To many employees, the impact of health benefit-based wellness incentives must feel like a whack upside the head. As health premiums continue to rise in double-digit percentages, many employers are taking drastic steps to stop the bleeding. Local companies are offering everything from cash to paid time off to persuade employees to participate in healthy lifestyle activities. A growing number of employers are tying participation in wellness programs to reduction in employee contributions to health insurance, all in effort to improve health and relieve the heavy burden of health benefit costs.
According to Mercer’s National Survey of Employer-Sponsored Health Plans, American companies have experienced double-digit medical cost increases every year since 2001. These increases are expected to continue for the next five years. If this trend continues, employers could be facing health care cost increases close to 20 percent.
The news in Milwaukee is worse. A recently released study by the Government Accountability Office showed health care costs in Milwaukee were 27 percent higher than the average across all other metro areas in the analysis. Other studies over the years have shown health care costs are considerably higher in Milwaukee than in most other markets.
Many companies are convinced that having healthier employees is one of the most effective long-term strategies in reducing this trend. Yet, experience shows us that most Americans do not think about their health until faced with a health care crisis, either personal or financial. In the past, changing employee health behaviors has been a long and difficult process. However, with health care being one of the highest costs for employers, many companies are taking immediate action.
Tying incentives to the health benefit
A rapidly growing strategy among employers is to use a monetary incentive approach to employee health insurance. Included are programs in which employees earn points for participation in health risk appraisals (HRAs), achieving certain scores on HRAs, and participation in wellness program activities and preventive care. These points are then tied to awards such as cash, paid time off work, gifts or a reduction in the employee contribution to their health insurance.
There is a belief that the quickest and most effective incentives are tied to the health benefit. However, reaction to these methods varies among employees. Although the reduction in contribution to the health plan is designed to reward and reinforce positive lifestyle behaviors, to some employees, it may feel more like a penalty.
Let’s look at an example. If a company’s standard deductible for the family health plan is $500, but this year it will be raised to $1,500, it will most likely get people’s attention. But if you and your spouse participate in the health risk appraisal, you will pay last year’s rate of $500. If you are used to meeting your deductible, and you participate in the HRA, this could look like cash in your pocket, or it could look like you are being forced to participate in a program that under other circumstances you would not choose.
Here is another example. Your monthly insurance premium contribution is based on your HRA score. If you score high, between 86 and 100 points, you pay only 20 percent of the total premium. If you score low, under 70 points, you pay 35 percent of the premium. Under this system, knowing that you will lose 24 out of 100 points of your total score for smoking, and maybe another 15 points for elevated body fat percent and cholesterol, you may be motivated to quit smoking and cut out the fast food. However, the pressure of having to make these sudden changes may cause you to feel overwhelmed and angry.
Know the rules
So how do employers keep the motivation positive? How do you reward, not punish?
"An incentive structure in your wellness program should be designed to reward and reinforce positive lifestyle behaviors and behavior change," says Cheryl Mealey, manager of health and wellness strategy for Frank F. Haack & Associates, a Wauwatosa-based insurance brokerage.
Mealy advises employers to "keep the emphasis on the positive." Linking incentives to benefit plan design is a somewhat new frontier. To protect consumers, Uncle Sam has stepped in and created provisions to prohibit employers and health insurers from imposing a "penalty" for unhealthy behavior. These provisions are outlined in HIPAA’s nondiscrimination provisions.
Under HIPAA, group health insurance plans may establish premium discounts or rebates, or modify copayment or deductibles in return for, "adherence to programs of health promotion and disease prevention." HIPAA refers to these programs as "Bona Fide Wellness Programs." A proposed regulation laying out the parameters for these programs has been issued, and a final rule is expected to be published in 2005.
Until then, employers can rely on the following proposed requirements, which stipulate that if you tie an incentive reward to a specific program score or standard:
¥ The rewards that are offered to an individual must be limited to a percentage of premium. It has been suggested that 10 to 20 percent is an appropriate level, but this percentage has not yet been finalized.
¥ The program must be reasonably designed to promote good health or prevent disease for the individuals in the program and must give individuals the opportunity to qualify for the reward at least once per year.
¥ The reward must permit any person for whom it is unreasonably difficult due to a medical condition to meet the wellness program standard to satisfy a reasonable alternative standard. For example, if the standard for cholesterol is 200 or below but the employee is unable to reach that standard due to genetic factors, a letter from their physician stating such will allow them to satisfy the standard.
¥ All plan materials that describe the terms of the wellness program must disclose the availability of a reasonable alternative standard.
We all know through previous experience with HIPAA that these government regulations can have us running in circles. Mealey recommends working with your benefits consultant, an attorney or an external vendor for advice on your wellness incentive program structure.
Connie Roethel, RN, MSH, is president of Complementary Health & Healing Partners (CHHP), a corporate wellness and health promotion services company with offices in Mequon. She can be reached at (262) 241-9947.
October 15, 2004, Small Business Times, Milwaukee, WI
Wellness incentives
Adieu
Visitors at Wixon Inc. are usually treated to a sensory barrage when they come to the St. Francis factory, packaging and distribution center. Cinnamon, spice blends, herbs and other aromas permeate throughout the plant. However, another sweet aroma has been drifting about Wixon’s facility in recent months – satisfaction blended with a bit of relief.
After more than one year of negotiations, the Wixon management team of Peter Gottsacker, Chuck Ehemann and Pete Caputa have pooled their interests and purchased the company from Fontarome S.A., a French holding company.
Fontarome S.A. had owned Wixon since the early 1980’s.
With the acquisition, the new owners have changed the company’s name from Wixon Fontarome Inc. to Wixon Inc.
Wixon specializes in making spices, sauces, concentrates and flavor enhancers for a variety of restaurants, food manufacturers and vendors.
Gottsacker is Wixon’s president, Ehemann is the executive vice president and Caputa is the chief financial officer.
"We were very fortunate to work for the previous owners that treated us with a professional and understanding manner," Caputa said. "There was a strong responsibility and caring for the people who made Wixon what it is and helped them become successful."
However, Wixon’s employees are thrilled that the company is now owned by local managers who have been working at the firm for years, rather than a foreign company, Gottsacker said.
"There was significant relief of the employees to return (the company) to local hands," Gottsacker said. "Food companies are hot properties. There are big consolidations and multiples that are crazy. Closings and everything else had been on everyone’s mind. And returning to local hands, I believe, meant a lot. It eliminated a lot of uncertainties."
Gottsacker said he had been thinking about purchasing the company since he started working there.
Caputa said he had been discussing a purchase of Wixon with the other members of the management team since he started at Wixon.
During his eight years as company president, Gottsacker said, he was able to closely watch as Wixon’s revenues increased and its value grew. However, Wixon was Fontarome S.A.’s only U.S. holding, and the French company began to consider selling it.
During the summer of 2003, Gottsacker boarded a flight to Europe with one purpose in mind.
He and the "powers that be" sat
in a room at Fontarome S.A.’s headquarters, talking for nearly two hours about the worth of the company. At the end of that talk, Gottsacker gave the board of directors a range of what he thought the company was worth.
One board member who had a slip of paper with him the whole time flipped it over, revealing a number exactly in the middle of that range, Gottsacker said.
Gottsacker declined to reveal that dollar figure, but he still keeps the slip in his office.
Appraisers, accountants and lawyers from both Fontarome and the three interested buyers went back and forth between August 2003 and September 2004. While the numbers and the eventual understanding of the purchase changed greatly over time, the dollar amount of the deal didn’t change much at all, Gottsacker said.
"Through the ups and downs of the negotiations, both sides were almost frustrated to the point of walking away," he said. "But it was kind of funny – we ended up on the number on that piece of paper."
The three partners leveraged the purchase with a combination of their own finances and financing from M&I Bank, which the company had existing relations with for many years, Gottsacker said.
The new owners said they felt no sense of political satisfaction in returning the company to American ownership from more than two decades of French ownership, even as tensions between the two countries grew over the war in Iraq.
"Politics is politics, and business is business," Gottsacker said. "These were men of honor, carrying out a business agreement on a handshake and a look in your eyes."
Now that the final hurdles of the purchase have been cleared, the new owners are moving ahead toward expanding Wixon’s operations.
The company’s revenue has increased 8 percent this year, approaching $50 million in sales for 2004. Its revenues increased 10 percent from 2002 to 2003.
At the same time, Wixon has added 10 full-time and 40 seasonal employees, and the firm is continuing to launch about 20 new products each year.
Gottsacker said Wixon also is considering acquiring another company within its field on the East Coast, and that purchase could be finalized within weeks. Both he and Caputa said that type of acquisition is indicative of their commitment to Wixon over the long-term.
"When you get together in a partnership, one of the most important questions is what your plans are for the organization," Caputa said. "It’s a long-term investment for the three of us, not only as investors, but also long-term employees."
The new owners say they feel a sense of responsibility and gratitude for the company’s employees, who have fueled Wixon’s growth.
"One of the differences now is that you clearly have more of a paternal responsibility," Caputa said. "You have a lot of responsibility for the different partners in Wixon. Because of that, you come to work with more enthusiasm. We all had a strong vested interest in it before. It’s just added to the excitement with what we think we can do with the organization."
Ehemann said the pride that many of Wixon’s long-term employees take in the company’s success and growth over the years continues to be a source of motivation for him and the other owners to make the right decisions for the company.
"They have a great pride in the growth the company has had, and they have been very key in it happening," he said.
For Ehemann, who is in his 30th year of employment at Wixon, the chance to become a part owner is almost like a dream come true.
"I never had an idea it would head this way. It just happened," he said. "It’s an absolute passion I have, and I love doing it."
Ehemann likened the experience of buying the company to one he had a few years earlier, when he bought $50 worth of lottery tickets and was fantasizing about what he would do with the money.
"I have two daughters to protect, and then past that, I thought I would look for a company like this to buy, and it would be my business," he said. "As it evolved, it’s like I won the lottery."
Wixon’s new owners
Peter Gottsacker
Title: President and co-owner
Background: Former president of Schwartz Pharma from 1986 to 1996; president of Wixon Inc.
Chuck Ehemann
Title: Executive vice president, overseeing sales, marketing and customer service, and co-owner.
Background: 30-year employee of Wixon, working in sales.
Pete Caputa
Title: Chief financial officer and co-owner
Background: Worked at Deloitte Touche, a public accounting firm, for 11 years, then for four years as chief financial officer and senior vice president at Stokely Inc., before coming to Wixon six years ago.
Ocober 15, 2004, Small Business Times, Milwaukee, WI
Businesses finally weighing in on new hospital plan
Some segments of the Waukesha County business community are beginning to speak out against Aurora Health Care’s plans to build an $85 million hospital on the Pabst Farms property in the Town of Summit.
The Waukesha County Chamber of Commerce board of directors decided earlier this month to take a stand in opposition to proposed construction of the fifth hospital in the county.
In addition, 45 Waukesha County business have criticized Aurora’s proposal in print advertising run by Not Another Hospital Inc., a group opposed to the project and funded in part by ProHealth Care, which owns Oconomowoc Memorial Hospital.
The Waukesha County Chamber of Commerce board’s official stance against the hospital was decided unanimously by board members at a meeting earlier this month. Patti Wallner, president of the chamber, said the board’s decision was reached after a prolonged period of research and discussion.
"The Waukesha County Chamber of Commerce opposes the construction of a fifth hospital in Waukesha County, because it is an unneeded duplication and will result in higher costs for health care in our community," the chamber’s statement said. "The Waukesha County Chamber of Commerce endorses competition whenever possible. However, heavy regulation, substantial public funding and several other issues prevent the health care industry in the United States from functioning properly as a free market. Thus, it makes sense for the Waukesha County Chamber of Commerce to oppose a fifth hospital in the county."
The decision was not meant to oppose Aurora, Wallner said, but to oppose the building of another hospital in Waukesha County. Wallner said the board’s opinion is based on hospital bed occupancy, the number of beds and the projection of the future population.
"Our conclusion was that the cost of health care is a crisis," Wallner said. "This is one way we thought we could make a statement and possibly affect what will happen. We see duplication of service as an increase in costs, and if we did not make this statement we felt we had no right to complain."
The Town of Summit and then the county will decide if the hospital will be built based on zoning issues, rather than a public referendum.
"We were disappointed that the chamber decided to take any public position on the issue because it was essentially taking a side with one member and opposing the side of another," Greg Banks, the president of the Kettle Moraine region of Aurora Health Care said. "The chamber is there to promote business growth and economic development, which we think is one of the major benefits of our proposed hospital in the Town of Summit."
According to Banks, many people within the Waukesha County business community have come forward in support of the hospital plans or have come forward saying it is inappropriate to have a public position on the issue. Banks said support has been growing rapidly once employers understand the project and feel more comfortable that the new hospital will be a positive addition to a part of Waukesha County.
"The business community is pro-competition and employers we have talked with are in support of our price pledge that we have made to price our services at the prevailing rates in Waukesha County," Banks said. "The additional pledge we would keep is that our prices would be below the medical consumer price index. When employers hear this, it resonates with them and they understand why the new hospital will not have any additional cost to them in Waukesha County."
Wallner said the chamber’s decision was not reached without extensive research, education and thoughtful consideration. The chamber held two board and executive meetings and gathered information from the Fox Cities, Kenosha and Two Rivers where similar situations have occurred.
"The chamber endorses free market competition, and at first glance you think competition is what makes America survive," Wallner said. "But research showed us that health care is not a free market and cannot be compared in the same way. We really see our role here as informing and influencing business and we hope businesses will continue to monitor the situation, make up their minds and impact whoever is in their sphere of influence."
Since the statement was publicized, other organizations and businesses have come forward in opposition to Aurora’s proposal.
Although ProHealth Care financially helped launch Not Another Hospital, the health care organization is not directly involved in its campaign, said Clare O’Sheel, director of public relations and marketing for ProHealth Care.
Not Another Hospital was formed to provide a place for people who oppose the hospital to get involved in the community debate, she said.
"ProHealth Care helped to start up Not Another Hospital to harness the emotions and opinions of the community," O’Sheel said. "People wanted something to do and somewhere to go. The organization has its own board of directors, and we are one of many financial supporters. We will continue to support the organization because we want to make sure the community has a voice in the issue."
In May, Not Another Hospital opened a storefront location at 24 S. Main St., Oconomowoc, and has advertised its Web site, www.NotAnotherHospital.org, on two billboards in Waukesha County.
The Web site offers information, advertisements, articles and research claiming quality health care does not need to cost more. The site also provides ways for opponents of the proposed hospital to get involved in the effort fighting its construction.
"The decision is going to be originally made in the Town of Summit, but we believe it is a regional issue," said Brian Nemoir, spokesman for Not Another Hospital. "High health care costs are not unique only to the Town of Summit."
Bill Nantell, the president of Parks Edge Lakeshore/Winds Solutions, Waukesha, was among the business owners who signed the advertisement for Not Another Hospital and believes the chamber’s statement will help with the cause.
"I am delighted with the chamber’s decision," Nantell said. "It appropriately calls upon the business community to engage in this health care problem. As a small-business owner, I have a health group policy that is quite expensive and part of why that is, is because southeastern Wisconsin has higher health care costs. There are too many hospital beds that are not occupied."
However, not all Waukesha County business owners oppose the proposed Town of Summit Aurora hospital.
"I own a business in downtown Waukesha and have owned music stores for over 27 years now. I can’t imagine someone telling me where I can and can’t open a business," said Mike Gallenberger, owner of Gman Music. "There is always room for another good business and the same for a hospital. I think you should welcome new neighbors. It can be very good for business and very good for the people in the area."
However, Nantell said a fifth hospital in the county would cause his premiums to increase. He is working with Not Another Hospital and networks within the community to inform businesspeople that this is the time to voice an opinion.
"I am hoping the Town of Summit will recognize that we don’t need another hospital, and if it doesn’t, then I hope the county recognizes this," Nantell said. "Waukesha Memorial does not have to care because it will still be a viable hospital. I have to care because I am the one paying the premiums."
June 25, 2004, Small Business Times, Milwaukee, WI
Joseph Douglas Homes
The co-owners of Joseph Douglas Homes, Deron Butler and Joe Orendorf, like to joke that builders and contractors are often listed as some of the most hated professionals, considered by some to be untrustworthy and inconsiderate.
"We are trying to change that (image) one builder at a time, one homeowner at a time," Butler said.
That effort starts in the office, a place Butler and Orendorf want employees to be happy to come each day.
"I think by treating our employees the way we would like to be treated ourselves helps them be a part of our vision," Orendorf said.
Due to that philosophy, the employees at Douglas Homes are not only committed to their jobs, but they also take joy in improving the company and helping it grow, Douglas Homes employees Kim Leistiko and Angela Cooper said.
Leistiko, office manager at Douglas Homes, said Butler and Orendorf have encouraged her to further her education.
"[The company] inspires me on a daily basis to achieve my best, and I feel fortunate to work here," she said.
Cooper, the company’s marketing manager, said she appreciates the flexibility she is given and the understanding that she has a family and a life outside of work.
"[Orendorf and Butler] treat you as an adult and believe you will accomplish your goals without micromanaging," she said.
Orendorf and Butler encourage employees to engage in community service and outside activities that will help them stay well-rounded and happy.
"The position people have here is only a part of their lives," Orendorf said.
Ultimately, employee satisfaction leads to customer satisfaction, he said.
"If you have happy employees, they produce a better product, and it filters down to customers being happy," Leistiko said.
According to Professional Builder Magazine, a national home building industry publication, and NRS Corp., a customer satisfaction research firm, Douglas Homes customers are quite happy. Both organizations recognized Joseph Douglas Homes with the NRS Award in Homeowner Satisfaction.
"We determine what all is needed in our product upfront so that what the customer wants and what they expect and what we have stated price-wise all closely match," Butler said.
The company strives to make the building process as simple, straightforward and enjoyable as possible, Butler said.
"[Customers] can make all their selections here. They don’t have to go shopping around town," he said.
Instead of forcing customers to find a lot to buy for their home, Douglas Homes has a selection of lots from which people can choose. Douglas Homes also has a guaranteed pricing program that eliminates cost overruns, has no hidden costs and promises that the contract price is the price a customer pays.
"We are not selling a home, we are selling a lifestyle," Orendorf said.
June 25, 2004, Small Business Times, Milwaukee, WI
Village of Jackson plans to create its own fiber optic utility
Village of Jackson officials are planning to establish a fiber optic utility in hopes of attracting high tech businesses to their community.
The village has hired Brunetti DEC, a division of Denver-based Intercell International Corp., to provide a feasibility study and create a preliminary design for the utility. Village President Scott Mittelsteadt said the study is expected to be completed in the next two months.
The fiber optic utility would be capable of delivering voice and high-speed wireless Internet service to the village.
In addition, Jackson is creating a 50-acre high-tech business park on the west end of the village near County Highway P and U.S. Highway 45.
Aurora Health Care plans to build a clinic near the high-tech park. Medic Group, a biotechnology firm in Jackson, is thinking about moving into the business park, Mittelsteadt said. Officials with Medic Group could not be reached for comment.
Jackson officials began making plans to create a fiber optic utility because they were frustrated that no private sector firms were providing service to the small village. Some businesses already in the village, including Medic Group and Universal Strap, have asked village officials for the service.
Mittelsteadt said village officials were contacted by telecommunications companies after the village began making plans to create its own fiber optic utility.
"Now we’re hearing from SBC, and other companies are calling," he said. "I think they’re more afraid of having us do it ourselves."
Tom Johnson, president and chief executive officer of Universal Strap, said he would rather deal with local government officials than a large telecommunications company’s massive bureaucracy when problems with the fiber optic service arise.
"We’re trying to stay ahead of the curve," Mittelsteadt said. "We’ve got a couple of companies that have requested better service. We’re trying to make sure that we’re able to do that."
Plans for the fiber optic utility and the business park are part of a concerted effort by Jackson officials to attract more high-tech businesses to the village, Mittelsteadt said. The village also has an incubator building, located near the high tech business park, to nurture high-tech startup businesses. Village officials know they cannot rely on manufacturing jobs alone to sustain their community’s future economy, he said.
"Manufacturing will still be here, but not as dominant as it once was," Mittelsteadt said. "(The fiber optic utility) could be a real shot in the arm for us."
Some businesses that are thinking about relocating to Jackson say a fiber optic utility would make the community more attractive, Mittelsteadt said.
"It’s one more edge that we’ve got," he said. "I think it’s a good start. There’s not a lot of places that offer (fiber optic service)."
"I don’t think it would be the main driver (to attract business to the village), but it would play a role," Johnson said.
The utility would be intended to provide a service to its users, not to make a profit. Mittelsteadt said he is unsure if the cost of the service will be higher or lower than what private telecommunications firms would charge.
June 25, 2004, Small Business Times, Milwaukee, WI
IDL Solutions Inc.
Baly Ambegaoker, chief executive officer and president of Brookfield-based IDL Solutions, says her 11-year-old information technology solutions company, which also has a Washington, D.C. office, has averaged 40 percent growth each year for the past four years, even through some very challenging economic times.
"We’ve grown because we always do our homework and strive to achieve our goals," she said. "Much of our first five years of business were devoted to getting certifications, filling out forms and getting ready to do business with both the government and private sectors."
Homework for Ambegaoker and her company also involves taking the time to fully understand the business processes and IT infrastructure of their clients before beginning any project.
While attending the University of Wisconsin-Milwaukee, Ambegaoker and her husband and business partner, Tony Ambegaoker, decided to combine their respective computer engineering and architecture skills and form their own company.
After graduating, they initially did engineering and computer work, but with the growth of the Internet and computer technology, they shifted away from architecture and concentrated on computer technology.
They targeted the government sector for most of their business because of a perceived need for their IT services. Their desired ratio was 70 percent government sector clients and 30 percent private sector business.
"That’s where we are at and where we intend to stay," she said.
The four pillars of information technology that they specialize in are infrastructure management, enterprise application, interactive Web technology and application development.
"Our primary function is to help our clients greatly enhance their computer applications," she said.
IDL’s federal government clients include the Department of Housing and Urban Development, the Department of Health and Human Services, the FBI and the Department of Transportation.
State of Wisconsin clients include the Department of Corrections; and local government clients include the City of Brookfield.
According to Ambegaoker, their private sector clients include many medium-sized companies, including Integrated Billing Systems, Oak Creek; Communication Packaging Services, Waukesha; and Integrated Risk Solutions, Delafield.
"Our employees are extremely service-oriented and are key to our success. We’ve got a good team-and it takes a good team to accomplish goals. We’re very selective of who we hire," she said.
June 25, 2004, Small Business Times, Milwaukee, WI
Grandview Management Inc.
Grandview Management Inc. has come a long way since Angelo and Ellen Zilli began with a humble little Tastee Freeze franchise in Waukesha back in 1967.
The Zillis converted that Taste Freeze into a family restaurant called Ellen’s on Grandview a few years later, and that transformation set the stage for a growing company.
"That planted the seeds for a company that now employs more than 200 individuals and serves food to thousands of customers every year," said Jim Zilli, son of Angelo and Ellen, who is now the vice president of marketing for Waukesha-based Grandview Management. "It’s a source of pride for our entire family to be able to carry on our tradition."
That pride as a family business is just one of the reasons Grandview Management was selected by the Waukesha Area Chamber of Commerce as the "Top Business of the Year" from a group of 10 finalists for the annual award.
"My mother, Ellen, is president of our organization, and three generations of our family now work in the daily operations of the company," Jim Zilli said. "They help each division operate seamlessly and in concert with the vision established at the company’s inception. Together with our talented team of professionals, we’ve grown from one small family-style restaurant into a multi-tiered restaurant and hospitality corporation."
Grandview Management’s divisions are:
— Zilli’s Grandview Inn, a Waukesha landmark serving high-quality food in a relaxed but sophisticated atmosphere.
— Ellen’s Prestige Catering, a company that has grown to be one of the top five largest independently owned catering operations in the Midwest, employing experienced event planning professionals, elegant presentations and five-star cuisine;
— Coast – A Zilli Restaurant, their newest venture located on Milwaukee’s lakefront, combining all of the elements of quality and service the family has become known for.
Last year, Grandview Management reported revenues of almost $7 million. However, despite the company’s significant growth, Zilli said the Grandview Management maintains the same core of values of hard work, exceptional service and dedication to excellence that his father defined decades earlier.
"We keep a very strong focus on developing our staff," he said. "We invest in
continuing education for them. We’re very fortunate to have the staff we have. A lot of them are my heroes, giving us good ideas for customer service and pitching in for each other to get the job done right. And we emphasize customer retention. It’s really a discipline that helps grow our business and keeps us in touch with what’s going on."
June 25, 2004, Small Business Times, Milwaukee, WI
What Was the Outsourcing Outcry Really About?
What a difference a few months make. Five months ago, you could not go more than a day or so without an article in a newspaper or magazine about the outsourcing crisis.
Now you could almost forget there even is a China. Recent newspapers stories say manufacturers are having trouble finding the skilled labor they need.
I’m sure there are still manufacturers feeling the pressure of outsourcing, but recovery is showing its face in the manufacturing sector.
There are many business owners breathing a sigh of relief and confronting the good problem of how to ramp up. But they are not out of trouble yet. The same outsourcing freight train is continuing its relentless surge.
Why was the alarm raised in the first place if the business cycle would eventually come to the rescue? During the bottom of the downturn, workers feared the loss of their high paying manufacturing jobs and business owners saw the crumbling of their businesses’ value just at the point some were contemplating selling or retiring and turning the business over to their successors. The panic was caused by the perceived loss of value to labor and to business net worth.
The recovery will temporarily rescue many marginal businesses as a booming U.S. economy can easily absorb the increased supply from China as well as everything that can be made in the U.S. But there will still be slow erosion of American jobs to low-cost countries, and it will not be obvious until the next downturn.
The boom of the 1990s was historic for its length and strength, and so some economists are predicting the start of the next downturn as early as next year. Whenever the downturn hits, the crunch will be on again.
How can the small to medium-sized business protect its value for its owners, and how does it protect the value of labor? There is only one way to preserve company value. Jack Welch, the former chairman at GE, put it very well, saying you either grow or die.
Every company needs to develop a strategy for growth. If it doesn’t, it becomes a stationary target for competitors, both foreign and domestic.
The strategic plan needs to answer the following questions:
¥ How does my company use its expertise to grow its customer base?
¥ How does my company provide customers the product and service they will pay a premium for and not be tempted to go to low-cost solutions?
¥ How can my company level the business cycle (exports)?
¥ If there are pieces of my product that have high labor costs but low contribution to margin, maybe I outsource those parts, which will provide lower cost to my customer before he decides to look to China. If my product is essentially a commodity, is there a service or innovation that can be added to make my product critical to the success of the customer?
These and other questions need to be thought through in developing a growth strategy. While companies are doing lean, six sigma or other process and quality improvement programs, they need to develop and execute a strategy to grow the business.
Some other recent news items also were interesting.
Recent data indicates Asian auto companies continue to grow market share in the United States. Also, Japan’s balance of trade with China just went positive, and the China boom is lifting the whole Japanese economy.
Imagine Japan, a country with higher labor costs than the United States, has a positive trade balance with China. Of course, Japan was doing lean and quality programs while U.S. companies were mired in the methods of the 1950s. Now, the latest in Japan is time-based competition, which is the process of bringing innovation to your customers, eliminating bottlenecks and improving speed. Japanese companies have growth strategies. Many U.S. firms are just starting with the basics of lean, while the Japanese are going to the next level.
Priorities should be clear. Companies need to develop and execute strategies for growth, get fast and improve processes and quality. Otherwise, you will also eventually see your company give way to the competition, whether the competition is a low-cost country or another U.S. company.
Joe Geck is the principal of Accelerated Solutions in Waukesha. He can be reached at (262) 542-2960, or at joegeck@global-intercultural-communication.com.
June 25, 2004, Small Business Times, Milwaukee, WI
The franchisee
Expetec, a South Dakota-based company that provides information technology services for small and medium-sized businesses, has opened a Milwaukee-area franchise and plans to add over two dozen more in the metro area.
Russell Koerner is the owner/manager of the first Expetec franchise in the Milwaukee area, which he opened in the basement of his Muskego home in early April. In addition to Koerner, the Muskego franchise has three part-time employees: two technicians and an office manager, Koerner’s wife, Karen.
"We don’t have the customer base yet to make the employees full-time," Koerner said. "Hopefully in a few months, that will happen."
Koerner also is looking for space to lease for his business. Eventually, he wants to find a location in the Muskego/New Berlin/Brookfield area.
Expetec, formed in 1992 by Lonnie Helgerson, has about 200 franchises across the United States. Of those, 54 were added in the first five months of this year. The company has an ambitious plan to grow to 5,000 franchise locations in 10 years, Helgerson said.
"It sounds like a lofty number, but it doesn’t take a lot to get a location open," he said.
Start-up costs for a new Expetec franchise range from $62,000 to $83,000, which includes equipment costs and a $25,000 franchise fee.
For franchisees with fewer financial resources, Expetec offers a financing program that allows franchisees to open the business with a $5,000 down payment, if they meet credit requirements. Expetec then loans the franchisee money for the rest of the start-up costs.
About 30 people ask for information each day about starting an Expetec franchise, Helgerson said. Many of them are IT technicians who have had difficulty finding a job since the dot.com bust of the economy in the late 1990s and the increasing number of companies outsourcing IT jobs to India.
"The vast majority of them have been out of work for a year to a year and a half," Helgerson said. "They’re tired of it. They get some entrepreneurial jolt, and they want to do it on their own."
Koerner worked as a computer technician for 15 years with other companies before he decided to become an Expetec franchisee. At his last job, his work schedule had been reduced to three days a week.
"I didn’t want to wait until I got laid off," Koerner said.
Being a part of a growing national chain has several advantages, Koerner said. For example, the company helps him with marketing.
"That’s the one thing I’m probably the worst at," he said. "From a technology standpoint, I’m pretty good. I guess I’m just not the salesperson I would need to be starting a business without anybody."
Expetec also has national accounts, which provide a customer base for new franchisees.
"I’ve been serving a few of the Office Maxes in town," Koerner said.
The company’s franchise owners also share information to help each other out with handling the latest computer glitch or on-line pest. The franchisees post comments on the company’s Web page for each other to review.
"By being part of a national company, you have these other owners that run into issues that might affect you in Milwaukee," Koerner said. "Because there is so much information out there, it’s hard to keep track of it without information from other people. I could spend all day sitting at my computer and learning about the latest and greatest things in the industry, but I have to go out and get revenue."
Small local IT service providers are at a disadvantage without that shared knowledge pool, Koerner said.
"These companies become reactive to problems instead of proactive to problems," he said. "With Expetec, you can ask 100 or so other franchise owners, ‘What’s going on? I’m getting complaints that all of these computers are running slow. What can I do?’ It has really been beneficial to me."
Nationally, the company’s profits are growing. Expetec had $6 million in system-wide sales in 2002, resulting in $1.4 million in corporate revenue. In 2003, corporate revenue was about $3.8 million. System-wide sales information for 2003 is unavailable but was "significantly higher" than in 2002, Helgerson said.
Corporate revenue is expected to reach about $5 million this year, he said.
"We’ve invested some serious money into the company," Helgerson said. "Our franchisees, they’re out there making money. They’re doing well and they’re talking about it."
June 25, 2004, Small Business Times, Milwaukee, WI
CL&D Graphics Inc.
About 30 years ago, Brian Dowling Sr. dreamed of starting a printing company in Waukesha County. His vision came together in 1978 when he established a small company, with one small printing press, called Custom Label & Design.
Over the years, CL&D, as it is now called, grew steadily. The company has added pre-press and plate-making capabilities, has utilized a flexographic printing process, has moved into a larger facility (60,000 square feet) and has opened additional plants.
"This year, under the leadership of Mike Dowling, who took over when his father retired, we’re approaching sales of $45 million," said Chris Keller, human resources manager of CL&D. "And we’re proud of our accomplishments."
The company found its niche in packaging and print labels for consumer products.
"Our largest customer is SC. Johnson Co.," Keller said. "We print a lot of labels for their products, including Raid, Off, Glade and Windex. We also print labels for the products of Rustoleum, Con Agra and Mead Johnson corporations, among others."
Flexographic printing, she explained, is a newer application for consumer product labels that were previously printed by other methods. It utilizes a press machine printing up to 10 colors. In the press, there’s a plate, a rubberized matte type of material that holds the image going around a cylinder. Ink is applied when the machine is turning and the web runs through it. During the process, the plate flexes, hence the term flexographic.
"We can print with the same high standards and resolution of other methods and can do it more easily, more cost-effectively," Keller said.
Keller said service and skills set CL&D apart from its competition.
"We’re the best at what we do," she said. "We credit the vision of the owners and their ability to manage the business and determine where they can be successful. In fact, last year, we won the Best Managed Company award from the Tag and label Manufacturing Industry. We also credit our employees. This place is energized constantly. Every day, our people are excited and positive. There’s an urgency to do things right, to exceed customer expectation. We’re so proud of what we do."
June 25, 2004, Small Business Times, Milwaukee, WI
Milwaukee at a crossroads
Chris Crawley’s company, Think Innovative Media, is nine years old and expects to have revenues of $1 million to $2 million this year.
Even so, Crawley describes his business as, "fragile."
"I’m a first generation business owner," said Crawley, president and chief executive officer of Think Innovative Media. "I’m not trained in business. I’m on a shoestring budget."
Crawley, 44, has a communications degree from the University of Wisconsin-Milwaukee and is pursing a masters of business administration degree from Cardinal Stritch University to obtain the business training he hopes will make his company even more successful.
However, Crawley said it is harder for African-American business owners like himself to attract investors and establish relationships with banks. Additional capital would help Crawley grow his company.
"That’s been my biggest challenge since I’ve been in business – financing," he said. "I don’t have uncles and aunts with deep pockets. I’m not part of the good old boy network."
Think Innovative Media will be the first minority-owned business participating in The Milwaukee Collaborative, a concept created by former Robert W. Baird & Co. Inc. vice president Alton Bathrick.
The collaborative seeks to unite small, minority-owned businesses with larger companies joint ventures. The minority-owned business is the majority shareholder in the joint venture. The larger company acts as a mentor and investor, providing financial resources, additional capacity and business contacts to allow the minority-owned business to take part in larger projects and grow.
Crawley said he is considering a partnership in The Milwaukee Collaborative with one of eight companies his business already works with.
Think Innovative Media provides multimedia training, consulting and production services for sales, marketing, training and education applications. The company’s developers, designers, artists and programmers create computer-based communication products, including Web sites and CD-ROMs.
The company creates communication products that are visual, audible and interactive. That combination increases the rate of retention for the information Think Innovative Media’s customers are trying to relay, Crawley said.
"The thing I love most about our industry is it’s all about packaging information in a way people can absorb it better," he said.
Think Innovative Media recently moved from the Historic Third Ward to The Hide House, the former Greenebaum Tannery complex located at 2625 S. Greenley St. in the Bay View neighborhood and owned by Bathrick.
"Our space in the Third Ward was being remodeled, and our rent was going to go sky high," Crawley said.
Bathrick has been an ardent supporter of Think Innovative Media, Crawley said.
"Al Bathrick has become my best friend," he said. "He’s become a real brother to me. He’s helped me identify mechanisms to get to the next level. He’s started to get me access to the good old boy network. He’s been where I want to go. He’s brought a lot to me that I wouldn’t have been able to get. He’s helping me with connections. He’s been a cheerleader, a fan. He’s been a motivator."
The Milwaukee Collaborative seeks to grow businesses in the city’s economically depressed neighborhoods where many minorities struggle to find job opportunities nearby.
"To create true wealth in minority neighborhoods and minority communities, you’ve got to build minority businesses," Crawley said.
Milwaukee must eliminate the racial segregation that is plaguing the community, Crawley said, and businesses in the metro area must hire more minorities, or the city’s economy will lag behind others in the nation. Too many talented minorities are leaving Milwaukee for jobs in cities in the South and on the East Coast because they cannot find jobs here, he said. That brain drain must be stopped for the sake of the community’s future, he said.
"The city is at a crossroads," Crawley said. "The city can move into the new millennium as a diverse, tolerant community that attracts high-tech workers or not. The Milwaukee Collaborative, should the city embrace it, is one of the tools that will help put Milwaukee back on the map. This Milwaukee Collaborative has the legs to take us so far if we embrace it."
Despite Milwaukee’s dubious distinction as one of the most segregated cities in the nation, Crawley said he believes the local business community can help eliminate that stigma and transform the city into a magnet for diverse, young talent.
"If I didn’t think it could happen, I might as well pack up and leave," he said. "For minority businesses, we don’t have a chance unless this city changes to embrace diversity."
June 25, 2004, Small Business Times, Milwaukee, WI
Building projects for 6/25/04
MSI General Corporation is designing and constructing a new development for General Capital/LaMacchia Shores, LLC, on the southwest corner of Port Washington and Greentree Roads in Glendale. The Glendale Market will consist of two separate retail buildings with a total of 23,700 square feet and a 50,000 square foot Pick N’ Save. The shopping center will incorporate “Prairie-style†influences, including the use of natural materials and long horizontal forms. The project also includes outdoor patio and plaza spaces for café dining and public use. Tenants will enjoy good visibility from both Port Washington and Green Tree Roads. MSI General Corporation is located in Oconomowoc and is a leader in the design and construction of commercial educational, industrial, municipal, religious and retail facilities in southeastern Wisconsin. MSI General Corporation also has been selected by Hartford Fire and Rescue to remodel and add an approximately 4,500 square foot addition to their existing fire station. MSI is a design/build general contractor located in Oconomowoc and serves as a leader to southeastern Wisconsin in the design and construction of commercial, educational, industrial, municipal, religious and retail facilities.
The Wyndham Garden Hotel in Brookfield has completed a $2.2 million renovation of its guestrooms and public spaces. All guestrooms have been updated to include new carpeting, light fixtures, closet doors, and artwork. They have also improved guest bathrooms and upgraded guestroom amenities. In the hotel’s public spaces, new furnishings, draperies, and carpeting give the hotel’s interior a new look. The Wyndham Garden Hotel is managed by Dallas-based Aimbridge Hospitality, which also manages properties in North Carolina, Illinois, and Texas. The hotel is owned, managed, and franchised by Wyndham International, Inc., which has properties in the U.S., the Caribbean, Canada, Mexico, and the United Kingdom.
Briohn Building Corporation in Brookfield is working on a number of projects. First, they have been contracted to design and construct a 6,000 square foot tenant improvement remodel and expansion of existing office and computer repair areas at 12100 West Wirth Street, Wauwatosa, for Walgreen’s DTR. Briohn has also been contracted to construct a new 30,000 square foot building for Chef Craft in Pewaukee Woods North on Wood Gate Court in Pewaukee. In addition to Walgreens and Chef Craft, Briohn continues to work with Always 99 on a renovation project that will include a new produce area at 3333 South 27th Street, Milwaukee and another project which involves building a new Always 99 store in Westgate Mall at 4901 Washington Avenue, Racine. Cottonwood IV, LLC has contracted Briohn to design and construct a 58,00 square foot multi-tenant building. The project, located at 1100 Cottonwood Drive in Hartland is underway and will be completed in early fall.
Voss Jorgensen Schueler Co., Inc. in Waukesha, is providing construction management services for additions and renovations at New Berlin West Middle and High School, with project completion slated for August 2005. The project includes an extensive addition including ten classrooms with updates totaling $11,500,000. In addition to the schools, Voss Jorgensen Schueler is currently providing construction management services for renovations to the Washington County Courthouse. The project consists of renovating the HVAC system, retrofitting nine elevators, updating the electrical system and in-flling an old coal vault that has been vacant for numerous years. The project has a completion date of March 2005 and total cost of $7.8 million. Voss Jorgensen Schueler is also providing their services for River Renaissance Luxury Condominiums. Currently, the space is being used as a parking lot at 100 W. Water Street in Milwaukee but, shortly will be built into 75 luxury condominiums and 20,000 square feet of retail space with a high-end restaurant and shops. Residents of the condominiums will have a large amount of amenities including fireplaces, private terraces, granite countertops, and rich hardwood floors. Furthermore, each resident will be able to access household electronics including lights, entertainment, and temperature through the telephone or internet. This project is scheduled to begin on September 1, 2004 with an estimated completion date of November 2005.
National Survey & Engineering is providing sitework engineering and surveying to the Historic Third Ward Association for the Milwaukee Public Market at the northeast corner of Water Street and St. Paul in downtown Milwaukee. The $10 million market project will include a glass and steel building that will provide space for about two dozen area farmers and local vendors selling fresh fruit, vegetables, fish, meat, cheese, flowers, and other items. The architect is Kubalo Washatko, Cedarburg. The project recently received a $2.5 million economic development administration grant from the U.S. Department of Commerce, allowing the market to break ground this June. It is expected to open in June 2005 and is anticipated as an important part of downtown Milwaukee’s revitalization.
Magill Construction Co. has a number of new projects. First Citizens Bank in Whitewater is adding a three-story addition, measuring 25,504 square feet, to their existing bank. The project is part of an effort to match the bank to other historical buildings in the area. Magill is working with Excel Engineering, Inc. on it as a Design-Build project for the bank. Magill was also hired by Guardian Container, owned by the Royal Group out of Cicero, Illinois to add a 3,000 square foot office addition and renovation project. The project is located in Elkhorn and is expected to be completed by the end of June. Better By Design in Delevan has hired Magill for a Design-Build project, with architectural services being provided by Dimension IV-Madison. The new building is an 11,500 square foot office and manufacturing building, and is scheduled to begin sometime in June, with plans for completion by the end of the year.
Collateral Mortgage Capital, LLC, recently closed a multimillion dollar, multifamily deal to fund The Ridges of Geneva East, a 120-unit development in lake Geneva. The transaction was funded through Archon Financial and collateral closed the first mortgage financing of $5,350,000 based on a ten-year term, amortized over 30 years. Amenities to the property include a clubhouse, pool and fitness center. Collateral is one of the nation’s leading commercial real estate lending/mortgage banking firms and has a servicing portfolio of over $5.3 billion. Their broad investor base includes leading life insurance companies, conduits, pension fund advisors and commercial banks. Currently, Collateral has 14 offices, but is headquartered in Birmingham, Alabama and provides financing for all types of commercial and multifamily real estate on a national basis.
Bielinski Homes announces pre-construction sales in the Heritage Hills single-family neighborhood of Waukesha, featuring 102 homesites. Bielinski has also purchased open space adjacent to the neighborhood in hopes of expanding the Retzer Nature Center of Waukesha. The southern portion of the nature center is a wetland complex that Bielinksi will donate to Waukesha County. “The wetlands would not only expand and enhance Retzer’s natural lands, but perhaps eventually this could allow us to connect the Heritage Hills neighborhood to the large trail system that runs throughout the nature center,†said Bob Brownwell, Bielinski Homes CEO. Models can be toured at 1828 Deer Path in Waukesha. Bielinski Homes is the state’s largest homebuilder and offers homes and condominiums in nine southeastern Wisconsin counties.
Total Team Construction LLC completed the interior build-out of Café Brücke and the café officially opened for business on June 9. Café Brücke is located at 2101 N. Prospect Avenue in Milwaukee. The German-named bar and restaurant is owned by Jerry Patzwald and Christine Lorch. Their world travel was the inspiration for a “simply prepared menu†of appetizers, sandwiches, salads, and desserts. Patzwald plans to use Belgian techniques for serving his two draft beers, along with offering fine coffees and espressos. Dinner service will also be available. Total Team Construction has also been awarded the contract to provide construction management services for building and site work at AJ Wright-Midtown Center at 5730 W. Capitol Drive.
Building Service, Inc., Milwaukee, has been selected by Kenosha Beef, Kenosha, to provide office furniture and installation services for a new facility.
Kohler Credit Union has chosen La Macchia Group, LLC as the design/builder for a new branch in Saukville.
DBI Inc. of Pewaukee will design and build a 48,000 square-foot manufacturing and distribution facility in the Wingate Creek Business Center on Highway 33 in West Bend for Americraft Inc. The existing Americraft distribution center, located two blocks from the Regal plant, is no longer large enough. A new line of cookware and numerous new stainless steel items will be manufactured and distributed from the new facility.