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Honor Roll

Giving rewards to prize employees.
April 1, 1998
URL: http://www.entrepreneur.com/article/15456

Looking for an innovative way to rev up employee motivation--and show them you appreciate the work they do? Take a tip from Doug Sears, who thought a good way to keep his employees' wheels spinning would be to offer a real set of wheels as an incentive. But instead of choosing a deserving employee himself, the owner of executive search firm DS&A and software development company RecruitMAX Software in Orange Park, Florida, let his 50 employees choose who would win the use of a 1997 Ford Mustang GT convertible for a year.

From June to December last year, employees were encouraged to recognize positive performance by co-workers with "Dream Dollars"--forms that looked like dollar bills. Employees noted the recipient's name, their own name and the reason for the award on the bill. Reasons ranged from handling a difficult situation successfully to simply brightening someone's day with a pleasant attitude. At the end of the contest period, the dollars were tallied, and the employee with the highest number was handed the keys to the car at the companies' holiday party in December.

The one-year lease on the car, plus gas and insurance, will cost the companies $10,000 to $12,000--an investment Sears believes is well worth it. During the contest period, the companies posted a 200 percent increase in sales over the same time period the previous year--from $382,000 to $1.5 million--which easily covered the cost of the contest with profits left over. In addition, Sears says the contest created a stronger sense of teamwork because the employees chose the winner.

"This contest has instilled something in each and every employee here," Sears says. "We are a team, and they are all first-string players."


Jacquelyn Lynn is a business writer in Winter Park, Florida.

Go Figure

Is the price really right?

Do you know the real costs of the products and services you provide? Charles L. Norman, a CPA and senior manager specializing in entrepreneurial services with Ernst & Young LLP, says many business owners don't, especially when they have a significant amount of indirect costs. One solution is activity-based costing, the process of associating costs with the activity which produced the cost.

One way to do this is with sophisticated software. But while precise, this option can cost you nearly $10,000 for the program, installation and training--no small change for most entrepreneurs. A more affordable alternative, Norman says, is to keep a very detailed chart of accounts and carefully allocate overhead costs back to the appropriate product or service. It's a technique that, while not 100 percent accurate, will provide a clearer picture of the cost of your products.

The key is to attach specific costs to the product involved. For example, if you spend a disproportionate amount of your advertising budget on one particular product, you need to charge the real cost of the promotion to that one product to get a realistic profit picture. The same procedure should be applied to depreciation, equipment expenses, interest and debt costs, building occupancy costs, freight and delivery expenses, and even executive compensation.

"Most people do a good job allocating the direct labor to the product," Norman observes. "What they don't do well is allocate [the cost of] management labor. For example, the president or chief operating officer may be spending most of his or her time on a certain product line, trying to get it off the ground, and if you allocated all his or her wages to that line, it might not be as profitable as it looked."

Norman says the process of determining where you're really making your money is often an eye-opening experience. Just remember, the information will allow you to make better management and pricing decisions, and ultimately create a more profitable company.

Prime Target

Keep your company from being a victim of extortion.

It's the stuff movies are made of: bomb threats, product tampering, sabotage and kidnapping. You might think these things could never happen to you--after all, you're a small, relatively obscure company. But that could actually be what makes you an attractive target to an extortionist.

"Being a victim of extortion or threats is not a factor of size, and it's not always connected to a perception of wealth. You can fall victim for many reasons," says Andy Duffin, managing director of crisis management services for Pinkerton Consulting and Investigations in Hallan- dale, Florida. "A small company might be an easier target than a large multinational one, which may often be perceived as having a significant security force in place. And while a large company might be able to weather the costs stemming from a kidnapping, a product recall or a negative press campaign, for a smaller company, the damage could be irreparable."

To protect your company from corporate terrorism, the first step is to understand that it can, indeed, happen to you. Duffin says the source will likely be one of six types of perpetrators: disgruntled employees (current or former); someone else with a grudge against you or the company; criminals who are looking primarily for financial gain; psychotic or mentally ill individuals; terrorists; or "hoaksters." Possible scenarios include an unhappy employee who threatens to release company secrets or plant a virus in your computer, threats from a perpetrator to injure people or damage property if a ransom isn't paid, product tampering, and threats to generate negative publicity if the company fails to take specific actions.

The next step is to develop a crisis management plan. Although you certainly can't plan for all contingencies, think in advance about what steps you'll take so you can react calmly and purposefully to resolve a situation. Decide who will be in charge of what, and plan for communicating with law enforcement officials, the media, your customers and your employees. You might also want to meet with a crisis management consultant before anything happens; establishing such a relationship in advance may cost a small amount of time and money, but it will be invaluable if the need arises.

Determine, too, how you will handle the costs associated with an incident. Some of the expenses may be covered under your regular business insurance, or you may want to investigate special policies. For example, CIGNA Property & Casualty recently introduced kidnap and extortion, and product tampering insurance to its product line. In conjunction with the insurance, CIGNA offers risk management services through Pinkerton, which consults with clients both before an incident, to reduce the likelihood of one occurring, and afterward, to assist with managing the situation.

All Locked Up

Speeding up cash flow with a lockbox.

It's a service large companies have been using for decades. Now a growing number of small businesses are letting their banks help them improve cash flow with a lockbox. It works like this: Your customers mail their payments to a post office box, which your bank rents in your company's name. The bank sends a courier several times a day to clear out the box; checks are immediately deposited into your account, and you get a report outlining all the transactions in as much detail as you want and as frequently as you want.

Lockbox is a low-tech-sounding term for a high-tech, high-speed service that can be easily customized for just about any business, says Roger Shields, vice president and manager of treasury management at Bank One Utah in Salt Lake City. "Any company that is spending more than a few hours a day having someone in their office running to the post office, picking up the mail, making the deposits and keying that information back into the system is a good candidate for a lockbox," Shields says. "It's a volume-driven process, which is why the bank can do it much more efficiently and at much less cost than you can pay someone to do the same work in-house."

A company that averages 500 remittances a month can expect to pay $75 to $100 per month for lockbox service. Reporting procedures can range from something as simple as a faxed copy of the daily deposits to the image of each check being placed on CD-ROM. Shields says lockboxes are a standard banking service; to set up a program, call your bank.

Politically Correct

Stand up and be counted.

What's the biggest challenge small-business owners face? If you conducted a survey, chances are, burdensome government regulation would be in the top three. That's why more and more businesspeople are getting involved in politics--an arena that has long been considered taboo in polite conversation but has a tremendous impact on companies.

"There isn't a businessperson alive who doesn't feel some burden in terms of regulatory, statutory or taxation issues," says Ronn W. Cupp, vice president of government affairs for the State Chamber, Oklahoma's Association of Business & Industry. "If you're in business, you don't have a choice--you have to be involved in politics."

But choosing your issues and staying informed can be a daunting task. The solution, says Cupp, is to look to the political arm of an organization that is sympathetic to your interests. Those organizations include local and state chambers of commerce, as well as your industry's trade and professional organizations. They will let you know what's going on in elections and legislation and will offer guidance on what you can do to help.

Your involvement might include making financial contributions, writing letters, attending meetings, supporting candidates during elections and perhaps even lobbying legislators. "You can choose your degree of participation," says Cupp. He recommends giving as much as you can to important issues, pointing out that political action is cyclical, generally peaking during election seasons and when state legislatures are in session.

The plus side of political action means you can positively influence legislation that affects your business. Is there a downside? Cupp points out it's possible you could take a public position on an issue that might offend some of your customers, but he adds, "You can do that with other things, too. [The State Chamber] has taken controversial stands, and in many cases, we gain more than we lose."

Accidents Happen

...but employees can help prevent them.

It's hard to argue with workplace safety programs--they help keep your insurance rates down and your productivity, profitability and employee morale up.

As companies work to create a safe environment, they often focus on such prevention issues as operating equipment and doing other tasks safely, and wearing appropriate safety gear. But, says Tom Callanan, senior vice president of Workers Compensation Fund of Utah in Salt Lake City, employees also need to be trained to take action if they see an unsafe situation, whether or not it has a direct impact on their particular job or work area.

Typical safety programs provide incentives for maintaining an accident-free workplace. Callanan says those programs also need to include recognition and incentives for employees who exercise initiative in spotting and taking steps to correct dangerous situations--whether it's a wobbling stack of books on a filing cabinet, a loose step or stair rail, or a major equipment problem.

According to Callanan, a good safety program includes the following components:

For assistance in developing or enhancing your safety program, Callanan suggests calling your workers' compensation insurance carrier. "It can help you set up a program, measure the results and make adjustments as necessary," Callanan says. "It can also put you in touch with any other resources you may need."

Contact Sources

Bank One Utah, 80 W. Broadway, #300, Salt Lake City, UT 84101, (801) 481-5125

DS&A RecruitMAX Software, 320 Corporate Wy., #100, Orange Park, FL 32073, (904) 278-9998

Ernst & Young LLP, 1 SeaGate, Toledo, OH 43604, (419) 321-5470

Pinkerton Consulting and Investigations, 1250 E. Hallandale Beach Blvd., #404, Hallandale, FL 33009, (954) 458-2707

State Chamber, Oklahoma's Association of Business & Industry, 330 N.E. 10th St., Oklahoma City, OK 73104, (405) 235-3669

Workers Compensation Fund of Utah, 392 E. 6400 South, Salt Lake City, UT 84107, http://www.wcf-utah.com