Donald H. Ho Fung Rutgers – The State University of New Jersey Camden Jennifer Lynn McKinney Rutgers – The State University of New Jersey Newark Harold Haddock, Jr. Samuel J. Sirota Richard D. Whitehead Saint Joseph’s University David W. Turner Saint Louis University David A. Gardiner San Diego State University Debra A. Ernst Carla M. Kuhns Charles M. Medvitz University of San Francisco David R. Dull George W. Parkerson San Jose State University Dave L. Coles Santa Clara University Mark Jon Bluth Robert E. Daley John Fabbro John L. Fetter David W. Gervais Anthony J. McKeon Mary Dana Niemiller Robert J. Emmons Seattle University William B. Gavin University of South Carolina Gloria Cook University of South Florida Darrell J. Ferrigno Lois A. Sorensen University of Southern California Edward M. Casselman Frank J. Dinoto Jay H. Grodin Terrence O. Hughes Gustavo E. Paladines Jason White Southern Illinois University Carbondale Roy A. Causey Southern Illinois University Edwardsville Deborah L. Johnston Southern Methodist University Gary A. Feather Christopher C. Loy University of Southern Mississippi Harold C. Brashears St. John’s University Iris Altilio Vivien M. Hegarty Suffolk University Susan O. Olivier Susquehanna University Raymond C. Lauver Syracuse University Gustav J. Braun Walter W. Hemming Frederick H. Weeks Temple University Russell U. McLaughlin Stephen H. Morris George W. Morriss Gary Mozenter John W. Wilchek The University of Tennessee at Knoxville Edgar J. Bostick Texas A&M University David E. Hairston The University of Texas at Arlington Joe Foster Mark C. Hensel, Jr. Susan Marie Williams The University of Texas at Austin Donald R. Broadland Susan Bonner Mead Allen R. Pierce Carol A. Shepherd Texas Tech University Barbara Ann Frankhouser University of Toledo Borge R. Reimer Tulane University Marie D. O’Neill University of Tulsa Nancy B. Quigg-Young University of Utah Francis A. Madsen, Jr. Valdosta State University W. Ed Crane
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Beta Gamma Sigma Student Leadership Forum October 30 - November 2, 2008 Tampa, FL
“The time I spent here was invaluable. I got to take time to really focus on myself and all the decisions I need to make without the distractions of school life. I did not walk away with too many answers, but I definitely am now asking the right questions. Thank you!� Miya Stodghill, Elon University
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