Bottom Line Business Insights

George O'Leary, Scott Thompson, and the Absence of Candor

Eliot Wagonheim — Tue, 15 May 2012 10:18:26 -0400

"Who doesn’t want a shortcut to greatness?”

This was the question posed by President Jackson Evans (Jeff Bridges) in The Contender. It could easily have been posed to Scott Thompson or George O’Leary.

Don’t remember George O’Leary? He held the title of Head Football Coach at Notre Dame for five days before being fired for lying about his background. O’Leary claimed to have earned a master’s degree in education and to have played college football for three years. Neither claim was true. In fact, he never earned a degree from New York University, let alone a master’s as claimed, and he never played a down for his alma mater.

Of course, by the time O’Leary had been hired by Notre Dame, he had other, real accomplishments in his chosen profession. But the lie, once told, grew legs and followed. Time, perhaps, bestowed upon it the ring of truth even to O’Leary’s ears, until the falsehood brought him down.

I hear echoes of George O’Leary in the headlines arising out of the Yahoo! shareholder dispute. Now former Yahoo CEO Scott Thompson was fired last week after only four months on the job after it was revealed that he padded his resume by embellishing his college credentials. Unlike George O’Leary, Scott Thompson did, indeed earn his degree. Unfortunately, his degree was awarded for accounting and not, as Thompson had claimed in his online biography and in corporate SEC filings for “accounting and computer science.”

Certainly, all dramatic downfalls contain cautionary tales. But O’Leary and Thompson are not in the same category as the indictment of John Edwards or the drunken rantings of Mel Gibson. O’Leary and Thompson shine a light on an issue all too common for business owners: what do you do with an employee who lied about his or her qualifications?

The answer, unsurprisingly, is “it depends.” Critical factors include:

The significance of the fabrication.
Whether the employee had already been working with the organization and proven his or her value by the time the discrepancy was uncovered.
The employee’s value to the company.
The existence of an established company policy.
Whether or not the employee is under contract.

Each circumstance is unique, and business owners must make their decisions on a case-by-case basis. Sure, you can establish a zero tolerance policy, but it has always been my experience that companies should avoid knee-jerk reaction policies intended to remove discretion. “Zero tolerance” sounds great in company literature but, by removing the human element, fails as an answer to an inevitably complicated question.

Instead, I strongly recommend that companies expressly reserve for management the right to use such fabrications as a basis to terminate immediately and for cause, preserving the ability to choose from a range of disciplinary options. Company policy in this regard should appear without fail in personnel handbooks, contracts of employment, applications for employment (hard copy and electronic), and applicable HR memos.

There is no doubt that fabrication or its kinder sister, embellishment, is a serious matter. Even the slightest fallacy can undermine a relationship and speak volumes about an employee’s character. In George O’Leary’s case, Notre Dame determined, and I think rightfully so, that O’Leary was not the kind of man it wanted as the face of its football program. Yahoo! may have an even bigger problem in that Thompson’s fabrication appeared on documents filed with the SEC. In both cases, the correct decisions were made to separate the offenders from the institutions to which they brought dishonor or, at the very least embarrassment.

For those other businesses which do not routinely occupy space on the front page of the business or sports sections, the answers may be less clear, but in no way are they less important.

Let's discuss!

What do you think you would do if you were put into this type of situation?

A Business Lesson from Hallowed Ground

Eliot Wagonheim — Tue, 08 May 2012 10:31:40 -0400

I visited Ground Zero on April 21^st. Even the process of getting to the memorial added grace to the experience. It took just about an hour, but there came that one moment when the long slog and inconvenience of security gave way to the open quiet of the memorial itself. The memorial is wide open enough so that the crowd could separate once again into individuals, each left to contemplate the carved names bordering the waterfalls and deep pools set inside the footprint of each fallen tower. No laughter here and hushed tones.

We pressed our faces up against the Plexiglas to see the preserved and twisted girders from that day. They are encased in the shadow of what is now the tallest building in Manhattan, the skeletal beams having surpassed the Empire State Building this past week.

Our country has a passionate need to remember. We turn these places into national parks and, as crass as the term may sound, even tourist attractions. Ground Zero, the tangible reminder of one of our greatest tragedies, takes its place beside Little Big Horn and Wounded Knee, Ford’s Theatre and The Texas School Book Depository as well-trod paths leading down into the nation’s deepest wounds.

I have heard it said that professional athletes are trained to have a short memory – to forget the previous play’s missed tackle or yesterday’s defeat . The memories, they say, are baggage, not to be carried into the contests to follow. I think, however, that the “short memory” statement is an over-simplification. Athletes are trained to have no short-term memory, but in order to be great, they must preserve and revisit the lessons ingrained in long-term memory. Those would be the hard-won lessons of practice.

The construction of something lasting, whether a building, a career, a business, or a legacy, requires a keen recollection of failure. Last week, I wrote that a well-drafted contract represents, with apologies to Tom Clancy, the sum of all fears. My point here is to illustrate that fear is only part of the analysis. The other part is history or, to be blunt, failure.

If success were guaranteed, no contract would be needed. A handshake would suffice. Contracts are at their most valuable when things go south. They are called into question, analyzed, followed or contested in the wake or expectation of a failure.

When a client asks me to review or draft a contract, the first part of the discussion focuses on what the client has seen go wrong in similar circumstances. It is only after we scrutinize the failures that we can begin our work to avoid them. Failure and fear represent the two sides of a very somber coin – containing within themselves lessons of past traps and the specter of lost opportunities to come.

My advice, as unconventional or depressing as it may be, is to create a failure file. A diary of what went wrong, what you wish you had done, where things began to go south. The goal is not torture, but rather redemption.

You see, in my mind, that’s the great thing shared by dedicated athletes, growing businesses and a healthy, thriving nation – the chance to do something better the next time. The chance, in other words, to draw a lesson from hallowed ground.

A Rose by Another Name

Eliot Wagonheim — Tue, 01 May 2012 14:29:06 -0400

True to its name, Consolidated Flooring, Inc. provided and installed a variety of flooring products for both residential and commercial projects. CFI, like many contractors, began to take a pounding, beginning in 2008 when the recession hit in full force. The margins on commercial contracts became razor thin – when you could win the work at all – and residential jobs became practically non-existent.

CFI was a solid company, in business for over 25 years, and prided itself on its work. It didn’t want to stray out of its comfort zone, and it didn’t want to submit bids it knew to be flawed in order to try to make up the money on Change Orders. What CFI did want was government work.

Here in Baltimore, we’re located 50 miles or less from the hub of the world’s largest customer. There are, to be sure, a lot of hoops to jump through, but the reward at the end of the process could be substantial. The government has significant projects, programs to help smaller businesses, and is a secure pay. For CFI, as well as countless businesses of every size and description, government contracts are the silver bullet that will kill woes brought on by the recession.

Unfortunately, CFI was getting barely a nibble. It had done its homework and submitted bid after bid. It had come close, but had yet to hit on that one door-opening project. That’s when CFI decided to change its name. While retaining CFI as a trade name, it changed its formal corporate name to Specialty Government Flooring. Not flashy (like say…Qwikster), but it said what they did.

CFI branded the new name, developed and trademarked a logo, and marketed the heck out of their new identity to every contracting officer, general contractor, and government agency it could reach. It began to work. In conversations, contracting officers told them that they were really looking for small businesses with an affinity for performing government work. Not that CFI hadn’t marketed this aspect before, but now, it seems that with “government” in their name, they were getting noticed. More importantly, they began to win contracts and secured a lucrative partner for several joint ventures.

Whenever I run across companies struggling to open up a new business channel, I am reminded of the CFI story. In my practice, I have seen several examples of re-branding enables companies to make significant inroads into niches and industries which had long been denied them. I have learned that success awaits those companies insightful enough to see the world through the eyes of others…and then do something about whatever it is that they see.

It is, after all, a two-step process: Perceive then execute. Perceive then execute. If you or your management team has the gifts to do the first, it would be akin to committing a cardinal sin were you to fail to do the second.

The Enemy of the Good

Eliot Wagonheim — Tue, 24 Apr 2012 15:13:35 -0400

Spouses can help you with many things, but only siblings can go way back into your past and remind you of the times when you really screwed up. My sister, who works with me as both a practicing attorney and our controller, recently took time out of her busy schedule to do just that.

She harkened back to the time when my father had instructed me, as a new driver, to make sure to affix the up to date registration stickers to my license tag. As a careful man and at times, meticulous, he cautioned me to wash the tag first with a damp wash cloth so that the sticker would stick to tag and not just dirt. He then gave me the envelope containing the sticker.

I had good intentions of following his instructions. I really did. Only, I never seemed to have a damp wash cloth with me and when I remembered his instructions, no such thing seemed to be in my vicinity. I put the stickers in the glove compartment, where they stayed until that cold, windy evening many months later when I parked my car in the wrong place.

I can almost see the steam coming from my father’s ears as he left work early to pick me up and take me to the impound lot underneath the JFX. The fine for parking illegally was high…but it was nothing compared to the fine for not displaying the proper registration.

“Where are the registration stickers,” he asked?

I tried to swim upstream with my explanation as to why they were in the glove compartment, but he was hearing none of it. We drove home in silence, I’m sure. He fumed and I, glad to be in a separate car, simply contemplated my fate when we got home.

This was my first conscious exposure to two rules which I encounter time and time again:

Make it easy for people to do what you want them to do; and.
Don’t allow perfect to be the enemy of the good.

I’ve covered Rule #1 on many occasions, but it is the second rule that I find causes problems again and again. Almost every time I work with a client where a notice, bid or claim deadline becomes an issue, part of the reason for missing it was not that the deadline slipped by unnoticed, but rather because the client ran out of time trying to make its compliance perfect.

Clearly, perfect is the goal. One never knows when the gap between good and perfect will cause a problem or result in a missed opportunity. But the answer is not to let slip the deadline. The answer is to scrutinize the gap and create a system to eliminate the shortfall…on time.

In my experience, it is that scrutiny and the resultant will and effort to put the system in place, that ultimately separates the stars from the also-rans.

The Question of Transferable Value

Eliot Wagonheim — Tue, 17 Apr 2012 15:41:30 -0400

As a business attorney, one of my most important jobs is to guide clients in the execution of their exit strategy. Long ago, however, I realized that attorneys engaged to assist in this regard are like flowers at a funeral – they always arrive too late.

In the column I recently turned in for the June issue of SmartCEO[1], I quoted a proverb (that I could have sworn was given voice by Winnie the Pooh) that “the best time to plant a tree is 20 years ago; the second best time is today.” Nothing more true than this could be said about planning one’s exit strategy.

I was reminded of this yesterday at lunch with Mark Cissell, CEO of Katz Abosch, one of Maryland’s leading accounting, valuation and consulting firms. We discussed the question of what I call transferable value – meaning whatever it is that gives value to a business in its sale to an unrelated buyer.

The question was first brought home to me many years ago when I served as seller’s counsel for a massage therapy business. The business had provided a good living for my client, but she had tired of it and wanted to sell. She had 4 massage therapists, excluding herself, and had visions of riding off into the sunset after closing.

But massage therapy is one of those businesses that lives or dies on personal service. There isn’t much inventory or equipment to speak of – maybe some lotions for resale, tables and such – but nothing that would fund a stress-free retirement.

The question that I couldn’t quite wrap my head around was “what does my client actually have to sell?” The clients were not loyal to the sign on the door; they were loyal to their chosen therapist. What was it that a third-party buyer would pay a premium for?

The answer, as it finally occurred to the buyer, was “not much.” I urged my client to take a longer road, turn down the deal that was offered, and work to transition her business to her therapists while consistently building her brand. She refused, having set her time table for withdrawal.

In the end, she did get out. Her proceeds were much less than she had hoped for and she still had to spend time to transition business to the buyer in order to maximize her earn-out. Even then, she had to fight to retain her therapists (and their business) as she had not locked down her streams of revenue in advance.

My client was an entrepreneur – that species of person I admire in business like no other. She did what so few people in our society are actually capable of doing. She built her living from a business of her own creation. I hope the readers of this blog appreciate how rare and special that is.

Unfortunately, she made a critical mistake. She allowed front-burner issues to consume her, rather than step back and focus down the road on her exit strategy. In so doing, she fumbled the ball at the goal line. She lost her best opportunity to cash in on her years of hard work on her own terms.

She failed to consider the question of exit strategy and transferable value.

If you would like to set a plan in motion to reap the rewards of your efforts, either by preparing your company for sale or by maximizing value (and stability) in a transfer to a partner or employees, talk to us. (It never hurts to ask.)

[1] Check out the April issue of SmartCEO for my previous column…then let me know your thoughts.

Deliver Good News Fast, and Bad News Faster

Eliot Wagonheim — Tue, 10 Apr 2012 08:00:00 -0400

By Michael Lentz, Wagonheim Law Attorney

Just over a week ago, Bobby Petrino (the head football coach at the University of Arkansas) was injured in a motorcycle accident. Petrino initially reported that he had been alone in the accident, and that a female passerby had flagged down assistance.

Last Thursday, Petrino confirmed swirling rumors that he had not, in fact, been alone at the time of the accident. At the time of the accident, Petrino, married and 51, was with Jessica Dorrell, 25-year-old alumni of the University, married to another athletic department staffer. Petrino had recently hired Dorrell as fundraiser for the Razorback Foundation, a booster club of sorts for the University’s athletic teams.

Several days after the accident, Petrino admitted, and apologized for, a relationship with Dorrell that he termed “inapproporiate.” Of course, Petrino’s post hoc mea culpa also amounted to an admission that he had lied to his family and his employer.

Petrino now finds himself on administrative leave, on the precipice of unemployment, put there not by his indiscretion, but by his foolish attempt to cover the matter up.

Petrino is probably one of the most recognizable public figures in Arkansas. He was seriously injured in a one-vehicle motor accident on a major highway. Certainly, dozens of motorists passed the wreck before Petrino and his passenger had even regained their faculties. In this, an era in which nearly everyone carries a phone capable of taking still pictures and videos, “cover-ups” of public incidents are well nigh impossible.

This is particularly so when litigation is threatened, or certain. Bad news is virtually certain to be discovered eventually. The “cover-up” often makes the bad news seem worse, and always gives opponents something else to focus on.

Unfortunately, in the middle of a crisis (real or perceived), individuals often respond as Petrino did in the aftermath of his crash. The best of intentions can abandon even the soundest of minds in time of crisis. For most small businesses, significant litigation, or public embarrassments, rightly counts as a crisis. Every small business with more than one employee would do well to consider a policy for responding to public missteps.

Most significantly, the business must speak with one voice, be it an employee of the business, an outside law firm, or public relations firm. For the spokesperson to function effectively, all of the business’ employees must refrain from speaking, and must ensure that the company’s officers and directors have timely, complete, and accurate information. Employees who can’t be honest and forthright should rightly find themselves where coach Petrino does today – facing an evaluation of whether his employer can or should function without him.

Is IBM Stuck in a Hazard at the Masters?

Eliot Wagonheim — Tue, 03 Apr 2012 11:00:00 -0400

By Michael Lentz, Wagonheim Law Attorney

In two days, the world’s best golfers will tee off at Augusta National Golf Club for this year’s iteration of the Masters. Augusta is the toniest of tony country clubs; extremely expensive and equally selective. It’s also a place steeped in tradition and history, especially for golfers; among other things, it’s the only club that hosts the same major championship every year. Not all of Augusta’s history is history to be proud of, though. Founded in 1933, it admitted its first African American member in 1990. It has yet to admit its first female member.[1] In 2003, the club responded to protests challenging its overtly sexist policy by asserting that women could “go start [their] own club.”

Now, it seems that there may be some crow on the menu at the Masters this year. Every year, Augusta has traditionally offered membership to the CEO’s of each of IBM, Exxon, and AT&T (the 3 principal sponsors of the Masters). In October, 2011, IBM appointed Ginni Rometty its new CEO. As of this writing, Augusta has not offered her membership. With its annual weekend in the national spotlight fast approaching, Augusta has a decision to make. More importantly, though, so do IBM and Ms. Rometty.

If Augusta wanted Ms. Rometty as a member, it would have made the offer long ago. To deny her membership after offering it to so many of her predecessors would be patently offensive and would rightly subject Augusta to scorn, vitriol, and ridicule. Offering it to her now, though, seems little better.

On a daily basis, Ms. Rometty certainly makes decisions that dwarf this controversy. So, I can’t imagine she’s devoting a whole lot of time or energy to thinking about it. Nonetheless, she and IBM have the chance to be good corporate citizens. I hope she’ll reject the membership if it’s offered, or (even better) politely announce, before it’s offered, that Augusta doesn’t deserve a member of her caliber.

What IBM should do poses a question more directly relevant to this blog. Personally, I’d like to see IBM extricate itself from sponsorship of the tournament as soon as possible without exposing it to litigation. Corporate directors and officers, though, don’t have the luxury of governing according to their personal feelings. In Maryland, a director must, among other things, act in the best interests of the corporation, acting as a reasonably prudent person with the director’s skill, education and experience would act in the same or similar circumstances.[2] In particular, this duty requires directors to become reasonably informed about their decisions before making them. Of course, the amount of information required varies with the importance of the decision being made. The point, though, is that even if certain individual directors at IBM might want to get the company out of its association with Augusta, they may be duty-bound not to. Terminating the sponsorship might very well cost the company substantial money in the long run, and might alienate many of its vendors and clients.

If I were counseling the directors of a Maryland corporation in a similar situation, I’d advise them to gain as much information as reasonably possible about the effect that each course would have on the corporation, then carefully consider all that information. I’d advise each director to (1) vote to terminate or continue the sponsorship based on what he or she honestly and in good faith believed to be in the best interests of the corporation, and (2) document the reasons for his or her vote (or at least the factors and information considered) in the meeting minutes. Doing so would ensure not only that each director met his or her duty, but could prove that he or she had done so in the event of a challenge.

[1] Information comes from Janet McManus’ excellent article on ESPN.com, here [http://espn.go.com/espnw/commentary/7755038/espnw-ginni-rometty-force-augusta-change-ways].

[2] IBM is a New York corporation. Directors’ duties under New York law are likely similar to those described above, but are almost certainly not identical. The author is not admitted to practice in New York, and expresses no opinion on any matter of New York law.

Employers Requesting Facebook Passwords...Bad Idea

Eliot Wagonheim — Tue, 27 Mar 2012 08:00:00 -0400

By Michael Lentz, Wagonheim Law Attorney

The Twitter-verse and the blogosphere are all, well, atwitter, this week over the growing number of employers that are asking for or requiring Facebook and other social media passwords from current or potential employees.

This trend should certainly remind us all to be extremely cautious with what we put online. In fact, we’ve previously addressed the issue in this blog, citing a Canadian divorce case in which the presiding judge ruled against one of the parties based in part on character determinations he made in reliance on the party’s postings.

Nonetheless, the idea of inspecting the online worlds of current and future employees is a terrible idea, for at least two reasons. First, and most importantly, a business should make hiring, retention, termination and promotion decisions without regard to age, race, gender, national origin, disability, sexual orientation, or physical appearance. Considering such factors in employment decisions will almost certainly leave the business on the wrong end of a successful lawsuit; even appearing to consider impermissible factors will likely lead to a lawsuit. While the business ultimately may prevail, the costs of such a lawsuit, both in dollars and in reputation, would certainly be enormous.

The best way to avoid (or prevail upon) a claim that your business considered an impermissible factor in its employment decision is to ensure that your business does not even have such information unless the information is absolutely required. Personnel folders and resumes should generally not include photos of the employee / applicant. Interoffice correspondence about the employee or applicant must exclude all reference to membership in any protected class. Your business should carefully document all its reasons for employment-related decisions.

Even seeking an employee’s Facebook password seems (to this litigator) to be an outright litigation magnet. When you ask for a Facebook or other social media password, you’re asking for a trove of information that should never be considered in making an employment decision. Imagine interviewing a potential employee and finding that he or she was just a terrible fit for your business and not right for the job in any way. Now imagine that a few weeks later, the same potential employee sues you and your business, claiming that you made your decision because of something you saw on his or her Facebook page. Again, you might ultimately prevail, but that’s just not a headache you want any part of.

Secondly, not only are you more likely to get your business sued if you solicit passwords, you’re also sending the wrong message to current and prospective employees. You’re sending the message that you don’t trust current or prospective employees, either to exercise good judgment or to properly segregate their work and personal lives. Imagine what your workplace will look like after a few years of hiring employees who learn, before you hire them, that you don’t trust them.

Urge your employees to post and tweet responsibly, always mindful of their association with your business. Consider whether your business would benefit from the adoption of a written social media policy. But leave your employees’ (and prospective employees’) passwords in their hands – doing otherwise can only get you in trouble and alienate your employees.

Need a refresher on best employment practices? Check out the 'Avoiding Landmines' in the Employment section of our Business Owner's Pocket Guide!

Update (5/3/2012): From Time.com

"Today, Maryland Governor Martin O’Malley is signing into law the first piece of legislation designed to prevent employees or prospective employees from being forced to turn over their login credentials for social networking sites.

Sponsored by a bipartisan group of state senators and delegates, the new law will prohibit employers from punishing or firing workers who don’t want to share private Facebook profile information, and prohibits companies from not hiring a job applicant based on their refusal to provide information like their user name and password.

The new Maryland law, which goes into effect Oct. 1, is likely to be the first of several similar state-level laws. According to the American Civil Liberties Union, which supports this type of legislation, similar bills are working their way through the legislative process in Illinois, California, Minnesota, Michigan, and Massachusetts. According to local news outlets in New Jersey, state assemblyman John Burzichelli also plans to introduce a password privacy bill in the next legislative session."

Strength at the Broken Places

Eliot Wagonheim — Tue, 20 Mar 2012 08:00:00 -0400

“The world breaks everyone and afterward many are strong at the broken places.” So wrote Ernest Hemingway in A Farewell to Arms. I think businesses are like that, too. Scan down the membership list of your trade association or take a moment to look at the businesses passing by your car window. Every one of them is a survivor. Every one of them, at one time or another has collided with the world and come out broken. The question is whether, eventually, they became stronger at the broken places.

Several years ago, one of my clients experienced a shareholder break-up. One of the shareholders, after five years in the business, wanted out. They turned to the Stockholders’ Agreement which had been signed at the formation of the company. It did not serve the company well. Apparently, the founders had decided that they would be overly generous to a departing member of the group – each having envisioned himself as the one to leave. Now that the others wanted to carry on, they were burdened with an agreement that placed the company in a very precarious cash situation because they had to pay the withdrawing stockholder much more than the true value of his share.

They put the issue on the back burner for three years, but they finally came together to discuss the issues. Each shareholder evaluated each scenario of departure – death, disability, voluntary withdrawal, termination for cause, and retirement – from both sides of the equation. They considered what would enable the company to move forward and what arrangements would constitute a fair return for the departing shareholders. It took a bit of soul searching, but they finally executed a new agreement that made them stronger in their broken place.

Breaks come in every conceivable form.

Companies lose money on projects every day. The good ones figure out why. Did the problem lie in poor estimating, poor execution, an inefficient workforce, indifferent supervision, or an inequitably drafted contract?
What if an employee leaves for a competitor and takes a boatload of business with her? Is there a non-compete in place and, if so, is it strong enough to accomplish what you want it to do?
Years after signing a lease, the business owner listens to her peers discussing landlord/tenant issues and realizes she could have negotiated a better deal. There’s no going back. The question is “what is she going to do about it when her lease comes around for renewal?"

Consider the history of your own collisions. Examine the breaks. Ask why they occurred and describe the outcome you would have wanted.

Now ask the real question: “What have you done to make yourself stronger in the broken places?”

Download our article “5 Ways for a Principal to Leave a Company” for more information.

A Short Post about Long Contracts

Eliot Wagonheim — Tue, 13 Mar 2012 11:00:50 -0400

The Employee will receive 10% of net profits realized on all contracts delivered.
Final payment will be rendered upon completion of work to the Owner’s satisfaction.
Insubordination will be grounds for termination with cause.

Just about anyone who has ever managed a business has run across terms just like those listed above. The terms are simple enough and readily understood. Who hasn’t shaken hands on a deal like this, only to let the lawyers paper it later? And that’s where things, it seems, go horribly, horribly wrong.

But before I continue on this theme, I’m going to take a brief detour back to my distant past as a sixth grader. Our language arts teacher (and why can’t they just call it “English”) asked us to write an instructional essay, giving the reader step-by-step instructions on a process. The process could be anything, but she stressed that it be something simple. The subject of my essay was “How to Make a Peanut Butter & Jelly Sandwich.” (Next to making egg nog and a killer chicken noodle soup, this was and remains one of the very best things I can do in a kitchen.)

My essay was probably about a page and a half long – a veritable doctoral dissertation for a sixth grader. I went through the expected steps: (1) get out two slices of bread, peanut butter and a jar of jelly; (2) place the bread slices on a cutting board; (3) take a knife from the drawer; (4) open the peanut butter jar, etc. all the way through to eating the sandwich and clean up.

I was proud of my essay, meaning it was neat enough to be read and I had turned it in on time and remembered to put my name at the top. My teacher did not return it with a grade. Instead, she had written in red ink on the top of my paper “what if you dropped the knife? Resubmit.”

After learning what “resubmit” meant, I had to add a section stating that “if you drop the knife, pick it up, clean it off, and resume step number ___.” By addressing that simple contingency, my essay got longer. Other contingencies such as running out of a supply or spilling something would have made my essay longer still.

That entire story is the reason behind legal contracts seemingly longer than they have to be. The better drafted contracts address the failed expectations and the things that don’t quite turn out as the principals expected them to be. Equally as important, reasonable people can disagree about key terms and where, besides in the original contract and in a court of law after the expenditure of serious legal fees, would one turn to determine who is right?

Take a look at the questions at the start of this blog post. A well drafted contract, no doubt longer than the business owners hoped it would be, would address:

The exact definition of “net profit” and possibly include an example of its calculation.
The objective meaning of the subjective word “satisfaction,” most probably by tying it to objective standards such as plans and specifications. (Better yet, the word “satisfaction” should be eliminated from the contract entirely in favor of something more precise.)
A list of what constitutes “insubordination” and an understanding of how that could be distinguished from a simply disagreement.

It is the job of the business principal and the attorney to work hand-in-glove to ensure that the contracts are written in plain, understandable English and strike a balance between being thorough and being so impenetrable that no one would ever sign on the dotted line. After all, a 50 page installation contract might cover all possible risks, but who would ever present, let alone sign it?

As a business lawyer, I get that. I understand the need for clarity and, believe it or not, brevity. What I try to explain to my clients, however, is that a well written contract is measured not in length, but in the number of possible disputes it avoids. Most of all, what I hope my clients come to understand is that, if I do my job correctly, the contract may sometimes have to be longer than they envisioned, but then never have to wonder “what happens if I drop the knife?”

The Benefits of a Flashy Thingy

Eliot Wagonheim — Tue, 06 Mar 2012 11:18:09 -0400

Yesterday, a client asked me for a neuralizer. Of course, he didn’t call it that. (And why can’t they ever use its correct name?) He used the term Will Smith tagged it with in Men in Black – the “flashy thingy.” By either term, it was the first such request I received in 25 years in practice. To me, the request made a lot of sense.

My client’s company was being acquired and we were hours away from Closing. We had finished negotiating the final documents. The final documents were coming off the printer and all we had left to do was collate and sign. In the lull is when he brought up the flashy thingy.

When he said that, it struck me that once the ink is dry on the final documents, the lawyers move on to the next transaction. The principals, however – both buyer and seller – often have to live with each other. For them, many times, the transaction is not actually a “closing” as its name would imply, but rather the opening of a new and hopefully robust relationship.

In this case, my client was looking forward to a new role as an executive vice president directing what was, for the buyer, an entirely new line of services and products. The last thing either of the principals wanted was the lingering memory of a contentious negotiation. They had a company to build and it would not be well constructed on a foundation of emotional baggage and residual resentment.

There are typically two possible approaches to the sometimes tense negotiations surrounding significant issues: (1) avoid them; (2) address the issues and deal with the fall-out. Too many business owners choose the former only to regret that choice at their leisure.

In the past month alone, we have had clients:

Decide against having us send a demand letter out of fear that a request for money on legal stationery would cause the other side to “blow up.”
Justify a termination decision on a “lack of work,” rather than the real cause of deficient performance, only to send shockwaves through the company when rumors spread that people were being let go because the business was faltering.
Lean toward approval of a significantly larger stock grant to an employee than twice performance would justify, rather than risk the employee’s disappointment.

The exercise of planting one’s head in the sand inevitably yields bitter fruit. By far, the better approach is to tackle what’s in front of you, work through the business issues and then, by continuing to look forward, allow the more contentious encounters to fade in the rearview mirror. Often one of the primary benefits of experienced counsel is to act as a buffer between principals who must later work together such that each has some level of deniability…especially where the more difficult interactions are concerned. Regardless of an attorney’s involvement, however, I have rarely seen better advice in my 25 years of practice than to do what needs to be done as honestly, forthrightly, and unflinchingly as possible, even if you sometimes find yourself patting your pocket hoping to feel the reassuring bulk of a flashy thingy.

The Luxury of Long Term Thinking

Eliot Wagonheim — Tue, 28 Feb 2012 13:12:41 -0400

In the early nineteenth century, around 4,000 Quaker families ran 74 Quaker British banks and more than 200 Quaker companies. As Deborah Cadbury writes in her book Chocolate Wars:

"For the Quaker capitalists of the nineteenth century, the idea that wealth-creation was for personal gain only would have been offensive. Wealth creation was for the benefit of the workers, the local community, and society at large as well as the entrepreneurs themselves."

To hear Ms. Cadbury tell it, those ideals died in 2009 with the takeover of Cadbury by the American food giant, Kraft. It was then that the business became all about shareholder returns. In other words, the bean counters (and for those of you thinking it, I’m not going to go to the obvious cocoa bean pun), won.

When people ask what we focus on, my typical answer is “small business.” The U.S. government defines a “small business” as a company or concern with fewer than 500 employees. I think that’s a good definition, and it may reflect what we do, but it does not tell the story of what we like to do.

We work with successful businesses with soul. By that I mean our ideal client is large enough to be successful and sustainable – even in tough economic times – but small enough to retain and echo the core values of its founders. In other words, our ideal client not only began its business for a reason, but still remembers it. For our ideal client, the bean counters are valued but they do not serve as the voice of the company.

Shareholders are typically interested in short-term gains. Those thick reports you see from publicly traded companies are really devoted to answering the single question: “What have you done for me lately?” The elevation of the immediate at the expense of the medium-to-long-term has had tremendous repercussions for our economy in general and for individual companies much too small to worry about SEC compliance.

To me, short term thinking, the demise of an independent Cadbury, and the ascension of Apple as a brand that put design and culture above returns are woven of the same thread. In absorbing this lesson, the question must then be asked of CEO’s and management teams: “in addition to balance sheets and financial dashboards, what have you done to preserve the company’s real eternal flame…lately?”

Iron Fist in a Latex Glove

Eliot Wagonheim — Tue, 21 Feb 2012 08:00:00 -0400

By Michael Lentz, Wagonheim Law Attorney

As a business lawyer with cerebral palsy who generally uses a wheelchair to get around, I can see both sides of the “reasonable accommodation” for disabilities debate in a way that few people can. I know what it’s like to grip a folder in my teeth so I can use both hands to wheel my chair forward while kicking open a door. One of my favorite T-shirts features the handicapped icon over the legend: “I’m only in it for the parking.”

Perhaps it’s my personal status or just the nature of my field, but I found myself fascinated (and not a little bit appalled) at the recently published opinion by Maryland’s highest court placing large and uncertain burdens on Maryland’s businesses. In Meade v. Shangri-La Partnership, the Court exposed business owners to potentially unavoidable liability, with no intelligible standard to guide their conduct.[1]

Meade concerned claims by a Howard County mother that she had had been discriminated against due to an alleged handicap, in violation of Maryland law and the Howard County code. The mother suffered from a severe latex allergy – so severe, in fact, that even airborne particles of powder from the inside of latex gloves might trigger a reaction. She enrolled her infant son in a pre-school, then discovered that the school used latex gloves for diaper changing. As a result, she was unable to spend significant periods of time in the school.

The mother wrote to the school, politely requesting that the school switch to non-latex gloves. She even provided the school with a temporary supply, at her own expense. Nonetheless, the school refused to switch, because of existing contracts with suppliers. Instead, the school asked that the mother place her son in another pre-school.

The mother sued, claiming that the school, a private institution, had discriminated against her due to a handicap, and had retaliated against her because she complained about the discrimination. After a small victory for the Plaintiff at trial, the case eventually found itself in the Court of Appeals.

The Court noted the statutory definition of “handicap” as a “substantial impairment of a major life activity.” In upholding the trial court verdict, the Court decided that parenting constituted a major life activity, and that the plaintiff’s parenting had been substantially impaired because she could not fully interact with her son while at this particular school.

While detailed analysis of legal opinions is well beyond the scope of this blog, this writer respectfully opines that the underpinnings of the opinion are weak at best. Instead, the opinion is particularly important for what it might mean in the future.

First, the mother’s claim is noteworthy because she was not the customer of the business that her lawsuit victimized. While she chose (and presumably paid for) the school in question, it was not she who attended the school on a daily basis. She did not rely on the school for her education. She chose to place her child in a school where she could have known that she might encounter difficulty, then sued the school when she encountered that difficulty.

The school – a private business, remember – could not evaluate or even foresee the liability that it ultimately faced. The school was placed in the impossible position of having to accommodate the alleged disabilities of not only its students but anyone related to any of them, or face liability for failing to do so.

Imagine the potential parallels. Is a business required to hold its holiday dinner in a wheelchair accessible location, to make sure that the wheelchair-bound spouse of an employee can attend? Must a business prohibit the consumption of peanuts, or products containing them, to protect potential customers with peanut allergies?

As the more reasoned voices on the Court pointed out (unfortunately, they were too few to establish a majority), the insidious danger of the Meade opinion is its complete lack of a standard by which businesses can guide their behavior. The Court decided both that parenting is a “major life activity,” and that the inability regularly to visit one’s child in the school of one’s choice is a “substantial” limitation on that activity.

Herein lies the problem: Who is to say when a limitation becomes “substantial” enough to become a handicap? More importantly, how is the decision to be made?

If the answer is determinable only on a case-by-case basis after litigation, no one is well served. Businesses and their owners cannot even identify the newly-expanded universe of risks against which they must now guard, and litigants (on either side) have no meaningful way to predict the outcome of a potential (or actual) lawsuit.

The Meade opinion, completely missing any meaningful standard, turns businesses and their owners into piñatas -- strung up at the mercy of blindfolded plaintiffs, all stumbling about with sticks, hoping to land exactly the right blow to disgorge all the loot. Under the circumstances, a disorganized, random mess is the inevitable result. Not bad, perhaps, for a child’s party – but a lousy environment in which to run a business.

[1] The Meade opinion is summarized in the blog of the Business Law Section of the Maryland State Bar Association, here, and the full text of the opinion can be found in PDF, here.

Knowing When to Say "No"

Eliot Wagonheim — Tue, 14 Feb 2012 08:00:00 -0400

In all my years of practice, I have never once regretted turning down a prospective client. I have, however, found myself living with the regret of having accepted a client or a case I never should have taken. Now, you may think that after 25 years in practice, mistakes of this nature would be at thing of the past. You’d be wrong.

A case, client, or customer can be a bad fit for many reasons. Maybe it’s just the wrong time and you’re too committed to other endeavors in order to serve the new client effectively. Perhaps the assignment is just a little outside of your comfort zone. Sometimes the customer is just a bad credit risk and there is a real possibility that you won’t get paid. Occasionally, of course, the customer is just stone cold crazy.

Many years ago, I represented a construction company that was very good at building big boxes – Home Depots, Wal-Marts, Best Buys, etc. Times were tight and their backlog wasn’t quite what they wanted it to be, so they bid on and won a contract to build a convent. The convent was a gorgeous and involved project featuring a soaring cathedral ceiling in the chapel, residential units, an indoor swimming pool, and well-landscaped grounds.

We wound up in a 5 week arbitration in which the photocopying bill exceeded $50,000.

I never asked them about it, but I’m sure there came a time before the contract was signed that the red flags went up. I can almost guarantee that there was some discussion – either internally or at a pre-bid meeting – at which the thought arose that this project was not down my client’s power alley. I don’t know when or how they convinced themselves otherwise. I only know the result.

When I got married, my wife and I wanted our wedding rings made out of rose gold taken from one of her stepmother’s rings. My wife’s stepmother was a wonderful person taken too soon and we felt that we could honor her by incorporating something of hers into our wedding bands. My wife picked up the rings one week before we were to leave for our Hawaii wedding/honeymoon. When we unwrapped them, it was like Christmas in July.

My wife’s ring looked gorgeous. She was thrilled. My ring looked like a third grader’s arts & crafts project. “Thrilled” is not the word I would use to describe my reaction. When I returned to the jeweler, he initially balked at my suggestion that the ring was less than acceptable. His reaction changed when I asked him this:

“Imagine that Baltimore Magazine came to do a story on your work. The entire town would see it and judge your abilities solely from that one article. Is this the piece you would want featured?”

He took the ring from me without another word, disappeared in the back, and had an assistant come out some time later with the rose gold he had detached from the ring. He never reappeared. Perhaps his feelings were hurt, but the point was made and understood.

Every initial client meeting, each new purchase order or RFP, comes with an opportunity to define you. The question at each juncture has to be asked: “Is this what we do best?” If that answer is “no,” yours should be too.

A Supermodel, or a Kicker?

Eliot Wagonheim — Tue, 07 Feb 2012 11:09:53 -0400

By Michael Lentz, Wagonheim Law Attorney

If you own or operate a business, things are going to go wrong. With planning, preparation, and a little luck, your disasters will be small and infrequent, but they’re going to happen. A long-time client of our firm likes to say (quite correctly) that good habits are learned in bad times, and bad habits are learned in good times. The recent Super Bowl, and one of the contests leading up to it, provided a reminder of how right he is.

As most of our readers probably know, the Giants defeated the Patriots in Super Bowl™ 46 earlier this week. It was an exciting game throughout, with the outcome in doubt until the final play. Both teams could well have won. After the game, a Giants fan in the crowd was heckling Gisele Bundchen, the supermodel wife of the Patriots’ star quarterback, Tom Brady. Bundchen fired back that her husband “couldn’t [expletive] throw the ball and catch the ball at the same time,” essentially blaming her husband’s receivers for the Patriots tough loss.

Two weeks earlier, the Ravens’ epic failures in the last minute of the AFC Championship game delivered a massive gut-punch to sports fans in this purple-everywhere town. Lee Evans, a wide receiver for the Ravens, dropped a pass that would have won the game and sent the Ravens to the Super Bowl. Seconds later, Billy Cundiff missed a routine field goal attempt that would have sent the game into overtime. Instead, the Patriots were moving on, and I suspect a fair number of folks in Charm City were picking up bits of newly-broken television sets.

Less than half an hour later, Cundiff appeared at a podium to face the national media. He explained that the kick was one he’d made a thousand times in his career, and he just missed it. He could have blamed the snapper, the holder, the turf, or the wind. He could have blamed anything or anyone. He could have stayed silent, declining to give interviews – it would have been hard to blame him for slinking quietly home.

One of the reporters, recognizing that most players would have opted for the sanctuary of a locker room, asked Cundiff why he had come out. The first thing out of his mouth was “Because I have kids.” He wanted to set an example for his own children and others – wanted to teach them to take responsibility for their mistakes. He said, in essence, this was my job and, on this occasion, I failed. (Evans later said essentially the same thing to a different media cadre about his own performance). One commentator said that Cundiff should be cut, and his teammates should be upset if he returned to the team next season.[1] Teammates universally supported Cundiff.

I was genuinely uplifted, both by Cundiff’s comments and by the team’s reaction to the situation. I hoped that his comments would get as much media coverage as his missed kick (not quite, but almost). The reflexive instinct to blame someone else has become almost as American as apple pie. How could it not? Congress and the President fill the nightly airwaves with two things: bad news and attempts to blame the “other side” for the bad news. Not long ago, our credit, as a nation, was downgraded. The downgrade occurred almost entirely because the rating agency didn’t trust the nation’s leaders to work together to get anything done.

Unfortunately, the tendency to avoid responsibility is pervasive in businesses as well. Many businesses are burdened with employees who leap at the first chance to throw a colleague under the proverbial bus. The “blame-somebody-else” culture is terribly destructive for a business, for at least two reasons. First, employees concerned about figuring out who to blame for a problem or mistake probably aren’t trying to prevent the problem or mistake from recurring. Second, employees who routinely blame their colleagues, even correctly, are corrosive to morale and office camaraderie; employees become defensive and isolated, instead of cooperative and collaborative. Likewise, an employer who’s overly focused on assessing blame may create such a culture. More importantly, focusing on blame too much or too soon might mean missing an opportunity to remedy the effects of the disaster, or at least prevent another similar one.

As a business owner, your employees are going to make mistakes; that’s for certain, and it’s not something you can entirely prevent. You can control how you respond to them and, to a lesser extent, how they respond to them. Certainly, you can neither tolerate nor encourage consistently substandard performance. But neither should you allow an isolated mistake or lapse in judgment to derail or hinder an otherwise promising employee or career. Focus instead on learning from the mistake; learn what happened, and why, and how it can be prevented in the future. If you respond in a measured and reasoned way, they likely will too. Instead of shirking responsibility, you may find that your employees are more willing to embrace it.

Employees willing to stand up and admit their own mistakes will quickly earn the respect of their colleagues. Those who throw their colleagues under the bus will quickly find themselves isolated, and you’ll find your business divided. When enough people get thrown under the bus, it gets cozy down there, and pretty soon you’ve got a cadre of “thrown,” who resent their colleague(s), and a cadre of “throwers,” all thinking their colleagues are incompetent and looking to save their own skin.

Billy Cundiff’s miss two weeks ago was surely an awful time for any Ravens fan, but he taught his kids (and anyone else listening) a fantastic habit. He made one of the worst mistakes that someone in his profession can make, in front of a national television audience. Given the chance to hide, or blame, he did neither – he stood up and admitted that he failed to do his job.

If I ran a business, a stand-up guy like Cundiff is a guy I’d want around, whether he could kick or not – I might not keep him as a kicker, if I thought he couldn’t kick, but I’d find something for him to do.

An employee willing to stand alone in the middle of a disaster, as Cundiff was, usually finds he’s not alone for very long, as Cundiff did. Employees willing to take responsibility make teams, and bring people together; look for and reward the Cundiffs on your team – leave the diva supermodels to somebody else.

[1] The commentator used a much less polite word for “upset”

If You Don't Ask, You Don't Get

Eliot Wagonheim — Tue, 31 Jan 2012 15:15:48 -0400

I was straining to hear the other parties to the conference call as the two sides debated a sensitive issue with significant ramifications. The matter at hand was a large corporate sale spanning several states, two separate buyers under family control, and one seriously ticked off lender.

The professionals on the phone – meaning the lawyers, accountants, and one person with the vague title of “consultant” – knew that the deal was about to blow up. And that’s when my client chimed in with something just this side of insane. There was a long pause during which all we could hear was breathing and a muffled cough. And then the buyer began to talk.

My first thought as I listened to the buyer stammer through a response was “dear God, they’re actually considering this.” Thirty days later, the completely unreasonable point raised by my client during that conference call became part of the deal with only minor variations.

I’ve reflected a great deal on that conference call. The experience was not singular in my career as I’ve had other moments like it. But this one really resonated, perhaps due to the stakes involved. We had spent months and significant dollars negotiating this deal and everyone seemed at the end of their proverbial rope. One more jostle, it seemed, and the deal would unravel. Well, my client not only jostled the arrangement, he put his entire weight on it and jumped. In the end, he got precisely what he wanted.

In sports, we often hear that the winner is the one who “wants it more.” I have always found it hard to believe that there was a locker room in which the desire to win was markedly lower than was present in room across the hall. But here’s what I’ve learned in business: the winner is frequently the one who wants it less. My client had the other side convinced that he could walk away at any time – that he was slightly more than ambivalent about the deal and that he could take it or leave it. The other side wanted it…and my client dared them to prove it. By closing on my client’s terms, that’s just what they did.

In my experience, too many business owners, even (especially?) those who pride themselves on their negotiation skills, sustain the other side’s objections. They take a look at possible terms and remove them before the other side’s review because there might be an objection. Now, I’m not suggesting that every document be drawn up to reflect the hardest possible line, but I am proposing that you “pay yourself first.” Take a good hard look at the things you want to get out of the agreement and beyond. Then ask for them.

Sure, you may have to back off a few key demands, but time and time again I have seen my grandmother’s wisdom pay off: “If you don’t ask, you don’t get.” And if you do ask…well…sometimes you’d be surprised.

Tell Me No Secrets

Eliot Wagonheim — Tue, 24 Jan 2012 10:56:21 -0400

The American people, we are told, want their government to be more transparent. Whether or not that’s actually true, one thing is for sure: when the subject is business, rather than government, we strongly prefer old-fashioned secrecy. Customer lists, patents, processes, tools, pricing, marketing strategies, product formulae, prospects…you name it. We, as business owners and managers, want the outside world kept in the dark.

As counsel, I tend to come in when this desire for secrecy has already been frustrated – when the proverbial cat has been let out of the bag; that’s when business owners look for the responsible parties and a way to lay blame and collect damages.

Maryland, like most states and the Federal government, affords companies protection against the misappropriation of trade secrets. In addition to remedies which may arise out of contractual relationships, the Maryland Uniform Trade Secrets Act (“MUTSA”)[1] provides a strong remedy for misappropriation of a trade secret. MUTSA defines a trade secret as:

“Information, including a formula, pattern, compilation, program, device, method, technique or process that:

a) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and

b) Is the subject of efforts that are reasonable under the circumstances to maintain secrecy.”

It is this final section that insurmountable hurdle for many companies looking to go to war over what they see as the wrongful taking of their trade secrets. Imagine a judge looking down at you from the bench and asking two related questions – one rhetorical, one not:

What steps did you take to safeguard what you now claim to be trade secrets?
If you didn’t treat this information like a secret, why should I?

Full disclosure: I am one of those small business owners who drive IT people nuts. I hate changing passwords, I fight the inconvenience that comes along with IT security, and I bristle every time NetGear blocks my access to my fantasy football site of choice as “inappropriate or tasteless.” (I’m guessing because of the “fantasy” tag.) The lawyer in me recognizes, however, that, even from a legal perspective, our IT guy has a point. If I don’t take even the most minimal safety precautions by restricting access to what I deem to be sensitive material, what right do I have to ask the court to rectify my error after the horse and the barn have separated?

Stop for a minute and think about the information your company holds dear. That information may already be the subject of Confidentiality Agreements or other restrictive covenants. The sensitivity of that information may be emphasized in company memos and personnel manuals. But regardless of what it is – customer lists, pricing structure, marketing strategy, or anything in between, honestly answer my hypothetical judge’s questions. (And if you need help figuring out what I mean by an honest answer, you may want to check out Don’t Lie to the Dog.)

Your challenge, of course, comes after you self-grade your two-question test. If you fail, what are you going to do about it?

[1] Md. Code Ann., Com. Law II §§11-1201-11-1209

Silence in the Face of Things that Matter

Eliot Wagonheim — Tue, 17 Jan 2012 11:26:50 -0400

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

-- Dr. Martin Luther King, Jr.

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

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

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

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

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

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

An Adult Conversation About Money

Eliot Wagonheim — Tue, 10 Jan 2012 08:00:00 -0400

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

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

“What did they think?”

“Were they pleased?”

“Were they disappointed?”

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

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

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

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

Is it time to have an adult conversation about money in your business?

Intellectual Property Ownership in 2012

Eliot Wagonheim — Tue, 03 Jan 2012 08:00:00 -0400

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

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

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

But how does that square with a shifting workforce?

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

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

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

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