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

I have this very clear memory of standing with parents and incredibly excited children on the sideline of a windswept soccer field.  The last game had just ended.  Our team, that is to say my 6 year old son’s team, The Green Goblins, lost 6-0.  We had won one game that season – a gripping 7-6 contest in which the excitement of the win for all but the coach was still easily overshadowed by the arrival of the snack parent.

But here we were, after the final game of the season, and something even more exciting than snack distribution was about to happen.  It was trophy time.

As each name was called, the child of the moment would walk up, grab the trophy, slap high-five with the coach and grin.  Parents clapped, occasionally yelled (“YEAH, JUSTIN!!!), pictures were taken, and the next trophy was pulled out of the box.  And even as I clapped and cheered for my son, and my wife angled for just the right shot at the precise moment David received his trophy, it still bothered me.

We have raised a whole generation of people accustomed to receiving  trophies for losing.

Beginning somewhere around the late 1980’s to early 1990’s, they stopped keeping score.  We were told that everyone’s a winner, just for having participated.  There were no losers.  
And, truth to tell, maybe there was something to that.  I’m no psychologist, and I’ll allow for the possibility that eliminating the label of “winners” and “losers” from early sports or extracurricular involvement (they also stopped giving out blue ribbons at the science fairs) prevented the destruction of the egos and self-esteem of a generation.

Yet even with this as a possibility, the more sober among us has long realized that everything comes at a cost.  The cost of this self-esteem saving strategy, it seems to me, is that we are now welcoming into the ranks of the newly employed young, vital, talented, and knowledgeable twenty-somethings with a pronounced sense of entitlement.

As Don Rheem, principal and co-founder of Engagient, one of the country’s leading employee performance and engagement consulting firms, describes millenials as people who:

• Go to work at GE and, within a week of having been there, send an e-mail to the CEO and expect an immediate response;
• Have a pronounced need for immediate feedback, praise, and recognition;
  
• Are constantly motivated (often into impulsive action) by a need to discover what else is out there
  

The challenge for companies across all industries, therefore, is how to keep these people – “millenials” they’ve been called – fully engaged and fully committed to the organization without: (1) disenfranchising more established workers; or (2) losing focus on the business at hand.

Now, upon reaching this point in the article, you may think that I would take the easy way out and point to “innumerable” solutions to this problem posited by countless experts.  There are countless experts, to be sure, but the studies, articles, and anecdotal evidence points to only one answer.

I will repeat that.  There is only one way to keep millenials fully engaged in and loyal to your company.  And the millenials are not alone.  This one rule applies as the single solution for client loyalty and the retention of older or more established workers.

The key to employee retention, client loyalty and a strong marriage is the ability to develop and sustain a relationship at an emotional level.  In other words, there must be a deeper connection between the employees and the business than just salary, perqs and a holiday bonus.  There must be a belief in the purpose of the enterprise and the employee’s place in it.  Each employee must be able to answer the key question “why do I keep coming to work?” with something more than just a reference to salary.

In addition to fair (if not downright attractive) salary and benefits, the organization must have a vision beyond just an increase of profits for the owner.  There must be buy-in – meaning everyone, including those crucial (and temperamental) millenials – must be on board the bus.

The company must work to establish trust, rather than just assume it’s there.  
There must be feedback well beyond just an annual review.
The company must create traditions, events or other visual touchstones to keep employees anchored to its vision.  

In essence, a company coming to terms with the challenges of keeping today’s workforce fully engaged has no choice but to take its cue from those non-scoring, participation-trophy games by providing approval, feedback and a connection – not just to the actual activity, but to the overall value that comes with being part of the team.

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Guest Blogger: Terry Weller, CPA

Did you know that the typical 5-year-old asks 65 questions a day, while the typical 44-year-old asks only six?  Children are curious as they are developing. I believe that businesses should be curious as they continue to develop.  Unfortunately, over time many organizations settle into a ‘know-it-all’ mentality; they get stuck in the business models, processes and cultures typical to their industry.  Most organizations are not asking questions regularly to initiate true innovation, nor are they digging into the core of what makes them unique. As Tim Brown, CEO of IDEO and well known innovation speaker states, “organizations focus more on optimizing the business machine rather than creating value.” If you don’t innovate around your products and services then you aren’t optimizing your ability to successfully grow your organization and expand in the marketplace.

So, what does it take to spur innovation?

While not all inclusive, there are two common resources for leveraging your differences and establishing authentic innovation within your organization.  I focus on these two because they provide a substantial return on the effort expended:

• Drawing inspiration and learning from industries and markets that are tangential to or different from your own
• Hiring or selecting a “diverse” team of talent

Innovation is not about understanding your common ground, it’s about celebrating your differences. Take the Volkswagen Beetle for example; when first released in the United States in the mid-fifties, the car design was considered ugly and not functional. These failures only made the company consider upgrading and refining the car’s utilities. Mmm...they respectfully ignored the obvious criticism from consumers. Then, at the height of the criticism, their 1960s advertising campaign was launched. Each ad embraced and celebrated the car’s unique design and features.  The attributes of the Beetle were simple - it was a small, well-made car that was inexpensive. The ads created used these facts, but never used the words themselves; they simply used the concepts to illustrate (typically in a humorous way) the aesthetic differences and functionality. This “innovative” campaign made the brand stand out in a marketplace crowded with cookie-cutter ads showcasing stylish cars and the ideal lifestyle you can have by owning one. What is especially amazing is that even today, the success of the Volkswagen Beetle brand stems from its now iconic design.

How we view our opportunities and make decisions is largely based on the lens through which we view the world.  Taken on a grand scale this encompasses every observation we have amongst all the areas of our lives.  When we are in the mode of viewing things from a preset angle we can miss opportunities that are right in front of us.   Joel Arthur Barker was the first person to popularize the concept of paradigm shifts relative to organizational behavior. He began his work in 1975 and pioneered the concept to explain the importance of vision to drive change within organizations. His model suggested that the “outsider,” someone who really doesn’t understand the prevailing paradigm in an organization (sometimes they don’t understand at all!), is one of the individuals who can affect change and innovation within an organization. Barker goes on to explain, “The outsider has the advantage of asking the dumb questions...They don’t realize they shouldn’t challenge the present practices because they haven’t learned those prohibitions yet.”  Many business leaders throw deaf ears on suggestions from outsiders. Their experiences and teachings have trained them to think of these ideas as “absurd” or “too radical of a change.”  However, what may sound ridiculous could actually be the origin of a new business model, product or service.  Take for example KUKA Roboter GmbH. Since building its first industrial robot in 1977, KUKA has become one of the world´s largest manufacturers of industrial robots. KUKA robots are utilized in a diverse range of industries including the appliance, automotive, aerospace, consumer goods, logistics, food, pharmaceutical, medical, foundry and plastics industries among others. So, when your organization has saturated the marketplace – how do you keep growing? Where do you go next? The answer for KUKA was the amusement park. Yes, born out of demand for more interactive theme park rides, KUKA brought the “Robocoaster” to market in 2003.  This was the first robot in the world to be approved for carrying human passengers. The interactive ride can be designed to match customer’s requirements in theme, intensity and realism. It is more cost effective than a traditional ride since customers can change themes to adjust to rider appeal and create an infinite number of rides by using one programmable industrial robot. With large theme park corporations such as Walt Disney incorporating robotics into their stage entertainment since the early 70s, it’s amazing that someone did not combine the industries sooner. That’s why it’s important to continually observe and look outside your industry to see how other strategies, resources, and practices could be used within your organization to enhance or even differentiate products/ services.

Your innovation muse does not have to be externally driven either. As a business leader, you should also look internally. Hiring or selecting a “diverse” team when it comes to driving innovation means not following your organization’s or industry’s culture of defined technical talent.  You want to look for individuals who demonstrate strengths in other business areas and/or offer a different set of skills. For example, another interesting fact about the Volkswagen ads is the composition of the advertising agency team that put them together. The firm selected and used a diverse creative team of writers and art directors. In most agencies at this time these functions were separate. By bringing these functional areas together the firm was able to draw from the interdisciplinary perspective of the entire team. Along the same lines, in one of my endeavors I had the opportunity to hire a group of people whose primary goal was to provide the outside of the box thinking and fresh ideas that would lead to innovation within the organization I was working with. They were true “outsiders” with no industry knowledge, let alone any deep business experience.  The team was made up of recent college graduates. Since they were not limited by preconceived notions, they quickly solved the challenges provided to them. The observations they made and solutions they posited led to changes within the company’s business model and processes.  Many of these changes could be directly tied to increasing customer satisfaction and growing the company’s bottom line. When you get a chance, I recommend reading my full account, “skunk works.”

These examples go to show you that teams of exceptional and diverse talents can work together to create amazing, novel ideas.  So, to get you motivated today to start true innovation, I’ll ask the first questions: What areas of your organization could benefit from being reviewed through a new lens? What products or services can benefit from or be created by brainstorming with a strategic partner? What teammates can you cultivate within your organization to solve current business challenges?

Any new ideas or thoughts on innovation? Please share them in the comment section. I’d enjoy reading about them and who knows what fresh idea you may spark for someone else.

Terry W. Weller, CPA is a Partner of McLean, Koehler, Sparks & Hammond and a member of the firm’s Executive Committee. Terry Weller’s many years of experience have been devoted to assisting family and owner-managed businesses on sophisticated financial planning issues and providing comprehensive help with business and interpersonal issues. His clients cover a wide range of industries, including wholesale/distributors, contractors, professional practices and service-related businesses. Terry’s services include business planning and consulting, accounting and auditing, and the integration and dealing with owner and company concerns often prevalent in family/owner-managed businesses.

Terry is a graduate of the University of Maryland. He received his certification as a CPA in 1970 and was admitted to the partnership of McLean, Koehler, Sparks & Hammond in 1975. An accomplished public speaker, Terry is a member of the AICPA and the MACPA.

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In a disturbing development, the New Jersey Supreme Court ruled that an employee may take confidential files for the purpose of helping in the prosecution of a discrimination claim. The Court, ruling in Joyce Quinlan v. Curtiss-Wright Corporation, found that the employee’s use of the confidential materials was a protected action for which termination would be improper.

Joyce Quinlan had worked for Curtiss Wright for approximately 20 years when she came to believe that she had been wrongfully passed over for promotion in favor of a male employee. She then devoted herself to the collection and copying of over 1,800 documents from personnel files and project work files to which her position gave her access. 

Selecting documents she believed were helpful to her assertion of gender bias within Curtiss Wright, Quinlan turned the documents over to her attorneys. The documents were admitted at trial and served as the basis for a significant award against Curtiss Wright, including punitive damages.

The Supreme Court of New Jersey upheld the verdict.

In its ruling, the Supreme Court attempted to balance the interests of aggrieved employees with those of employers seeking to preserve the confidentiality of their information.   In so doing, the Court acknowledged the competing interests of each party, stating:

In making these evaluations, the court must be mindful that both employers and employees have legitimate rights. Employers have the right to operate their businesses within the bounds of the law and legitimately expect that they will have the loyalty of their employees as they do so. Employees have the right to be free of discrimination in their employment and the right to speak out when they are subjected to treatment that they reasonably believe violates that right. Balancing all of those considerations is a difficult and important task.

Applying a 7 point balancing test, the Court made it clear that employees are generally safe copying and using an employer’s confidential documents if: (1) the employee acquires the documents in the normal course of his or her job duties; (2) the documents are delivered only to counsel; (3) the employee has a good faith basis for believing s/he has a meritorious case; and (4) the copying of the documents does not interfere in the employer’s business. 

What made the Quinlan ruling so alarming was that it was rendered after a thorough review of applicable federal and state case law. The prospect that the Quinlan decision could be adopted by Maryland and other states should send a shock wave through employers seeking to protect their trade secrets and confidential records. 

While certainly not urging employers to shield illegitimate or improper discriminatory behavior, we would highly recommend that companies review their document management and security policies with an eye toward preventing unauthorized access. Our recommendations are as follows:

1. Ensure that applicable written policies place employees on notice that copying or scanning documents as well as removal of documents from the workplace without proper authorization is a termination-level offense.
   
   
2. Review security measures for personnel files – both medical and administrative – as well as other confidential documentation, including trade secrets, pricing, and customer lists. Determine: (a) who has access; (b) when access is permitted; (c) whether unauthorized access is possible; and (d) how management would know if there was unauthorized access, copying, or removal of files.
   
   
3. Update any security measures, document control technology, and access procedures necessary to ensure that your documents only go where you want them to go.

Sure, I know this may sound a bit alarmist, but consider one thing about document management and security: 

It is better to have it and not need it, than need it and not have it.

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Guest Blogger: Michael J. Lentz, Esquire

I’ll admit it – I used to be profoundly annoyed by, and more than a little bit uncomfortable with, the notion that Twitter could be a useful tool in the development of my commercial litigation practice. I envisioned Twitter as the latest unwelcome step in the drive-thru-ification of America, where fast and easy often replace, and are often deified at the expense of, thorough and thoughtful. I viewed Twitter as nothing more than one of many ways for the self-absorbed to tell the rest of the world about their lives - it seemed unnecessary at best, and shallow and self-aggrandizing at worst. 

Last week, though, I attended an excellent webinar on the use of Twitter for client development, presented by Kevin O’Keefe, the founder of LexBlog (full disclosure: LexBlog hosts this blog). I’m not going to attempt to reiterate Kevin’s points here – you can follow his blog or follow him on Twitter. At the start of the webinar, I was largely Twitter illiterate – I didn’t know a hashtag from a hash brown. More to the point, I literally could not fathom that Twitter could be useful to me, so I didn’t see any reason to attempt to become literate. 

An hour later, though, I had specific examples of ways in which Twitter might be useful to a busy litigator trying to develop a practice. Certainly, some of the suggestions were inapposite. Others were sensible in theory, but might be difficult for me to put in to practice, given a finite amount of time to devote to the effort. There were other suggestions, though, that made sense immediately, and that I knew I could put into place immediately. Receiving fairly simple, concrete examples of what Twitter can do for me made me change the way I thought about Twitter. I’m still not convinced that it’s the eighth wonder of the world, as some of its advocates seem to believe, and I’ll probably never use it as fully as Kevin and others like him do, but I am convinced that it has its place. 

This epiphany reminded me of an important marketing lesson: when you’re marketing, whether verbally or in writing, and whether your audience is an enormous group or a single individual, make the presentation not merely about you, and your skills and talents, but about what you can do for your audience. Leave your audience with simple, concrete examples of how your business, product or service can help them.  No matter how good your business is at what it does, prospective customers and clients will not become actual clients and customers unless and until you can explain, simply and completely, how your business will benefit them. 

Michael graduated from Georgetown University Law Center in 1998. After spending five years with large Baltimore firms and three years as a solo and small firm practitioner, Michael joined Wagonheim Law in 2006, where he continues to utilize his extensive experience in commercial, bankruptcy, and appellate litigation to work with companies throughout the mid-Atlantic region.

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Yesterday at 5:00, I found myself sitting in our conference room across from a very interesting gentleman. He was in his upper fifties, maybe 60, and carried himself as a professional. He explained that he had been in business for upwards of 40 years – that he had made some big mistakes, learned from them, moved on, and built a fairly successful business. 

He told me that the business that he had started had run its course and he wanted to start a new one, having learned from the mistakes of the old. In order to start the company, he decided to bring in 3 additional people. These people were friends of his, experienced in his industry, and possessed of the skill sets necessary to make the new venture run. My visitor had decided to divide 40% of the stock among them, retaining 60% for himself – enough, he felt, to keep control of the company.

He was convinced that giving out shares of the company was the only way to keep the group motivated, absent money to pay each person’s going rate. My visitor was wrong.

Recently, I wrote a piece in our e-mail series discussing the mistake of offering partnership at the outset of a business relationship. And whether the discussion concerns true partnership or co-ownership of a corporation or LLC, the fact of the matter is that co-ownership is a business marriage. And make no mistake, just like the real thing, a business divorce can be expensive and emotionally draining. 

For his part, my prospective client was asking his friends to invest their time and skill in a new business for little or no compensation. What he wanted was a way to show his friends that they would reap the benefits of their investment.   We explored a number of possible solutions, but what we decided upon was offering stock options.

People, you see, are unpredictable. Some may be highly skilled and great friends, but start working together and it’s a trainwreck. Different business philosophies, work ethic, or personalities can destroy a team that could not possibly look better on paper.   Stock options and a vesting schedule are two ways to put together an arrangement now which takes effect later. 

In this case, we could commit to an option to purchase stock in the company beginning in 3 years, discounted for each year the person had been with the company. Moreover, as incentives, other discounts to the purchase price could also apply, provided we took care not to trigger any unwanted tax consequences.

In other words, my prospective client could date before he got married. And in my experience, that’s a pretty good plan.

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