Milwaukee Biz Blog

Most business owners have some way of intuitively understanding how their company is doing. That insight could be based on any number of factors, including new orders, shipments, machine hours, labor activity, etc.

In effect, those are key performance indicators – information that owners and managers rely upon to keep their companies on track toward specific goals. As a company grows and the owner gets busier or as business conditions change, it’s important to formalize those indicators and develop a dashboard that exists outside the mind of the owner.
As we look toward 2012, now is the time to develop or revisit those factors that drive the business and ensure growth. Use the following suggestions to identify key performance indicators and develop your dashboard.
There are numerous financial and operational factors that can be viewed as key performance indicators, including: revenue; orders; time to ship; labor hours; machine hours; inventory runs; accounts receivable statistics; backlog; new customers acquired; staff turnover; returns; and working capital.

Each of those areas has subsets and circumstances unique to an industry and to a specific business within that industry. Key performance indicators should reflect a company’s goals and be quantifiable and actionable. The goals become the benchmark against which ongoing data is judged and responses considered. 

Along with company-wide key performance indicators, departments can have their own indicators based on their roles in reaching the company’s overall goals.

The structure that conveys key performance indicators can be in the form of written weekly activity reports or flash reports, spreadsheets, charts or some other numbers-based overview.

Dashboards offer quick review
While those forms are valuable, today’s technology offers an even quicker way for time-pressed executives to review current information – the computer screen dashboard. Like the dashboard on a car, a computer screen dashboard can offer company owners and managers a quick look at current business conditions, and allow them to make adjustments based on the numbers.

The best dashboards use graphic displays that allow the user to quickly grasp the situation and determine what steps could be taken in response to the information.
Like any business activity monitoring, dashboards can provide information tailored to the specific needs of a particular business or to replicate the data the business owner intuitively followed during a less formal stage of the company’s life.

Data is real-time
One of the great benefits of dashboards is that information is pushed to them from the underlying financial systems so data and charts that are displayed are always real-time.

A dashboard can relay financial statistics as well as information on activities and processes within the operation. Since the dashboards are intended for a quick overview, it’s best to select a limited number of key indicators that you find meaningful. In this case, less is better. Too much information can make dashboards overbearing and, over time, ignored.

Key performance indicator dashboards can be built as a custom software application or acquired as an available product or web-based subscription service.

While dashboards can be convenient, what really matters is the consistency of information a business owner or management team receives. Through that consistency trends can be observed, allowing proper responses.

John Lauber is a CPA and president of LauberCFOs, a firm that pioneered the part-time CFO model. The company provides top financial talent to companies in Wisconsin on a part-time, interim or permanent basis and currently serves as chief financial officer for dozens of small and medium-sized businesses.

For many of us, the clock is ticking on our countdown to Christmas.

Maybe you’ve got a few last-minute gifts to buy or wrap. Maybe Santa has a few more stops to make. Maybe you’ve got some major grocery shopping to do to prepare for your guests. Or maybe you’ve got to prepare for traveling over the river and through the woods.

Regardless, the Salvation Army of Milwaukee County has a more urgent Christmas countdown, and the good folks there could use your help.

With only four days left before the Red Kettles retire until next Christmas, the local Salvation Army is still $1.3 million behind in it’s $2.7 million goal.

“We’re thankful for the donations we have received to date. Reaching our Red Kettle Christmas goal is critical to providing much needed shelter for the homeless, food for the hungry and Christmas assistance for families in great need,” said Major Roger Ross, Salvation Army Milwaukee County Commander.

The Salvation Army operates 84 seasonal and year-round programs and services to families living in Milwaukee County.

In 2010, the Salvation Army provided:
132,439 meals to homeless individuals and families
66,813 nights of lodging to homeless individuals
96,572 toys to children of low-income and unemployed families

This year, the Salvation Army is prepared to provide more than 100,000 toys this Christmas to area children.

Donations can be made at Red Kettles through Christmas Eve, by texting ‘Give’ to 80888 to make a  $10 donations or visit www.SAmilwaukee.org to make a donation with your smart phone or on-line.
I’m also hearing the local food pantries could use an extra boost to meet the urgent needs out there. If you can spare some talent or treasure, they could sure use the help.

*******
While I’m at it, I’d like to take care of a couple of Christmas errands of my own. In the past couple of years, I have passed along some of the best holiday videos produced by Milwaukee public relations/advertising/marketing companies.

This year, through the Twittersphere, Matt Waller at Laughlin Constable in Milwaukee provided this video:
http://holiday.laughlin.com.
Priya Barnes of Creatonomy in Milwaukee sent along this video:
http://www.creatonomy.com/holiday.
Andy Larsen and the folks at Boelter Lincoln put this video together:
http://www.boelterlincoln.com/Holiday2011.
Marilyn, Phil and Jessica Vollrath, along with their staff, show off their ugly Christmas sweaters here:
http://vimeo.com/33791471.
Bruce Gibb and Rich Schmig at Plum Moving Media in Milwaukee get a silver star for bringing their crew to life in this one:
http://www.youtube.com/PlumMovingMedia.

But the winner - hands down – (even though the shower scene is about five seconds too long) has to be Ward Alles, Beth Crivello, Dana Carpenter, Colin Deval and the rest of the team at Core Creative, as they introduce a new product into the market:
http://www.uselesssack.com.

As a bonus, I’m tossing in this Christmas video sent by Marquette University’s Chris Stolarski, featuring the Gold ‘n Blues a cappella group singing “Oh Holy Night.” You can listen for free, and if you download the songs on iTunes, all proceeds will benefit the Boys & Girls Clubs of Greater Miilwaukee.

Merry Christmas.

Steve Jagler is executive editor of BizTimes Milwaukee.

A new law allowing qualified Wisconsin residents to carry concealed weapons goes into effect on Nov. 1, 2011. As a result, businesses must now make a decision about whether to allow concealed weapons on their premises and among their employees.

The following points below should help businesses make this decision.

1. A license is required.
Except for military or law enforcement personnel, an individual is only authorized to carry concealed weapons if he obtains a “CCW license” by completing an application through the Department of Justice (DOJ). The DOJ requires a background check to ensure the applicant is not prohibited from possessing a firearm (for example due to a felony conviction).  In addition, the license can be granted only if the individual completes a firearms training course by experienced and qualified instructors.

2. Right to self-defense has not changed.
A CCW license does not give anyone new or additional rights to exercise self-defense or defense of others. Under existing law, a person can defend himself or a third person by using as much force as necessary to prevent or stop an attack, but cannot intentionally cause death or great bodily harm unless necessary to prevent imminent death or great bodily harm to him or the third person. These rights have not changed or increased now that individuals may be licensed to carry concealed weapons.

3. Local limits on gun use remain.
There are still laws in effect applicable to CCW licensees, such as city, village or town ordinances restricting the discharge of a firearm. Current law also prohibits discharging a firearm near certain parks, from a vehicle, from or across a highway, into a building or from an aircraft. Even CCW licensees are still prohibited from loading, carrying, or going armed with a firearm with malicious or illegal intent, intentionally pointing a firearm at another, or negligently or recklessly endangering the safety of another with a weapon.

4. Now designated driver and designated carrier.
It is illegal for anyone to go armed with a firearm while under the influence of an intoxicant, such as alcohol or illegal drugs.  A CCW licensee can carry a concealed weapon in a tavern only if they are not consuming alcohol on the premises.

5. Guns can be kept in cars at work.
An employer can prohibit employees from carrying concealed weapons on the job (whether on or off the employer’s premises), but may not prohibit the employee with a CCW license from carrying or storing a weapon or ammunition in the employee’s own vehicle, even if the vehicle is used in the course of employment or is parked on the employer’s property. If an employer does not prohibit its employees from carrying concealed weapons, the employer is immune from liability arising from that decision. If the employer does prohibit its employees from carrying a concealed weapon, it should publish a clear policy explaining this prohibition, and enforce the policy.

6. Shopping with a gun?
Business owners can prohibit persons from carrying a concealed weapon on their premises. This prohibition can be applied separately from or together with the prohibition applicable to employees. If business owners choose the prohibition, they must post a conspicuous notice (at least 5 inches by 7 inches) near the entrances to the building, stating that carrying concealed weapons is prohibited.  A business that does not prohibit an individual from carrying a concealed weapon on premises is immune from any liability arising from that decision.

7. Is immunity an illusion?
While immunity sounds appealing, there will still be claims under the worker’s compensation law if employees are injured, and there may still be OSHA penalties if the company failed to provide a safe workplace. Further, the immunity applies only to liability “arising from” the decision to not prohibit concealed weapons, leaving the door open to creative litigants to argue the injury did not arise from that decision, but from some other act or omission. In addition, your own intentional unlawful acts may not be insulated. While the lack of immunity may sound frightening, businesses that prohibit the carrying of concealed weapons do not have any increased liability because of the new law. The business’ liability is the same now as it was before the law – there may be liability for injury caused to third persons only if the business failed to take reasonable care and the situation was reasonably foreseeable. 

Join us on Wednesday, Oct. 12, 2011, at 10 a.m. for a webinar featuring a rapid fire discussion of a bulletproof plan. Register for the webinar, “Don’t Shoot Yourself In The Foot — Understanding Wisconsin’s Concealed Carry Law,” by clicking here.

Not having a plan in place is like carrying a loaded gun without a safety.

Attorney Jennifer Walther is a shareholder at Mawicke & Goisman, S.C., Milwaukee.

The America Invents Act was signed into law by President Obama on Sept. 16, 2011. In addition to a number of technical and procedural changes, the Act makes several significant substantive changes to American patent law:

• The Act changes from our traditional and uniquely American "first to invent" system to the "first inventor to file" system used in most of the rest of the world.
• It includes a substantial increase in almost all patent fees and gives the Patent and Trademark Office substantial leeway to implement additional increases.
• It creates several new procedures for reviewing and challenging patents.
• It eliminates the ability for uninterested third parties to sue for penalties for falsely marking products as patented.
• It eliminates as patentable subject matter certain tax avoidance strategies, and subjects certain financial institution methods to a heightened level of scrutiny.

Since very early in the history of patents in the U.S., the system has awarded the patent to the first to invent. That is, if two inventors filed patent applications covering basically the same invention, the system was set up to award the patent to the inventor who was the first to invent it. That was true even if the second inventor filed an application earlier than the first inventor. In applications where this was an issue, expensive and complicated "interference" litigation was often necessary to resolve the question of who invented first. Under the new system, the patent will be awarded to the first inventor to file the application.

It will still be illegal, as before, to file an application based on someone else's invention. The effect of this change will be to put more pressure on developing new inventions faster, and on filing applications sooner in the product development process. We expect that provisional patent applications, already growing in use and popularity, will see even more prominence, as it is a quick and inexpensive way to get a patent application on file as soon as possible once an invention is made or realized. A regular application can then later be filed, and still rely on the early filing date of the provisional, at least for the information is included in the provisional. This provision will go into effect 18 months after the bill was signed into law.

The Act also transfers responsibility for setting patent fees to the Patent Office, whereas before, most of the fees were set by act of Congress. For a number of years, Congress had transferred money from the fees collected by the Patent Office into the general treasury. This practice is ended by the law, and the Patent Office is directed to set its fees at a level to recover its expenses. At the same time, the new law includes a surcharge of 15% on all fees currently established. That surcharge will be effective September 26, 2011. So it would be best if any fees that are due in the next few months were paid now, before the surcharge takes effect.

The Act establishes several new procedures for reviewing and challenging the validity of patents. The procedures include the ability for third parties to submit prior art to the Patent Office for consideration during examination of an application, new post-grant review procedures, and a supplemental examination procedure.

A further change involves false marking of products with "Patent Pending" or with the patent number. There has been much litigation in past few years over whether a particular product that carried a patent notice was truly covered by a patent, particularly when the patent marking was not removed when the patent expired. Some cases held that any private person could sue for damages up to $500 (splitting the final award equally with the government) for each item that bore the improper patent notice, resulting in the possibility of judgment in the millions of dollars for high volume items such as foam coffee cups. Some companies had gone as far as to eliminate all patent marking entirely, so as to avoid this liability, even though their ability to collect damages from an infringer would be limited by such lack of notice. The new law permits false marking suits only by the government or by competitors who can show that they actually suffered damage due to the false marking, and prohibits such suits altogether for patents that covered the product but have simply expired.

The technical and procedural changes include the creation of a new entity status, some changes regarding business method patents, and a new prioritized examination. A newly created "micro entity" is permitted a 75-percent reduction compared to large entity fees, and is defined as one who qualifies as a small entity, has not been named as an inventor in more than four previous patent applications, and does not have income exceeding three times the median household income for the preceding year. As to business methods, including certain tax strategies, certain financial or banking inventions, and certain other business methods, such inventions were deemed no longer the type of inventions that can be patented. A new "prioritized examination" is established for examination of a patent application ahead of all regular applications, on payment of a $4800 fee (less for small or micro entities), but the number of such fast track applications that will be accepted is limited to 10,000 per year.

For more information on any of these changes, or any question on patents, you can contact
Attorney Nick Kees is a member of Godfrey & Kahn's Intellectual Property Team in Milwaukee.

A recent survey conducted by Automotive Fleet magazine found that 99 percent of respondents are concerned with fuel prices this year. The survey also revealed that only 16 percent could pass those cost increases on to their customers.

Fuel efficiency and the inability to control the price of fuel were the top two concerns of the respondents - consisting of managers to executives of small, medium, and large companies.

So what can you do?

Review the age and mix of your current vehicle fleet. Automobile manufacturers are responding to increased consumer demand as well as new federal standards regarding fuel economy. New technology four-cylinder engines are performing like six-cylinder engines, but with much better fuel economy. If you have been specifying 6 cylinder engines in the past, it’s time to consider a change. With gasoline at around $4.00 a gallon, you may be able to replace older vehicles with new fuel efficient vehicles and reduce your monthly operating costs. Values of used vehicles are at all time highs and interest rates continue to be low, which leverages your ability to upgrade vehicles sooner than you may think.

Explore out-of-the-box solutions. Trucks should be re-evaluated as well. Automobile manufacturers are moving to offer new down-sized models for a reason. They are responding to demand for improved fuel efficiency. Savvy businesses are reviewing old practices and thinking outside of the box. Reducing weight by eliminating unnecessary cargo improves fuel economy and may allow for the use of smaller trucks. Converting even part of the truck fleet to smaller more fuel efficient trucks can have a significant impact.

Challenge drivers to engage in more fuel efficient behavior. Reducing idling time, monitoring tire pressure and eliminating unnecessary cargo, all contribute to better fuel economy. This may require a contest or some other incentive, but the benefit will far outweigh the cost.

Look at other areas to reduce operating costs in order to offset rising fuel costs. Centralize and monitor your maintenance and fuel by implementing a comprehensive maintenance management program such as Network. Properly maintained vehicles get better fuel mileage, and closely monitoring fuel purchases generally results in a 10- to 15-percent savings.

Evaluate fleet utilization and right-sizing. Underutilized vehicles can be turned into cash and with both demand and prices of used vehicles at an all-time high, no time is better than the present to remarket underutilized vehicles.

The earlier you act to implement these recommendations, the better prepared you will be to weather rising fuel prices. Evaluate your vehicle fleet, think outside the box, engage your drivers, and evaluate a maintenance and fuel program that allows you to manage costs.

Bob Rothe is vice president of sales and marketing at Mayfair Leasing, which is part of the Ewald Automotive Group.

If you are even vaguely thinking about buying or selling a company in the next five years, you owe it to yourself to attend the “BizTimes M&A Forum: Buy? Sell? Hold?” at the Pfister Hotel, 424 E. Wisconsin Ave., Milwaukee, on Wednesday, May 19.

The seminar will be held from 7:30 to 11 a.m. For additional information, visit www.biztimes.com/site/m-a-forum.

The Great Recession took a significant toll on the mergers and acquisitions market. Many businesses that could have been sold for a significant gain during the frenzied M&A market of 2005 through early 2008 have since seen significant losses and decreased profits. Many private equity firms that had gone on shopping sprees earlier this decade saw their portfolio companies taking losses, making it difficult to re-sell them at a profit. And commercial banks, which helped fuel the buyout boom, significantly clamped down or even stopped new lending in light of their own losses and increased government scrutiny.

However, the marketplace has improved greatly since the beginning of the year.

The M&A Forum will include breakout sessions featuring experts from Reinhart Boerner Van Deuren Attorneys at Law and Northern Trust Bank.

The sessions will include:
Part 1 – Long-range planning from an estate planning perspective. The questions answered in this session will include: Defining goals for business succession and transferring wealth effectively - what will your legacy be? How to minimize estate taxes, safeguard your lifestyle and control your business for as long as necessary to achieve your goals. What are the planning strategies business owners can use to reduce income taxes on the business sale? What strategies can owners use to transfer their business to heirs?
Part 2 - Long-range planning - How to position the company for greater value. The topics covered will include: How is a business valued? What are the strategies business owners use to increase value? Management retention strategies. Building the management team. Intellectual property.
Part 3 - The deal itself. Topics covered will include: What is the role of the investment banker and how to engage one? What does it cost? What's an auction and is there more than on type?  What are the advantages and disadvantages of an auction? How do financial vs. strategic vs. synergistic buyers differ in approach? Should I sell to management? What are the current trends?   What do the other professionals do? Accountants; lawyers; other consultants. What if you're approached by a buyer, what do you do? The role of due diligence - how to enhance and retain value. Telling the business story - making the buyer eager to buy. What is a recapitalization?  Selling only part of the business.

The keynote speaker of the BizTimes M&A Forum will be Mark Herndon, president of Dallas-based Parkwood Advisors LLC, a financial services firm specializing in mergers and acquisitions, investment banking and private equity financing. I recently interviewed Herndon about the new M&A marketplace. The following are excerpts from that conversation.

BizTimes Milwaukee: Has the window re-opened for business owners that want to begin the sale process who may feel they missed out with the height of the market in 2007 and 2008?
Herndon: “Within the last 60 days, the general business conversation that I am hearing from business owners as well as intermediaries and service providers is that they have all experienced a noticeable uptick in both activity, interest in transactions and confidence. That is heavily qualified by the fact that the deal recovery and the ability to get the desirable valuations and the desirable deal structures will act somewhat like a jobless recovery. No one expects a fast bounce back in employment. And likewise, none of the deal market advisors expect a fast bounce back in terms of valuation or the widespread availability of credit like there was pre-crash. But there are very encouraging signs of progress.”

BizTimes: What is the first step that these business owners should take when they are beginning to craft an exit strategy?
Herndon: “A business owner that I met in September of 2008 told me that he had been contemplating the sale of the business but had not really crafted a viable exit strategy. As we watched the capital markets crater and the financial markets crater, the business owner said, ‘When I started thinking about selling my business, it was already too late.’ That’s a perspective I hear a lot. Owners who are serious about reaping the rewards of their lifetime of hard work need to start now. It’s never too soon to start planning an exit strategy. As we come out of this and get into the next 12 to 36 months, I think we’re going to see a lot of deal activity because of pent up demand and people anticipating the ability to make a transaction. You don’t want to miss out on those opportunities to find the ideal partner, so starting early is the key.”

BizTimes: What about valuation and pricing? How has the recession changed what business owners can expect to receive for their companies?
Herndon: “By and large, valuations have declined. (A valuation) number is a moving target that changes quarter to quarter and annualized and industry to industry, but at a big picture level, count on 1.5 to 2 times less in terms of your EBITDA multiple as of the end of 2009 from prior.”

BizTimes: Are deals being put together differently today than they were previously?
Herndon: “Not only are the valuations going down, but the structures of the deals have changed.
Buyers will need to be prepared to put more equity in deals and rely less on commercially available credit of any kind. Almost all small market and lower mid market, Main Street type businesses, have some type of seller financing included. It’s typically interest bearing debt, but it is typically subordinated to a variety of things – maybe even the performance of the business and not just other debt in the deal. Earn outs have been used for a long time and are fairly common in the lower end of the middle market. It basically says, ‘We know we’re not able to do a deal for the ultimate value of the enterprise based on the circumstances right now. But if you’ll stay in the saddle and help to grow the business, there will some additional earnings opportunities for you over a one to three year time frame.’”

BizTimes: In terms of financing, are banks willing to back buyouts in the same manner that they were in 2007 and 2008?
Herndon: “I would say that banks have acted just like private equity buyers and in some cases strategic buyers, in that there is a major flight to quality. At the Main Street level, at the lower mid market and particularly anywhere there is distress in a company or unstable earnings or a challenging balance sheet, I would say that the credit availability is still not there, except perhaps with regard to some of the alternative financing sources. Private equity buyers have stepped in to do more debt deals, mezzanine lending is back – so you’re going to end up paying a much higher rate probably with some warrants but using your sub debt or mezzanine level for a substitute for your senior lending and just relying on equity and your sub debt or mezzanine along with whatever seller’s note and earn-out will be involved in the structure. We’re still not at a position where I can confidently say that debt capital is widely available in the lower end of the market, yet.”

Eric Decker is a reporter at BizTimes Milwaukee.

In a recent entry in the Milwaukee Biz Blog, I wrote about how technology solutions can help businesses stay afloat in this new economy. While it's true that companies today evaluate every decision that affects the bottom line, some are also simultaneously concerned about how these decisions impact the environment.

Some companies don't realize that the same solutions can meet both objectives. In many cases, technology can cut costs while also reducing the overall impact on the environment.

Here are a few technology tips that can help you save money and the environment.

Avoid phantom energy
Leaving power cords for devices plugged in can consume energy and result in a higher energy bill. Unplug devices that you're not using to reduce "phantom" energy costs.

Save energy with virtualization
Consolidate your servers virtually to save energy. By reducing the number of physical servers in your office, more energy is saved and less money is spent on power and space.

Sleep at the end of the day
Choose sleep settings for your PC when not in use, allowing your PC to use less energy. Many PCs already have a default setting for sleep mode, but it doesn't hurt to be sure it is on.

Work remotely
Endorse remote working to reduce the effects of travel on the environment and reduce associated costs by as much as 30 percent. Live Meetings, video conferencing and instant messaging can make working remotely as easy as working in your office.

Use energy-efficient hardware
Choose a laptop over a desktop to consume less energy. Laptops consume less than 30 watts at full performance, compared to desktops that can use anywhere from 60-150 watts at full performance.

Build a recycling program
Establish a program to recycle old equipment. Tens-of-millions of functional computers are discarded each year by businesses, organizations and individuals. To find a recycler near you, go to http://green.msn.com/Tools/GreenDirectory/Recycle/Default.aspx.

Use less paper
Use programs like Office OneNote or SharePoint to reduce the amount of paper you use. SharePoint allows coworkers to share information and collaborate on documents without needless printing.

Calculate your savings - cost and energy
Use applications such as the Microsoft Desktop Energy Savings Calculator to conduct a full sustainability assessment to show your cost and energy savings.

Many companies are trying to find solutions to reduce operational costs that don't include employee cutbacks. With these tips, businesses can effectively use technology to reduce company costs and also shrink their carbon footprint.
 
Rob Busch is the Wisconsin enterprise sales manager for Microsoft and serves clients and partners in the company's Waukesha office. For more information, visit www.microsoft.com/environment.

The billable hour has been killed more often than Dracula. Against its countless detractors it marshals few defenders – but it still goes on. Why? Partly, no doubt, because of inertia and partly because many clients feel quite capable of managing uncertainty and building relationships with their lawyers that compensate for the model’s structural defects.

But it should not persist because there aren’t any practical alternatives. There are.

For starters, there’s no shortage of variations that can palliate the most frequently noted problems. Blended rates, for example, offer the client a single hourly rate than a range of rates. This facilitates comparisons and gives firms an incentive to have given tasks performed by  attorneys whose actual rate is below the blended rate – in other words, to manage cases efficiently.

Partially contingent rates offer base rates that are lower than the firm’s standard rates but are subject to increase if settlement or judgment below a specified amount (or some other defined “good” outcome) is achieved.

But I wouldn’t tease about practical alternatives unless I had more to offer than tinkering with variations on the basic billable-hour theme. Let’s take this step by step.

Start with fixed fees. Some firms offer them for high-volume, routinized projects. Uncertainty becomes absolute certainty, and incentives become unambiguously positive. Unfortunately, complex corporate litigation isn’t routinized and had better not be repetitive. A fee high enough to cover the possibility of taking the case through trial will generate an enormous windfall if the case ends by settlement or dispositive motion; and a fixed fee at any other level risks having lawyers think they’re working for free.

An obvious response is fixed fees for each phase of the case: initial pleadings, lay witness discovery, and so on. The client would not become responsible for the fee set for a given phase unless substantial work on that phase begins.

Any surprises will be pleasant ones. The firm now has a strong incentive to minimize inefficiency – but that doesn’t eliminate the windfall problem. If the case settles after two depositions, the amount paid for the fact-discovery phase will translate into a head-grabbing effective hourly rate.  Is there a constructive response to that issue?

Sure. (Swallow hard, colleagues.) Instead of a fixed fee for each phase, make it a capped fee. The firm is solidly compensated if it manages the case competently, but it won’t hit jackpots at the client’s expense.

Lawyers, of course, are human. If  they find that, say, the dispositive motion phase is approaching its end with $30,000 in cap-room left, will they be tempted to find $28,000 worth of last-minute work to do on that phase? Maybe, but an elegant, win-win response is available.  Providing the firm with a bonus of (say) 25 percent of the difference between billings and the cap for a given phase for completing that phase below the cap-level provides the firm with a practical reason to forego file-churning, to go along with the strong ethical reason to avoid that unsavory practice.

And it cushions the risk of exceeding caplevels for some phases by creating the possibility of compensating bonuses for other phases.

But what if firms determine cap-levels by application of the billable-hour model? Who cares? The key objections to it – uncertainty and perverse incentives – are gone. Clients. Moreover, can take the caps quoted by one firm and shop them around. If no peer firm is willing to match them, that tells the client all it needs to know. If it receives some lower bids, then it has the challenge of deciding whether the price differentials reflect quality differentials. That won’t be easy – but, hey, I can’t do all the work here.

I have yet to have a client who was dissatisfied with the results under a capped-fee-by-phase-of-case-with-efficiency-bonus arrangement.  (I’m still working on a snappy title.) The first time a client agreed to one, in fact, he called me when the case was over with the sincerest possible compliment. He asked me to prepare a template agreement based on the arrangement we had used, so that he could propose it to outside counsel instead of waiting for them to think of it.

Michael Bowen is a partner in the Milwaukee office of Foley & Lardner LLP and is a member of the Distribution & Franchise and Appellate Practices. He concentrates on commercial litigation and arbitration at both the trial and appellate levels.

The root cause of our economic mess is commoditization. If your business can't offer its target market(s) differentiated benefits that matter, recognize that your business is stuck in a quicksand called commoditization.
Endless cost-cutting to survive the recession-magnified price discounting will only push you deeper into the muck, making it even harder to escape competing on price.

You only have three smart options:

• Redefine your business model strategy to become the lowest-cost competitor. You'll earn profits despite market commoditization.
• Redefine your business model strategy to escape commoditization and compete beyond price.
• Exit the business.

Over the last 10 years, our economy's productivity increased dramatically through industry consolidation, value chain and process redesign, outsourcing and IT investments. These changes lowered inflation, but also created pervasive commoditization.
Big banks engaged in these activities and ended up as lumbering copycats of each other, earning their returns by taking enormous risks rather than having a better value promise for business and consumer customers.
Rating agencies, AIG, former Federal Reserve Chairman Alan Greenspan's low-interest rate policies, a lack of federal regulation, Congressman Barney Frank's push for affordable housing and Asian foreign currency surpluses enabled the banks to take these risks, much as spouses and friends might enable an alcoholic partner or friend.
The housing bubble and massive credit card consumer debt emerged from the drunken dance. Consumers must bear some of the blame for our mindless enjoyment of the short-term riches.
That's my theory of what went wrong. What's yours? Until bank boards begin to demand strong strategic thinking from bank CEOs and their teams, banks will be right back at taking whatever level of risk new regulations will let them get away with.
Watch what will happen in pharmaceutical markets too. Big pharma is following the bank model, with mergers and acquisitions engaged in solely to cut costs. Pharmaceutical companies also purportedly acquire competitors to improve their new drug product portfolio, which parallels acquiring another financial institution to get better retail locations or stronger investment advisors. But the pharmaceutical mergers, I predict, will do little to improve drug discovery success and may, in the case of Genetech's acquisition by Wyeth, reduce drug discovery success.
Commoditization marches on with generic drug companies (the Walmarts of the drug industry) and inventive biotech start-ups poised to earn attractive profits. Changes in health care policy will whittle away any profits big pharma might have made in the past by bringing other companies' discoveries to market.
Are your actions as a company creating more commoditization? What are you doing to compete beyond price discounts?

Kay Plantes, Ph.D., is an MIT-trained economist, business strategy consultant, columnist and author with expertise in business model innovation, strategic leadership and smart economic policies. She resides in Madison, Wis., and Oslo, Norway. For additional information, visit www.plantescompany.com.

"Throw out the strategic plan! It's no good now that the economy has tanked."

That's a natural reaction to a strategic plan built on assumptions about the future which may no longer hold true. For many businesses, confidence in a company's continued steady growth and profitability probably cannot be sustained, at least for the short term.

So what's a company to do? Trash the culture of planning, hunker down in a survival mentality and just wait for tomorrow's mail to bring in some orders? No, just the opposite:  difficult times scream out for planning. The benefits of initiating or revisiting a formal planning process in today's economic environment far outweigh the costs.

Take back control
This business is yours to manage now and in the future. A clear, definitive plan based on today's market realities returns control to the company instead of leaving it to the whims of market forces. In tough times, people need, expect and respond to the structure that a well thought out plan provides.
A client recently lost a major customer, representing almost 50 percent of its business.  The management team didn't just throw up their hands in despair. They sat down and developed a plan to recapture the customer while increasing revenue from other markets. The plan involved hiring a specialist in an emerging market and enhancing relationships with the lost customer. Additional customer service offered taking over inventory replenishment with automatic ordering. The customer came back. 

Build confidence
Going through the hard work of preparing a strategic plan develops organizational confidence in the future. When crisis hits a company, the future looks foggy. No one knows where to go or what to do. Planning helps management make the difficult decisions and design ways to implement them. When everyone knows what the end goal is, what their responsibilities are, and what others are expected to do, a sense of camaraderie with a can-do attitude arises. Employees realize they are not alone, and they have the resources and skills needed to succeed.

Enhance communications
Fear drives the current economic downturn. People don't know what to expect, with more negative announcements arriving daily. Employees fear losing their jobs, no matter how reassuring the company leadership may have been.
Having a definitive strategic plan tells the organization what's going to happen and what results to expect. Though the news may not all be good, minimizing uncertainty is a big plus. Reporting progress against the plan develops confidence in leadership and lets people share in both the good and bad news. A sound strategic plan is an excellent communications tool.

Build the team
Working together, discussing alternatives and having input in tough decisions bring people together. Through a successful planning process, barriers between departments fall and old grudges are laid to rest. With equal participation and understanding of all points of view, a stronger team emerges, committed to each other and to making the plan happen.

Improve performance
Planning focuses effort on the organization's principal goals. With quantifiable measures to track progress in achieving the plan, employees know how to spend their time and resources. The knowledge of the plan and its priorities permeates the organization.
In nearly 30 years of helping organizations develop their plans, we have seen hundreds of success stories. Exploiting new markets, enhancing manufacturing efficiencies, reducing costs, superior customer service, offering unique technologies and creating new products are all initiatives that have propelled significant profitable growth. Discussions in a planning environment established priorities, husbanded resources and laid out the program to implement.

The process
The strategic planning process looks where the company is today, where it wants to go and how it's going to get there. This oft-told mantra actually works and works well.
No one knows the business as well as the people running it. However, an outside facilitator has experience in the process and can push gently for greater in-depth analysis and thinking. A facilitator keeps the participants on target, while ensuring the result has the acceptance of company leadership.

And finally
Planning should be an exciting, creative, constructive process that brings out the best in an organization. The process forces managers to face difficult decisions, make commitments and have a sound roadmap for the immediate future. It should be a positive experience with participants eager to contribute, criticize and be criticized, while investigating new approaches for success in today's business environment.  Understanding of and confidence in the future are powerful motivators.
Given the urgency and volatility present today, the resulting plan may not be perfect. However, it will provide direction and work priorities with the ability to make mid-course corrections. It is ever so much better than no plan at all.  

Good luck and please plan your future.

Charles Krause is the president and chief executive officer of Krause Consultants Ltd., a management consulting firm, and owner and managing partner of the Milwaukee Wave professional indoor soccer team. He is the author of "Fastrack Business Management: The Minute MBA."