Short On Cash? Buy a Business

Consulting Bills: By the Hour Or Value-Based?

Common Law Employees

Biotech HR Strategies

Corrections or additions?

These Survival Guide articles by Peter J. Mladineo were published in

U.S. 1 Newspaper on July 15, 1998. All rights reserved.

Commerce Department: What’s Next?

The kill date of the New Jersey Department of Commerce

and Economic Development has been set. Starting September 1,

Christie

Whitman and Gil Medina will head its replacement, the New

Jersey Commission on Commerce and Economic Development, a

public/private

partnership. And amid the back-patting, one exporter thinks it means

curtains for the state’s efforts at foreign trade.

"This would probably work as well as a privatized division of

motor vehicles," says Tony Corsini, a vice president of

L/C Expeditor, a Manhattan firm that helps small and medium-sized

exporters deal with letters of credit. "My perception is that

this is a way to get it off the bottom line of state expenditure.

If I’m a small to medium-sized company looking to export and want

to use the resources of my state, where do I go? I no longer have

the Department of Commerce."

Corsini is on a New Jersey Technology Council panel on Tuesday, July

21, at 8:30 a.m. at Liz Claiborne in North Bergen. The program,

"Global

Strategies for Your Multinational Customers," features moderator

Geoffrey Brooks, president of Brooks Industries; John

Caldwell,

a partner at Woodcock Washburn; and John Bailye, president of

Dendrite International. Call 609-452-1010 for more information.

Medina heralded the new commission as the solution to "an

intransigent

bureaucracy that does not allow us the ability to react quickly to

help businesses." Stephen Kukan, executive director of

Prosperity

2000, called the new commission "the ultimate in terms of being

responsive to economic development questions and servicing clients

who are interested both in retention and retraction." (U.S. 1,

February 18, 1998.)

Corsini thinks that this language is euphemistic for cost-cutting.

"I have to take a very skeptical view," she says. "It’s

not going to be a good measure for the people who have to keep that

business wheel going. It’s going to derail those people who might

have considered going overseas. And if they can’t open up new markets,

where are they going to sell? Are they going to leave New Jersey?"

Corsini fears that the new commission’s public/private status will

force it to shift into survival mode — to the detriment of the

state’s services to businesses in foreign trade. "Is their

business

going to be financing themselves and keeping themselves afloat or

is it going to be to help New Jersey businesses do business

overseas?"

Although she classifies herself as a political independent, Corsini

feels the governor’s recent trade missions abroad were minor

consolations

to the foreign trade sector in the state. "I applaud those efforts

but that’s a small portion of the job," she says. "The larger

portion is to make sure that if I am a small to medium-sized company

and I need some help, I have to know and feel certain that I have

resources to depend on."

The core of the problem is that many businesses, especially small

ones, need all the help they can get in overseas trade. The commerce

department’s matchmaker programs, she feels, were instrumental for

many companies involved with foreign trade. "If I personally

didn’t

know how to reach prospective clients I could go visit them as part

of a group, or they would take my product, or include it in a

catalog,"

she says. "I could get visibility. You need that helping hand,

it’s not around the corner. You can’t just pop it up on the Internet

and fill an order."

"All the other countries make a point of sending people over to

the U.S. and they are selling their country and they are selling the

benefit of doing business for their countries and they have

incentives.

My question is, in this new arrangement where is the incentive for

the businessman?" Corsini, 51, has a management degree from St.

Peter’s College and spent 20 years in the export business and is also

treasurer of the World Trade Association of New Jersey.

Perhaps most offensive to Corsini is the timing of this privatization.

The government, she feels, is deliberately "sliding it" past

the cognizance of many small businesspersons during the midsummer

lull. "And then all of a sudden we’re going to come back to

reality

and somebody’s going to say, `No we don’t have this anymore.’ It’s

going to be another change that happened when somebody wasn’t

watching.

If I were to be an advocate for the small to medium-sized business

I really don’t think that this is going to be helpful. I hope I’m

wrong, but I just don’t see it."

— Peter J. Mladineo

Top Of Page
Short On Cash? Buy a Business

If you have a spare $100,000, Mark Damon suggests

using it for a downpayment on a business. "The basis for wealth

in the U.S. is owning equity interest in a profitable company,"

says Damon. "Every dollar under the corporate roof translates

into six to ten dollars in market value."

Damon tells the Venture Association of New Jersey how to buy a company

using small amounts of up-front cash on Tuesday, July 21, at 11:30

a.m. at the Governor Morris Hotel in Morristown. Call 201-267-4200

for more information.

Damon is a 65-year-old native of Israel and Harvard Business School

graduate (Class of 1956). The first part of his career was spent as

a senior financial officer of several major companies, including CBS,

where he was assistant controller of broadcasting operations. Then

he switched to the financial community as chief investment officer

of a large venture capital investment firm, Small Business Investment

Center of New York. "I was the person responsible for finding

investment opportunities, analyzing them, and submitting

recommendations,"

he says. "During three years with them I must have reviewed 500

companies and recommended nine." After the SBIC, he joined the

investment banking firm of John Nuveen & Co, and eventually, Merrill

Lynch.

In 1988 Damon took early retirement from Merrill Lynch and is an

financing

advisor to small, privately held businesses. Damon claims to have

purchased 10 companies when he was employed and now has equity

ownership

in two businesses. He knows quite a bit about family business, too.

"The wealthy part of my family is in the private banking industry

in Switzerland," he says.

If a deal is sweet enough, Damon explains, a business owner will agree

to sell for a limited downpayment — in exchange for an installment

plan and an agreement that the new business owner won’t take too much

money out of the business as a salary. "The installment method

will create double the investment income from the payout formula

compared

with what he could have earned on an all-cash deal," says Damon.

"You have to make an offer that the seller and his advisors cannot

refuse."

A person with "limited capital" ($100,000 to $500,000),

"an

average ability," and "above average determination and ability

to run a business," Damon insists, can become a multimillionaire

in six to eight years with a modest downpayment. "If you earn

a salary of $200,000 that’s dollar-for-dollar," he explains.

"However

if you buy a decent-sized business it is worth five, six, or ten-times

earnings."

"The average price of a share listed on the New York Stock

Exchange

is selling close to $30," he says. "That means every dollar

of net value translates into $30 of market stock. Every dollar under

the corporate umbrella is worth $6 to $10 in market value and that

is the key to wealth creation. Even top officers of the largest

companies

derive the bulk of their wealth not from big salaries, but from stock

options."

However, not all of Damon’s message is a sunny beach. Damon is wary

of globalism. The "high-cost producers" such as the U.S.,

Canada, western Europe, and Japan, he fears, are "going to face

brutal competition with the low-cost producers," such as Mexico,

China, and other Pacific Rim countries. "You know what they pay

a worker?" Damon gripes. "We’re going to become a bunch of

hamburger flippers in a service economy."

— Peter Mladineo

Top Of Page
Consulting Bills: By the Hour Or Value-Based?

Consultants are like lizards, says Alan Weiss.

While their reptilian counterparts respond only to light, consultants

tend to respond only to the traditional pay-by-the-hour contract.

This per diem billing structure "is ingrained to the extent

that is imprinted on the cerebral cortex of most consultants,"

he says. "It’s like their reptilian brain won’t let them move.

The fact of the matter is they have an inferiority complex. They only

think they’re valuable when they show up, and really that’s when

they’re

least valuable."

Strong words — but words that have paid off for Weiss. The author

of seven books, including two McGraw-Hill titles, and the owner of

a successful consulting practice, Weiss boasts a seven-digit income.

His success, he claims, stems from his decision to open his practice

based on the premise of getting paid by the job, not by the hour.

"When I went out on my own 13 years ago I decided I was going

to be paid for my work, not for my time," he says. "Here’s

my unscientific observation: I would say that about 50 percent of

everybody calling themselves a consultant does not know what they’re

doing, but 90 percent of the buyers have no way of knowing that. And

that’s why you have so many loused-up consulting projects."

Weiss, president of Rhode Island-based Summit Consulting Group, speaks

about value-based pricing at the Institute of Management Consultants

on Monday, July 20, at 6 p.m. at the Forrestal. Call 732-972-0549

for more information.

Weiss, 52, got his undergraduate degree in political science from

Rutgers (Class of 1968), a master’s from Montclair State, and late

in his career, he received a Ph.D in psychology from California Coast

University. He started his career in Princeton at Kepner Tregoe.

"I

wound up heading its Asian/Latin American division," he says.

Since 1985 Weiss has been an organizational development consultant

but has diversified his practice. His efforts to train consultants

at value pricing are now beginning to rival his regular practice,

he says. "Large companies like McGraw Hill and Hewlett Packard

have hired to me to change their internal consulting

relationships."

His books have also been doing well. His most successful title,

"Million

Dollar Consulting," is published by McGraw-Hill, and has been

reissued recently. His newest title, "Money Talks," is about

public speaking, and is published by McGraw-Hill.

Weiss’ method is simple in theory. Value-based pricing works backwards

from the traditional per diem method, he explains. First, the

consultant asks the prospect what they want to accomplish and why

it’s important. Then, the consultant develops a method to measure

the success of the project. Lastly, the value of the project is

quantified,

and from that figure the consultant writes a proposal stipulating

a fee. "The discussion is never about fees and always about

value,"

says Weiss. "That’s why I’ve been able to establish a seven figure

practice working by myself."

This method generally requires more time to close the sale. "You

have to be willing to be patient and develop a relationship so you

can establish conceptual agreement of what’s needed," Weiss says.

"The proposal is a summation not an exploration."

Weiss uses psychology to close sales: He proposes several different

solutions for prospective clients. "I call them a choice of yeses

— a very subtle but very powerful change of psychology for a

client.

Instead of a client saying, `Should I use Dr. Weiss?’ The client says,

`How should I use him?’" Buy that guy a terrarium.

— Peter J. Mladineo

Top Of Page
Common Law Employees

What do Microsoft, Exxon, ABC-Capital Cities, and New

York Life Insurance have in common? They were all sued by freelancers

and temps who claimed that they should have been remunerated like

regular employees. This is not hard to do these days, because the

fine line between independent contractor and employee is getting finer

while the definition of a "common law employee" seems to be

expanding.

"If a plan fails to define the eligible class of employees or

contains an ambiguous definition," writes attorney Stephanie

Monique Bosworth of the Web Network of Benefits Professionals,

"all employees, even those who mistakenly thought that they were

independent contractors, may claim benefits unless there is proof

that the employer intended a more limited class. Evidence of an

employer’s

intent may include employment agreements, board meeting minutes,

established

practices, insurance contracts, informal communications, a handbook,

and other plan provisions."

The Web Network hosts a seminar on worker classification issues with

Linda Newman, a senior counsel for American Reinsurance Company,

on Tuesday, July 21, at 8 a.m. in the offices of Smith Stratton at

600 College Road East. Call Bosworth at 609-987-6672 for more

information.

A worker is common law employee when "the employer has the right

to exercise control over the work process (i.e. the manner and means

by which a worker performs a job) and the result," writes

Bosworth.

Here are a few selected factors that a court would cite as proof that

the worker is an employee:

"*"The employer requires the worker to wear a uniform or adhere

to a dress code.

"*"There are substantial similarities between the nature of

the worker’s responsibilities and those of other workers the employer

considers employees.

"*"The employer reimburses the worker for expenses that are

normally included in the contract price.

"*"The worker exclusively works for the employer for a an

indefinite

period.

"*"The worker uses equipment provided by the employer.

"*"The worker receives performance evaluations.

Also, writes Bosworth, it is important for employers to make

sure that benefit waiver agreements are easily understandable.

"For

this purpose, an employee must be capable of understanding the

agreement

terms, have adequate time for consideration, but be informed of his

or her right to seek the advice of legal counsel and have an

opportunity

to do so."

Employers should also "train lower level managers and field

operations

to assume that a worker is an employee, unless there are legitimate

business reasons to treat the worker as an independent

contractor,"

Bosworth writes.

And when reclassifying employees, employers should make sure that

all reclassifications are made "consistently with respect to all

similarly situated workers."

For more information about this issue, contact the Web Network through

Bosworth 609-987-6672. The network is recruiting members in the

benefits

arena.

Top Of Page
Biotech HR Strategies

How a biotech firm in Biotechland attracts and retains

employees will be the subject at the New Jersey Technology Council

meeting on Thursday, July 16, at 8:30 a.m. The speakers are Joseph

Mollica, Pharmacopeia’s CEO and president, and Ken McCarthy,

the firm’s human resources director. Cost: $40. Call 609-452-1010.

McCarthy explains that the job of convincing people to work there

is helped by Pharmacopeia’s reputation in its industry. "When

we bring folks in and they see the kind of work that we’re doing and

the people that we have here, it is very attractive. We tend to

attract

the kind of person who likes visibility, growth, and science in

leading-edge

areas."

The firm recruits chemists and biologists, sometimes directly from

the universities — even though it doesn’t exactly have to.

"Folks

who are interested in combinatorial chemistry kind of get steered

towards us," says McCarthy. "That word-of-mouth reputation

has helped us tremendously over the years."

But the challenges with retention can only expand like the rest of

the company. Pharmacopeia, with 205 regular employees in its Princeton

area offices, is in danger of losing the small company atmosphere

that is so attractive to scientists. "We tend to work in teams

of 6 to 12 people on a project," says McCarthy. "Scientists

feel that they’re a major part of each project that we’re working

on. They get to see the impact of their work."

Another human resources challenge was delivered in June, when

Pharmacopeia

completed its acquisition of Molecular Simulations Inc. in San Diego.

This move added more than 300 new employees to its roster, and offices

across the United States and abroad.

"I’ve got a lot more areas to cover," says McCarthy. "The

challenge for us is how to integrate companies and maintain cultures

and synergies."

McCarthy, 42, has a BS in industrial and labor relations from Cornell

University (Class of 1978) and has spent his entire career in human

resources. His resume includes stints with Gene Labs, in Redwood City,

California, and Schlumberger’s electronics group in San Jose, Albany,

and Poughkeepsie. He has been with Pharmacopeia for two years.

"It’s

nice to be in a situation like I’m in, an HR executive who has this

kind of atmosphere to work with," he says. "But we’re also

pretty selective. But we have been successful over time so we can

afford to be that."


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