This month, I’m writing about the new overtime rules and how they might apply to your company.
My special appreciation to Toni Leiker, senior compensation consultant at TEC’s accounting firm, Clifton Gunderson, LLP, in Milwaukee, for attesting to the accuracy of my comments and those of TEC speaker Louis Licata, CEO of Licata & Associates in Independence, Ohio, from whom they were taken.
By the way, these new rules will go into effect Aug. 23. Here are some things you might want to consider:
1. The pay level is increasing. The old rules qualified any employee making less than $155 a week for overtime pay, even if the employee was declared exempt. The new rules raise this level considerably to $455 weekly or $23,660 annually.
For instance, under the old rules, if you were a retail store manager hired at $400 a week, making $10 an hour for a 40-hour work week, you would be exempt from overtime pay and could work more than 40 hours without additional pay. Not so under the new rules.
2. A "highly compensated" rule is in place. Almost all white-collar employees earning more than $100,000 a year are not eligible for overtime pay. This highly compensated employee must primarily perform office or non-manual type work. In addition, on a regular basis, he or she must perform the duties of an exempt executive, administrative or professional employee.
3. Some employees are automatically eligible for overtime regardless of rank or pay level. They include employees described as "first responders." Examples are police officers, firefighters, paramedics, emergency medical technicians and licensed practical nurses.
4. Exemptions from overtime due to work type. These new guidelines fall into three groups:
* Executive jobs. These jobs have three requirements. An employee must: 1) Manage the business, department, or division; 2) Be responsible for the work of two or more employees; and 3) Have the authority to hire or fire employees.
* Administrative jobs. The employee’s primary responsibility involves office or non-manual work directly related to the management or general operations of the employer. Discretion and independent judgment by the employee can be exercised in significant matters.
* Professional jobs. This is known as the "learned professional" exemption. The employee must perform work that requires advanced knowledge and consistent discretion and judgment. This also includes the "creative professional" whose job must involve invention, imagination, originality, or talent in a field of artistic or creative endeavor.
Are there employees who are not affected by the changes and continue to work with overtime exemptions? You bet. Outside salespeople who regularly spend time away from the workplace, and computer specialists such as systems analysts, systems designers, computer programmers, software developers and software engineers. In the latter case, they must be paid a base salary of $455 a week or higher, or an hourly rate of at least $27.63.
What happens if we choose to ignore these new rules?
We don’t want to go down that street. Look at these numbers. In 2003, the U.S. Department of Labor represented 314,660 employees involved in overtime disputes. Non-compliance employer costs exceeded $182 million, a 27.4 percent increase over 2002.
What about the statute of limitations? It’s two years on unpaid overtime cases. Incredibly, the amount owed is doubled unless an employer demonstrates that a mechanism is in place to track the hours worked. Usually, that mechanism is timeclocks. However, employers increasingly are removing timeclocks as one way to empower employees.
If the employer is found to have willfully violated the law, a recurring problem in the transitory migratory worker environment, the statute extends to three years with double damages. That can amount to six years of back overtime pay!
Here’s an ugly example. Assume an average base wage of $15 an hour and $22.50 in overtime. Assume the employees worked 10 hours overtime weekly for 50 weeks a year. That translates to 500 hours a year of overtime pay at $22.50 an hour, or $11,250 a year. A six-year penalty (three years plus double damages) now equals $67,500. With 100 employees involved, that’s approaching $7 million before legal expenses!
Incidentally, these new overtime rules and regulations are explained in more than 500 pages of Department of Labor compliance guidelines.
Finally, one additional point pertinent to Wisconsin Child Labor Regulations. Minors 16 and 17 years old get overtime pay if they work more than 10 hours a day or 40 hours a week, whichever is greater. Contact the Wisconsin Equal Rights Division/Labor Standards Bureau for additional guidance here.
There are, of course, exceptions to every rule, and especially with new rules, there are always exceptions and new interpretations, so that bureaucrats can write new rules for all of us to comply with. In TEC, our members are telling us that when in doubt, "document." Make sure you have hard copy documentation to cover any gray areas in the application of overtime rules in your business.
Harry S. Dennis III is the president of TEC (The Executive Committee) in Wisconsin and Michigan. TEC is a professional development group for CEOs, presidents and business owners. He can be reached at (262) 821-3340.

June 11, 2004 Small Business Times, Milwaukee, WI

Corey Uretz and Robert Edmundson are expanding the presence of the Dunkin Donuts chain in metropolitan Milwaukee after years of decline.
The doughnut business once had about 20 locations in southeastern Wisconsin, but that count has dwindled to less than five.
Uretz and Edmundson intend to reverse that decline by opening new Dunkin Donuts locations in the region. However, this time, the Dunkin Donuts restaurants will be combined with Baskin Robbins and California sub franchise Togo’s Great Sandwiches.
Triple Play Hospitality LLC, plans to open 30 to 40 combined Dunkin Donuts/Togo’s/Baskin Robbins restaurants in southern Wisconsin over the next five years.
"We are reintroducing the brand of Dunkin Donuts to Milwaukee," said Uretz, president and chief executive officer of Triple Play Hospitality. "We are bringing it back in a new, exciting and fresh way, both with the store appearance, the offerings that Baskin Robbins and Togo’s have and by adding a drive-thru."
The combined restaurants are referred to as "All Day Cafes," open 24 hours, serving products from all three of the brand names at all times and from all registers.
Customers can order a sandwich, coffee and ice cream – all at the same time at the same counter.
Triple Play Hospitality has already penetrated the market with four locations: 4950 S. 27th St., Milwaukee; 242 E. Capitol Dr., Milwaukee; 11401 W. Silver Spring Drive, Milwaukee; and 7180 W. 75th St., Kenosha. Uretz said two new locations, a Dunkin Donuts/Baskin Robbins at 2015 W. Ryan Road, Oak Creek, and a Dunkin Donuts/Baskin Robbins/Togo’s at 8111 Brown Deer Road, Milwaukee, will open in the next two months, according to Uretz.
Edmundson, chief operating officer for Triple Play Hospitality, said putting the three restaurants together was economically efficient, and the company strives to maximize convenience for the customer.
"We are focusing on order accuracy and speed of service. The brands are complementary, so we can offer one-stop shopping," Edmundson said. "We look to make things as easy as we can for our guests."
Triple Play Hospitality is a franchisee of Allied Domecq Quick Service Restaurants (ADSQR), the Boston-based American affiliate of the British company, Allied Domecq PLC.
Allied Domecq PLC has acquired the Dunkin Donuts, Baskin Robbins and Togo’s franchises over the course of the last 20 years.
"Baskin Robbins really cannot stand by itself anymore because it is too seasonal of a product," Edmundson said. "When it is combined with Dunkin Donuts, which has the highest traffic in the morning, and Togo’s which is popular throughout the day, we are able to serve anyone at anytime."
Most of the Triple Play restaurants will be 23,000 to 24,000 square feet, according to Uretz, and will seat 25 to 40 customers.
Large wooden chairs have replaced the traditional plastic pink and orange chairs at the old Dunkin Donuts and the small ice cream parlor chairs formerly found at Baskin Robbins.
Triple Play Hospitality’s franchisee region consists of southern Wisconsin, from Kenosha to Mequon and west through Madison.
Uretz said Triple Play is very particular in selecting locations for the All Day Cafes because the company wants the stores to have enough traffic to be successful.
Uretz and Edmundson said three requirements must be met before they even consider a site. The traffic count has to be at least 20,000 to 25,000 cars per day, particularly focusing on morning traffic. For Dunkin Donuts to be a convenient stop for people heading to work, the site must be on the "morning side" of the street’s traffic flow.
Togo’s mainly has customers during the lunch hour in the workweek. Uretz said market research indicated that 50 to 75 percent of his customers are white-collar workers coming in for lunch.
According to Uretz, Baskin Robbins is most successful in a residential area, with a population of 20,000 to 30,000 within a 3.5- to 5-mile radius.
"We plan to open between six and 10 stores per year for the next five years, including four or five stores in Madison," Uretz said. "This is our focus. We are 110 percent committed to this market, and once we have all of the pieces in, we will stop developing. I think a lot of businesses make the mistake of growth for growth’s sake. We want to develop a long-term bond with this market, because we are here to stay."

June 11, 2004 Small Business Times, Milwaukee, WI

Two years ago, Steven C. Stewart sold his company, Real Cap LLC, so he could focus more on his passion of real estate development and less on administrative aspects of owning a business.
Real Cap had four employees, and Stewart no longer wanted to handle personnel-related tasks. So, he formed a new company, Investors Equity, LLC. Stewart is the company’s only employee.
Today, Stewart’s new firm is involved in several mixed-use real estate projects in the Milwaukee area, and he is working on plans for another: a 35-acre mixed use development on the new, four-lane, Highway 120 bypass in Lake Geneva.
The Lake Geneva property hugs the east side of the new Highway 120 between Townline Road and Bloomfield Road. The site is less than two blocks from Lake Geneva Middle School and Badger High School.
Stewart’s development, still in the early planning stages, would include senior housing, townhouses, condominiums, retail space, office space and possibly a boutique hotel. The offices will be built above the retail spaces.
Preliminary plans include a town center area, modeled after central Lake Forest, Ill., with retailers on the ground floor and offices or residential units in the upper levels. The number of units and the amount of space devoted for each use is yet to be determined, Stewart said.
For the project, Stewart’s firm is partnering with Bluemound Development LLC, the development arm of Voss Jorgensen & Schueler Co., Inc. of Brookfield. The architect for the project is Zimmerman Design Group of Milwaukee.
"I’m so excited about it, I can’t even tell you," Stewart said. "Walworth County and Lake Geneva is going to be the highest growth area in the state of Wisconsin. I think the greatest amount of that growth will come from Illinois, without question."
The Geneva Lake Development Corp. acquired the property over the last five years, using profits from the sale of land in the city’s business park. The corporation hired PDI Inc. of Milwaukee to develop a concept plan for the property.
PDI reviewed six development proposals for the site and selected the proposal by Investors Equity and Voss Jorgensen & Schueler.
The project still must receive approval from the Lake Geneva Common Council before it can proceed.
Stewart said the Lake Geneva development is intended to serve full-time city residents and travelers passing through.
"It’s not set up to compete with downtown" businesses, which are bolstered by tourists, Stewart said.
Construction on the Lake Geneva project could begin next year. It would be the first development on the new bypass road, which was completed last year to enable motorists to travel from the south end of Lake Geneva to Highway 12 without driving through the middle of the city.
The new road also provides access to large amounts of undeveloped real estate.
Lake Geneva Mayor Sheldon Shepstone said the city has already heard from other developers who want to build on property along the new road. One developer proposed a 700-acre development with a golf course and senior citizen housing, but aldermen shot it down.
City offficials are expecting to continue to receive more development proposals on the new Highway 120, Shepstone said.
"The property that is within the city limits is an ideal spot for commercial development with residential behind that," he said. "We are working on a south side development program for anything south of Bloomfield Road."
The Lake Geneva project is the type of mixed-use development Stewart enjoys. He also is a partner in the New Berlin City Center development. Stewart is handling development of the 70,000 square feet of retail space, a 30,000 square-foot medical clinic and 20,000 square feet of office space for the mixed-use development at National Avenue and Coffee Road. The New Berlin project also will include a library and residential development.
Construction of the retail development and the library already is under way.
Stewart is partnering with Voss Jorgensen for the New Berlin clinic development, and construction is due to begin this fall.
"I’m a big proponent of mixed developments," Stewart said. "They combine the elements of residential, retail and office uses. They bring about all of the elements of living in one place. They provide a neighborhood. To me, it’s a better quality of life. We’ve become a jump-in-your-car-and-drive society. So many people don’t have a community feeling."
Stewart also is a partner with Schulz Development of New Berlin in the $24 million River Renaissance condominium development at the corner of Water Street and Erie Street on the Milwaukee River in the Historic Third Ward.
A parking lot is on the site now. The proposed seven-story building will have 17,500 square-feet of first floor retail space and 72 condos. Milwaukee’s Riverwalk will be extended in front of the property, and some boat slips will also be installed.
"I think this is the finest site remaining in the Third Ward," Stewart said. "I’m bullish on the Third Ward and downtown."
Stewart also is working with Voss Jorgensen to redevelop the former Parkland Mall property in Muskego. The plans include more than 100 condominiums and 70,000 square feet of retail space.
Those plans are still being negotiated with Muskego’s city officials, Stewart said. The developers are seeking assistance from tax incremental financing district funding.
Stewart is partnering with Voss Jorgensen on the Lake Geneva, New Berlin and Muskego projects.
"I think they do a good job of building," he said. "They are a large firm, well respected. I think it just adds credibility (to the projects)."
In addition, Stewart is working with A.N. Ansay and Associates of Port Washington on a proposed $24 million, 150 unit condominium development in Saukville.
Stewart said he prefers running a one-person company and forming partnerships with other firms to handle aspects of developments such as construction, engineering, architecture, legal services and accounting.
Stewart said the financial backing for his projects comes from a combination of investors, his personal investments and funding from his partners.
"My business is outsourcing and partnering," Stewart said. "That’s what I do. I work with investors and partner and build development teams with other firms. When you do that and (communities) look at the quality of the entire team I’ve built for that project, that gives us the strength of a large corporation. It gives me the freedom to be selective in the projects that I choose. You don’t have to be big to be a great developer."

June 11, 2004 Small Business Times, Milwaukee, WI

We just returned from the International Strategic Account Management Conference in Orlando, where we conducted a session on transitioning your sales force to a mutual value orientation.
We opened by posing two seemingly unrelated questions to the group of executives in our session. Now we’ll pose them to you (and explain their connection later):
1. How would your salespeople answer the following question? "I send a ‘thank you’ note after a customer/prospect meeting:"
a. Almost always
b. Frequently, but sometimes I just don’t get to it even though I know it’s important
c. Almost never, but if I had more time I would
d. Almost never, because I don’t think there’s any reason to send them
2. Over the last year, how many sales opportunities did your company lose? Of those:
a. How many were real opportunities your company could have won but lost because it didn’t pursue them hard enough
b. How many were opportunities your company pursued that, in retrospect, were "unwinnable" in the first place.
Now, assume you had won the winnable ones and not spent time on the unwinnable ones. Do a little rough math to put some revenue and margin numbers around those answers.
It’s about mindset, not qualification
Question two gets to the reality that salespeople spend too much time on opportunities that they’re probably going to win anyhow without involvement from the salesperson and too much time on opportunities they’re going to lose no matter what the salesperson does. Therefore, the troubling reality is that they are not spending enough time on opportunities where the salesperson’s involvement can be the deciding factor in the deal.
"It’s a qualification issue," you might argue. Not exactly. There’s a bigger issue at play here, one that is far more subtle than simply applying the right qualification criteria. It’s mindset!
Specifically, it’s the "customer advocate" mindset, and it’s part of the DNA of most salespeople. But it’s DNA that we believe should be re-coded. In fact, it’s because of the customer advocate mindset that effective qualification is such a rarity because it inhibits salespeople from asking hard questions. "Don’t want to upset the customer, you know."
Master/servant or business peer relationship: You choose
A customer advocate mindset is a way of thinking that is characterized by a sense of subservience to the customer. It’s usually disguised by euphemisms like "responsive" or "customer focused." But the unfortunate truth is that the customer advocate mindset results in a master/servant relationship with customers, not the business peer relationship that we would all rather have.
Here’s an everyday illustration of the consequences of the customer advocate mindset. Dennis sells I/T and networking hardware and related services. He received a call from an I/T director for a big company in town who said, "We’re going to be doubling the size of our network, so could you help us put together some preliminary designs and cost estimates?"
A month-and about 10 man-days of tech support work-later, Dennis meets with the I/T guy to go over his company’s recommendations. Smelling a sale in the works, he confidently pours over the plans and cost estimates with Mr. I/T. Then the waiting begins.
To fast forward to the end of the story, Dennis had wasted his and his tech’s time working on this one. Turns out, the company was never going to expand the network in the first place-at least not at this location. Next month, we’ll tell you what was really going down and walk you through the customer advocate dialogue Dennis had with the I/T person, as well as the mutual value one he should have had with him that would have prevented this costly exercise.
Wow, thanks for the favor!
Let’s turn to the first question – the deceptively innocent thank you note. Over 90 percent of salespeople choose a, b or c-which are really all the same answer because they reflect the belief that salespeople should send thank you notes. Why do we send "thank you" notes in general? Because someone did something nice for us or gave us a gift, right? When customers meet with us, are they "doing something nice" for us? Are they "giving us a gift?" Then why do we feel the need to thank them for the meeting? Salespeople who are guided by this mindset-like Dennis-are, by their nature, reticent about asking frank and direct questions of customers, and the results-ten wasted man-days in Dennis’ case-testify to that reticence.
A customer/supplier meeting is a mutually beneficial interaction. Nobody is doing anyone any favors. Both parties derive value. The feeling that prompts salespeople to think they should send thank you notes is the customer advocate mindset in action. It’s this mindset that is at the heart of why salespeople spend too much time on the wrong opportunities.
Here’s the first step-and it’s an easy one-toward making the migration to a mutual value mindset in your sales organization. Encourage your salespeople to stop saying things like "thank you for meeting with me" and "I’ll let you get back to work" in customer meetings.
Those phrases, especially the "thank you" one, seem to roll off salespeople’s tongues without their even being conscious of it. Have them replace the phrase with a mutual value one such as, "I’ve been looking forward to our meeting. I’m glad we were able to make our calendars connect." Far less subservient, wouldn’t you agree?
Jerry Stapleton and Nancy McKeon are with Stapleton Resources LLC, a Waukesha-based sales force effectiveness practice. They can be reached at 262-524-8099 or on the Web at www.stapletonresources.com.

June 11, 2004 Small Business Times, Milwaukee, WI

J.P. Cullen & Sons, Inc.
Company address: 330 E. Delavan Drive, Janesville, WI 53546; and 13040 W. Lisbon Road, Suite 900, Brookfield, WI 53005
Company Web site: www.jpcullen.com
Industry: Construction
Number of employees: 500
Company’s annual revenues: $150 million
Education: Bachelor of business administration from the University of South Dakota; graduate of the Owners and Presidents Management Course at Harvard Business School
Family: Wife, Kathleen; and children Patrick, Danny, Sean and Jillian
What was the smartest thing your company did in the past year?
"Our company has reinforced our focus on maintaining long-term, rewarding relationships with our clients. In our fluctuating marketplace, our clients are our most valuable resource for discovering industry trends and developing strategies to meet their future needs based on those trends."
What’s new at your company?
"Our production engineering staff has made a major impact regarding our efficiencies on the job site. We take a construction activity, such as erecting precast panels, and break that activity down into measurable components, which allows our team (including the folks actually putting the work in place) to evaluate each activity and determine areas of waste that can be eliminated. The end result is higher quality at a lower cost to our clients."
Do you plan to hire any additional staff or make any significant capital investments in your company in the next year?
"Staffing in the construction industry is always a major challenge. Our ability to grow and serve our clients is in direct correlation to our ability to provide the right team for the project, from upper management to our field forces. We are always looking for quality people."
What will be your company’s main challenges in the next year?
"I just hit on one of the major ones, which is staffing. A continuing major challenge is differentiating ourselves from the quality competition we face in our marketplace."
What is the hottest trend in construction?
"The debate on the advantages and disadvantages of the different construction delivery systems continues to rage on among our competitors and clients. No matter what the construction delivery system, the bottom line will always be the benefits we provide to our clients. By staying focused on the benefits, we have continued to grow throughout the ups and downs in our industry."

Do you have a business mantra?
"Never do anything to sacrifice your integrity. As a family-owned firm, our name is on every piece of equipment, every hardhat and every truck. Without our integrity, that name means nothing."
From a business standpoint, who do you look up to?
"My father, J.P., continues to be a major influence on my decision making. As the fourth generation of family ownership in our firm, I draw great inspiration from those who have led before me and created a company that was and is a major force in our industry."
What was the best advice you ever received?
"Always maintain a good balance in your professional and personal life. I start each day by identifying ways to maintain that balance. If I do so, everyday, regardless of the result, is a successful one."
What do you do like to do in your free time?
"What free time? I love to spend time with my family – traveling, boating and cycling."
June 11, 2004 Small Business Times, Milwaukee, WI

Question: I am trying to convince my business partners to develop a customer reward/loyalty program. Some of them think that rewarding customers is just a fad and are not very responsive to the idea. Do you have any information about the success of these programs?

Answer: While the influx of coupons, special sales that reward patronage and other "frequent buyer" programs may be at an all time high, the concept is certainly not new. In fact, one of the oldest examples is a baker’s dozen, started hundreds of years ago.
Those that offer such programs report varied results, depending on the measurement systems they have in place. Most successful programs consider employee retention integral to customer retention. To determine whether or not loyalty programs are successful, you need to consider the cost of customer and employee defection.
Here are a couple of statistics that may surprise you: On average, U.S. companies now lose half their customers in five years, half their employees in four years, and half their investors in less than one year. It costs, on average, five times as much to attract a new customer as it does to keep an old customer. No wonder so many companies place value on loyalty programs.
If you decide to implement such a program, consider the following guidelines. A good loyalty program has four key elements, and they all have to be in place if the program is to provide maximum return on investment. They are: a communication plan, rewards and benefits structure, customer behavior tracking and measurement.
Let’s review each.

1. A communication plan – That means a plan that not only communicates your program to customers but also communicates it internally. Every employee needs to be involved in the program, understand the program, and be able to explain it to customers. Make sure that employees understand why the program is important to customer loyalty and ultimately what that means to them as stakeholders in your company. Most loyalty programs breakdown when employees don’t understand why the program exists or why it is important.

2. Rewards and benefits structure – Most companies that offer loyalty marketing have some kind of reward system in place. Do a certain amount of repeat business with those companies, and you get a reward. Do more business, and you get a greater reward. But most programs stop there. Why not reward customers for bringing you more customers? What is the behavior you want from customers? From employees? Define it and reward it.

3. Customer behavior tracking – This is the toughest part of the program, gathering the demographics. Who among your customers uses your loyalty marketing program? Has your program modified the purchasing behavior of your customers? Can you use the customer loyalty data to do customer modeling?
Customer modeling is a process of defining the ideal customer, then putting processes in place to find such customers. Here are the types of customers that loyalty based companies look for:
First, customers who are inherently predictable and loyal, no matter who they are doing business with. They prefer stable, long-term relationships.
Second, customers who are more profitable than others. They spend more, pay promptly, decide to buy quickly and require less service.
And, finally, customers who find your products/services more valuable than your competitors’ – for whatever reason. Your particular strengths meet certain customer’s needs best.

4. Measurement – Does the program have a significant return on investment? Is the program justified? Does the program need modification? How do the successful companies, I’ll call them loyalty leaders, do it?
First, they avoid what I call "snapshot" accounting. Anyone can improve a business financial picture for a short time period, just cut. Cut the staff, cut inventory, cut everything. But long-term, that may severely hurt the business.
Loyalty leaders look at the human asset for the long term. The business pictures they study are time exposures. They see people as assets rather than expenses, and they expect those assets to pay returns over a period of many years.
Loyalty leaders choose human assets carefully and then find ways to extend their productive lifetimes and increase their value. In fact, loyalty leaders design all their business systems to make their human inventories permanent.
They view human asset defections as unacceptable value-destroying failures, and they work constantly to eradicate them.
By improving value and reducing human asset defections, loyalty leaders have lowered their inventory losses to a minimum amount, and their resulting performance, by comparison to competitors, is astounding.
By decreasing defection rates in all three groups; customers, employees and investors, they achieve tremendous growth in profits and cash generation.
They have discovered that human capitol, unlike most other assets, does not depreciate over time. Rather, like good wine, it actually improves with age.

Marcia Gauger is the president of Impact Sales, a performance improvement and training company with offices in Wisconsin, Florida and Arkansas. You can contact her at 262-642-9610 or marciag@makinganimpact.com. Her column appears in every other issue of SBT.

Jan. 9, 2004 Small Business Times, Milwaukee