Bottom Line Business Insights : Maryland Business Lawyer & Attorney : Wagonheim Law Firm : Mergers & Acquisitions & Contractual Negotiation

"Our lives begin to end the day we become silent about things that matter.”

-- Dr. Martin Luther King, Jr.

Yesterday, on the federal holiday that is Martin Luther King Jr.’s birthday, I went to work. And, truth to tell, I was too consumed with client concerns and various front-burner issues to give much thought to Dr. King during the day. Last night, however, I found myself in a dinner table discussion arising from my youngest son’s inquiry about; (i) why the schools were closed; and (ii) what the Google doodle for the day meant. 

For those of you who may have missed it, the Google doodle highlighted Dr. King’s “content of their character” quote. In our discussion, however, I found that that expression did not resonate with my children as much as some of his others. Perhaps so because it is expressed in the passive voice – “they will be judged” – rather than in an active voice which would make the listener the thought’s protagonist. In either case, the quote at the outset of this entry made our conversation much more concrete. It was here that the conversation turned from what they (the people who judge others by color) should do to what we should do if we witness a wrong that matters.

Last year, I recorded a video centered on the idea that “you teach what you tolerate.” My focus, then as now, was on business practices. Now I know that Dr. King’s message was crafted to raise the consciousness of a nation, rather than the productivity of a workplace, but the same truth applies. As business principals and managers, our businesses begin to decline the day we become silent about things that matter. 

In the Republican debate last night, Newt Gingrich and Rick Santorum once again directed their fire at frontrunner Mitt Romney over his tenure at Bain Capital. It was fascinating theater, made even more so by the backdrop of the seeming Party of business frantically trying behind the scenes to get the candidates to tone down the attacks on the free enterprise system. The controversy begs the question: Is there an inherent conflict between the ideal unbridled self-interest that is the capitalist system and the universal truth that turning a blind eye to things (including things other than money) causes ourselves and our companies to diminish? 

I don’t think so. I believe that adherence to core values is, in and of itself, good business. I would submit that, in business, what causes most companies to begin to die is not a conscious decision to turn away from core values, but rather a reluctance to take action when witnessing transgressions or problems that matter. From the seemingly trivial (dress code) to the indisputably significant (price gouging, customer disservice, and policy indifference), we as business owners teach what we tolerate. 

In the running of a company, just as in the redemption of a nation, silence is fatal in the face of things that matter.

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When I said the words “it’s time to have an adult conversation about money,” anyone overhearing might be forgiven for thinking I was talking to my 12 year old son. I wasn’t. I was looking in the mirror.

Toward the end of last year, I gave out bonuses to my employees. I do this every year and there was no doubt that they were well earned. Some people thanked me; some did not. Regardless, in what has become an unwelcome annual tradition following the delivery of the bonus checks, I found myself wondering.

“What did they think?”

“Were they pleased?”

“Were they disappointed?”

“Did they walk away thinking they were happy to be working for me or do they think I’m some kind of skinflint?”

I value each and every employee. There is no such thing as indentured servitude and, as people of talent and accomplishment, everyone who works here has options in the marketplace. I want to keep them happy. Of course, I also want to run a non-cash-strapped, profitable business.

That’s when it occurred to me: It’s time to sit each of my employees down and have an adult conversation about money. It’s time (or long past it) to talk to them individually about their wants, constraints, and expectations … and mine as well. After all, we share a common interest, they and I: we want this firm and everyone associated with it to prosper. 

That’s my task between this week and next – to sit down with each person and talk to them about raises and bonuses, profits, losses, and projections. If we each approach it the way I think and hope we will, for the first time I won’t have to wonder if we’re on the same page; I’ll know it.

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I remember helping my father install his law firm’s first IBM PC in 1985. He was ecstatic. He felt that the kind of personal technology represented by the computer would enable solo practitioners like him to match the production of firms many times their size.  

The rise of the individual, giving power to the lone voice, seems to be the common thread running through our technological and social advances. The internet, the proliferation of blogs and consumer review sites, and the advent of social media have elevated individual branding to an art form. 

Today, companies are struggling to catch the social media train many are convinced has already left the station. Many business owners feel that they have somehow failed unless they have thousands of Facebook “likes,” Twitter followers, and LinkedIn connections. So they encourage their workforce to blog, tweet, post, and connect. After all, many of the social media sites are designed around the individual, rather than the company. They are created with an eye toward building the personal, rather than corporate brand.

But how does that square with a shifting workforce?

Kevin O’Keefe recently wrote a blog post for attorneys entitled “Who owns the Twitter followers at your law firm?” In his posting, he recounted the now-pending case of a new your company, Phonedog.com which filed suit against a former employee seeking ownership of his Twitter account and its 17,000 plus followers. The Complaint alleges that the employee, Noah Kravitz, opened the account while employed by Phonedog under the name Phonedog_Noah. When he left, he took his account with him.

While this case has yet to wind its way through the courts, the question it raises is absolutely crucial to the determination of social media strategy as well as to the formation of employee-employer relations. Many employment contracts have provisions stating that anything the employee creates while employed – all intellectual property in other words – belongs to the employer. Few contracts, however, address social media. 

As you review your employment agreements and social media strategy for 2012, remember that they are not separate entities. They overlap. As technology advances, so does the power of the individual to help or hurt your company’s brand. Just as many companies place a priority on keeping employees’ cell phone numbers after they leave so that they can catch calls from company accounts, business owners should also keep social media followings in mind when planning beyond the tenure of any given employee.

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It seems like every year I have read articles (now blogs) condemning the practice of making New Year’s Resolutions. The critics charge that efforts to change for the better should not be reserved for one day on the calendar, but rather should be an ongoing effort throughout the year. 

Personally, I like the New Year’s Resolution habit. While I embrace ongoing change, I’ve always welcomed the blank space in which to reflect and make renewed commitment. In no endeavor is this more necessary than in business.

With that in mind, I submit the following Resolutions for your consideration:

• Arrive at a new focus on brand discipline. Farrah Fawcett, Steve Jobs, and the Lessons of Apple...in 2 minutes
• Use the time over the holidays to write your higher level strategy planning time into your 2012 calendar. Note that I did not say “pencil” it in. Use a Scripto. The Importance of the One Night Stand
• Scrap your annual review process and find a better way to coax the best out of your people. Employment Law’s Dirty Little Secret
• Personally visit every single one of your customers in 2012…no exceptions. Do Your Clients Still Know You?
• Look at your most important forms – contracts, purchase orders, etc. – and make sure they actually say what you think they say and that they actually protect you the way you think they do. How to Document a Transaction
• Make sure your company has locked down its streams of income through enforceable restrictive covenants like Non-Compete Agreements. What Thomas’s English Muffins Can Teach You About Non-Complete Agreements and Why You Need a Non-Compete, Non-Solicitation, or Confidentiality Agreement for EVERY Key Employee
• Pay attention to the little things that could make or break your contracts. Contracting Basics: Why Boring Things Like Venture and Jurisdiction Matter
  
• Get better at basic small business financial management. Basic Small Business Financial Management 
  
• Make your company a little bit more embezzlement proof. 5 Ways to Prevent Fraud and Embezzlement
  
• Make sure your company follows Rule Number 1
  
• Don’t just learn the Lessons of My Father, commit to putting them into practice.

Please accept our best wishes for every personal and professional success in 2012.

Do you have any other suggestions for small business owners?

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I am always attracted to the edge of the flame – the flickering boundary between the candle and darkness, where the fire seems to dim to a burnt orange. My eyes hover there, and it is in that place that I find the most meaning. 

Chanukah is known as the Festival of Lights, but Christmas and Kwanzaa could also carry that label. Through its trappings and teachings, each holiday compels us to focus on light and warmth; the light of shared values, the warmth of family, and the brightness of hope and peace. We are told in the verses of our worship that, unlike so many candles, our holiday lights need not flicker and die in the space of a few hours, provided we make it a point to carry their light with us throughout the year to come.

I am writing this blog in a bleak time of economic uncertainty. So many families are under stress and our leaders seem incapable of giving more than lip service to the commonality of our purpose.  But it is precisely this commonality of purpose that marks the readership of this blog and others like it. 

The website of the advisory group Vistage features the statement: “wherever you see a business, someone once made a courageous decision.” That statement resonates with me, and I have cited it in other entries. I see those courageous decisions as individual choices to keep the darkness at bay. These choices…these decisions to start and persevere with businesses – especially in times uncertain – live on the edge of the flame and each, in its own way, carries with it hope.

The coming year will bring us large events to consider and experience. But in the midst of the tumult which will, no doubt, characterize a good part of 2012, let us remember the brightness of this holiday season, conspire together to push back the darkness, and find within ourselves the courage to live the words we pray.

Happy Holidays from Eliot Wagonheim and Wagonheim Law.

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In  March 2010, my accountant told me I was a bad client. I’m not saying he implied that I was a bad client or hinted at his meaning. He looked me straight in the eye, sighed, and told me flat out that I was a bad client. He was right.

I had been with my accountant, Mike Weinberg of Weinberg, Griffith, Tucker & Jones PA, since starting this firm in 2002. Over the years, I have come to value his insight, his genuine concern for his clients, and his principled approach. But valuing those things is not the same as utilizing them. 

Every year, I would gather my information from the past year – internally generated general ledger, payroll reports from ADP, personal information and receipts, etc. – and turn them over to Mike…usually somewhere around March. Mike’s firm would prepare the requisite returns, I’d pay the taxes, pay my bill, and put the process to bed for another year. 

But a strange thing happened over the years. The firm grew, added employees, and became what one might call a “real” business. We had employees depending on us to help pay for their homes, their children’s education, and contribute toward their long-term security. We had a diverse and growing client base. We had become, in other words, a “real” business. 

Unfortunately, I wasn’t acting like I ran one. Even while guiding clients through some extremely complicated situations, I was running my business like it was a start-up. Certainly, I had all the trappings of a real business – I had an insurance agent, an accountant, a benefits advisor and an IT consultant – but that wasn’t Mike’s point. 

When Mike called me a “bad client” he was telling me that it was not enough to engage consultants if I was not willing to put forth the effort to use them properly. He wasn’t after a fee; what he wanted was communication. He wanted me to work with him during the year so we could do some tax planning and discuss the strategies he could employ to help us reach our goals as a firm. What he needed was for me to make it possible for him to bring me his best; when I failed to do that, year after year, I earned my label as a “bad client.”

I’ll never forget this discussion. It took all of 2 minutes and it contained one of the most important lessons I’ve learned as both a lawyer and a business owner. I’ve given that speech to my clients – those who pay me to be reactive, rather than allow me to be fully engaged in the pursuit of their goals. I gave the speech last week to a client who made an appointment to see me this week after many months of silence. I’ll probably continue to give this speech to carefully selected audiences for the rest of my career.

As we approach 2012, perhaps you may want to consider the advisors you value and ask yourself if, objectively speaking, you too have been a bad client. If so, maybe the new year brings with it a chance for you to do better.

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“I got a phone call this morning from one of our oldest customers. He fired us. After 20 years, he fired us. Said he doesn’t know us anymore. I think I know why.” 

The speaker recounted his phone conversation to his account reps, saying “we used to do business with a handshake, face-to-face. Now it’s a phone call, a fax, ‘get back to you later,’ with another fax, probably.” 

This United Airlines commercial was originally aired before e-mail and the advent of social media.  First aired twenty years ago, in 1990, it still resonates. So many businesses are started by an entrepreneur, skilled in the producing the product or service that spawned the company.  Customers came because of the skill and stayed because of the attention. As the owner of a small business, the founder could track every project and knew every client. When someone was upset; he knew it.

Growth has a way of making that kind of personal attention obsolete. Time passes and a founder looks around to realize that whole projects are being performed for customers he never met. And what about the ones he knew – the ones who built his business or who inspired him to go into business in the first place? Chances are, they’ve been delegated. Delegated to talented people, to be sure, but delegated just the same. 

Sooner or later, the thought has to occur to these customers – your old friends -- that if they mean little enough to your company that they can be delegated, your company means little enough to them that they can go elsewhere.  

Looking ahead to 2012, most business owners set targets for growth  -- more revenue, more customers, bigger projects, better distribution. But how many set goals reflecting stronger relationships, customer retention, and expressions of gratitude? 

Many years ago, I read a book, Raving Fans by Ken Blanchard, in which the author urged business owners to “pay attention to the ‘fine’s.’” He meant that people rarely voice their complaints. When asked about service or the particular product they purchased, even when dissatisfied, they’d normally respond that things were “fine.” Not every customer can be counted on for enthusiasm.  After all, there isn’t an infinite amount of enthusiasm to go around. But the silence and the “fine’s” speak volumes to those with a keen enough ear and enough focus to notice. 

So what are you doing to focus on client retention, rather than just growth? Studies indicate that a new client is 7 times more expensive in terms of marketing and advertising dollars than existing clients. The point is that it is much cheaper and more efficient to keep the clients you have than spend every ounce of energy trying to bring new prospects in the door. 

If you do not already track trends in returning business, 2012 is an ideal time to start. After all, nothing speaks to customer satisfaction more than repeat business. Even more than tracking it, look for the things that increase the pace of returning business over time. 

Perhaps, like those executives in the United Airlines commercial, you can forgo e-mail, faxes and phone calls, and, just once in a while, put in the time to travel even great distances for a handshake.

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I had an interesting conversation with my wife this morning. This, in and of itself, is nothing new. The topic, however, was.

We were discussing the latest in a string of allegations focused upon the interaction between GOP presidential candidate, Herman Cain, and various women with whom he had become acquainted. Some had accused him of sexual harassment. The most recent person to come forward, however, told a story of an alleged extra-marital affair spanning some 13 years. 

In response to this story, Cain’s attorney dismissed the inquiry as irrelevant, saying:

"This is not an accusation of harassment in the workplace. This is not an accusation of an assault, which are subject matters of legitimate inquiry to a political candidate," he said. "Rather, this appears to be an accusation of private, alleged consensual conduct between adults -- a subject matter which is not a proper subject of inquiry by the media or the public.

"No individual, whether a private citizen, a candidate for public office or a public official, should be questioned about his or her private sexual life," Wood said. "The public's right to know and the media's right to report has boundaries and most certainly those boundaries end outside of one's bedroom door." Source

The question presented was whether Mr. Cain’s attorney was right. Whether the fact that someone may or may not make a lousy spouse had any rightful bearing on whether that person would make a good President. In other words, can one compartmentalize the two? Does honor matter? 

It struck me that business owners face this question all the time…and nowhere more often than in the realm of social media. Does it matter what an employee says or does on his or her own time, provided that: (1) no laws are broken; and (2) the company and its management are not disparaged? 

Whether the issue in question is pirated cable, a narrowly averted stop for driving while impaired, or just bad social judgment, does a business have a right to look behind the doors guarding someone’s private life, even if those doors have been left unlocked and ajar? 

There are, without doubt, reasonable arguments on both sides. This is, after all, an issue on which intelligent people can and do disagree. But the question remains, and it is a nagging one: Does honor matter or, more to the point, does it always matter everywhere equally?

The purpose of this column is not to answer those questions, even if I were qualified to do so. I raise the subject, however, because it is something that cries out for discussion and direction from business owners before they are involuntarily confronted with it.

I’d be interested to know your comments.

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2012 will mark my 25^th year serving as general counsel to small-to-medium-sized businesses. During that time, I have handled innumerable employment-related inquiries. For the first part of my career, my advice concerning personnel files and the building of a defensive wall against potential employee lawsuits was conventional, parroted established wisdom, and was dead wrong.  

You see, it used to be that when a business owner called and asked me if she would be in the clear if she fired someone, I would inevitably ask about the existence and contents of performance reviews. The conventional wisdom being that a paper trail of performance reviews in the file would bolster the company’s defense against a discriminatory or retaliatory firing. 

But I began to notice something curious about these supposedly these company-saving performance reviews. 99% of the time, the performance reviews were entered into evidence, not by the company, but by the disgruntled former employee. 

The reason? The performance reviews, even those preceding the firing decision by just a few months, would inevitably rate the soon-to-be-fired employee as “meeting expectations” or “above average.” Not one item of the laundry list of the employee’s grievous deficiencies could be found anywhere on the company’s own evaluation forms. What’s worse, the presentation of these deficiencies in court by the company would invariably have to come from the person who signed an adequate, if not glowing, performance review immediately prior to termination. 

 The reason? The vast majority of supervisors will check any box necessary to avoid the unpleasantness of confronting an employee with a less-than-positive evaluation. 

Last week, I attended a seminar presented by Garold (Garry) Markle of Engergage echoing and building upon this theme. Markle compared the performance review process to one in which the supervisor tells the employee “you hit yourself in the head with a hammer; I’ll hit you in the head with a hammer, and then we’ll see if both blows felt about the same.”

Instead, Markle emphasized the need for establishing a frank coaching dialog with employees on the things that really matter -- both to the employee and the business. 

Now, I disagree with one of Markle’s apparent assertions that the coaching be conducted primarily on an annual basis. I would prefer to build a system in place for a continuing dialog. 

Where I wholeheartedly agree with Markle is that conventional performance reviews -- whether conducted because “you’ve always done them in the past,” “that’s the way everyone does it,” or “my lawyer insists that I paper the personnel file” should be tossed in the trash never to see the light of day again. 

In place of performance reviews, work to install something that’s rationale, true, and doesn’t come back to bite you in court.

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