Archive for June, 2010

Complacency and Maybe Disaster Fatigue?

Wednesday, June 9th, 2010
It's That Time of Year

It's That Time of Year

As disasters recede into memory, complacency creeps in and we become less vigilant in preparing for the storm season. Even worse, mega-disasters competing for our attention may distract us from more imminent threats. With the round-the-clock media attention on the largest oil spill in U.S. history, residents of the Gulf Coast may be desensitized to the beginning of the 2010 hurricane season. This would be risky at any time, but particularly when the forecast calls for an unusually severe Atlantic storm season. This indifference alarms the Florida Division of Emergency Management, which retained Florida State University geography professor Jay Baker to conduct a study of disaster preparedness. Professor Baker found that nearly two-thirds of residents of hurricane evacuation zones dismissed the threat levels of wind and water damage. Half of the residents of the hurricane risk zone do not have an evacuation plan, an increase from prior years. It was just a few short years ago, in the 2004 – 2005 period, that Florida endured a destructive hurricane season in which it was slammed by storm after storm; in particular, Hurricanes Katrina and Wilma. But it isn’t just Floridians who dismiss the threat of the 2010 storm season. A Maxon-Dixon multi-state poll of residents in the southeastern coastal states found that most residents are unaware of their vulnerability. I am particularly concerned about a potentially severe storm season during a period of record unemployment. Imagine that you live in one of the vulnerable states. You would reasonably have to budget at least $1,000 for an evacuation fund, inclusive of transportation, meal and hotel costs, perhaps slightly less if you have out-of-area friends and relatives with whom you could stay. How many people who are collecting or have exhausted their unemployment benefits are equipped to evacuate? If you live in the hurricane zone, look after your employees and their families by briefing them on appropriate safety precautions during the storm season, including an evacuation plan.

Tornadoes Strike Ohio and Michigan

Tuesday, June 8th, 2010

Powerful and DeadlyTornadoes and thunderstorms struck the Midwestern states this weekend. In Ohio, the tornadoes killed at least seven people and destroyed homes and commercial buildings along a seven-mile trajectory path. The storm also knocked out emergency 911 dispatchers for a brief period. Thankfully, the storm missed the more heavily populated communities around Toledo. In Michigan, the storms caused cosmetic damage to a nuclear reactor, causing a safety protocol to initiate an automatic shutdown. More than 30,000 people were left without power, possibly due to the nuclear plant’s shutdown or to damaged power lines in the area.

One of the key takeaways of this weekend storm is that every natural disaster comes with a threat of power outages. It is uncertain how soon power will be restored to the affected area in Michigan, but consider solutions for your business that address this threat. Do you sell products on your website? Perhaps a hosted e-commerce solution can ensure that your online store stays up and running even when your office is down. Are there contingent service providers you can retain to perform certain of your functions remotely when your office power is knocked out? Assess the sensitivity of your revenues to these risks and plan accordingly.

Measuring Performance Is Not Straightforward

Monday, June 7th, 2010
Measuring Management Performance

Measuring Management Performance

This weekend, I read an excellent article, “The Expectations Treadmill”, in the current issue of the McKinsey Quarterly. This publication is obviously not geared towards small business owners, which is why I appreciate its insights – I like to learn about best practices from leading corporations that I can apply to my own business. And occasionally, it lifts my spirits to be reminded that whatever challenges we face in the small business community – such as the inability to diversify risk and the lack of access to capital – the alternative of large corporate employment remains unattractive for a number of reasons. McKinsey’s article sheds light on one of them: the difficulties of measuring management performance. I appreciated the counter-intuitive insight that the share price measure complicates fair compensation for managers of public companies. We tend to think it is harder to value privately-held concerns, that the public companies have an indisputable report card in the form of share price at the close of each business day. Many believe that total return to shareholders, meaning share price appreciation plus dividends, is the cleanest measure of performance. McKinsey’s analysis highlights one of the deficiencies of this measure: share price embeds market expectations about future performance. As a consequence, measuring performance by total shareholder return distorts incentives, leads to bad decisions and alienates capable managers. One aspect of private company ownership/entrepreneurship that I truly appreciate is that I am not hostage to the expectations of the stock market or a focus on short-term returns.  At a time when we are all gloomy about access to capital and other hardships we face as small business owners, it is good to be reminded of our advantages.

Spread the Word to Help Louisiana

Sunday, June 6th, 2010
Safe and Delicious

Safe and Delicious

Food safety officials are taking a two-pronged approach to ensure that tainted seafood doesn’t reach consumers. First, one-third of the fishing areas of the Gulf of Mexico are closed because of the oil spill, ensuring that the fish are harvested in unaffected waters. Second, fish samples are tested for evidence of contamination, to add a second layer of protection to ensure food safety. Unfortunately, perception matters and these measures have not reassured consumers. The Director of the Louisiana Seafood Promotion and Marketing Board reports that buyers are canceling orders and more restaurants are posting notices that they are not selling seafood caught in the Gulf. Sadly, history may be repeating itself as buyers shunned Gulf seafood for two years after Hurricane Katrina, even though fishing waters were cleared as safe a month after the hurricane. The impact is significant as Louisiana’s seafood brand accounts for one-third of all U.S. production. For the commercial fishing businesses it is a triple impact: reduced harvests (Worldwide Shrimp reports that it would normally pack 250,000 pounds of Gulf Coast shrimp daily at this time of year versus 15,000 pounds now as a consequence of the oil spill); lower sales volumes owing to consumer fears and this occurring when shrimp prices are 50% higher than they were at this time last year. Perhaps one thing we could all do to help Louisiana is to purchase their seafood and spread the word about the adequacy of food safety measures.

When 1+1=5: the Oil Slick During Hurricane Season

Friday, June 4th, 2010

New Orleans Mayor Mitch Landrieu expressed concern about how the Deepwater oil spill could be lifted by hurricane force winds and storm surges to become a tidal surge of slime over inland areas. “The oil that’s in the water is either going to be on the marshland or the land that it touches, the challenges are great,” he said. Ron Kendall, an environmental professor at Texas Tech University, told National Geographic that a major hurricane could deliver oil to downtown New Orleans. My friends in Louisiana told me that they see oil slicks the size of Manhattan moving through the Gulf Coast, creating dead zones where fish and the birds that feed on them cannot survive. Should the residue from the spill be pushed deep into coastal marshes, which slow and sometimes block storm surges, low-lying areas such as New Orleans will be even more vulnerable to major storms for the foreseeable future.

Heartache and Activism in Louisiana

Thursday, June 3rd, 2010
Endangered Oysters

Endangered Oysters

June 1 would have begun the shrimp catching season in the Gulf Coast. While the season lasts only 90 days, during that period Gulf Coast fishing enterprises earn their entire year’s income, often working 18 – 20 hour days in a grueling business. But the Deepwater oil spill ended the shrimp season before it began, forcing many businesses, such as Camardelle’s Seafood, a bait shop and convenience store operating in Louisiana, to close. The proprietor put a sign on her door stating that BP closed her business. She reported to the news media that her utilities are being shut off and she can’t pay her rent. The oil spill has destroyed more in the Gulf Coast than hurricanes of past years did. Small businesses in Louisiana’s fishing industry report that BP’s compensation for their losses doesn’t even come close to making them whole.

One community isn’t accepting the losses without a fight. A group of Vietnamese-American fishermen have filed a class action suit against BP seeking compensation for their losses. The case is to be heard by U.S. District Judge Lynn Hughes who, according to the Miami Herald, has ties to the oil industry. Specifically, the Herald reports that the judge was compensated for traveling around the world to present ethics lectures to the American Association of Petroleum Geologists, a professional association that works with oil companies, including BP. The company has requested that Judge Hughes hear all of the cases filed against it, presumably because the judge has positive relations with the oil industry. This action suggests a long march to justice.

But the Vietnamese-American community has fought such battles before. Case in point: in the aftermath of Hurricane Katrina, residents of Versailles, a community on the edge of New Orleans, used the disaster as a catalyst for change. Versailles is the home of the densest community of ethnic Vietnamese outside of Viet Nam. Hurricane Katrina destroyed what they had spent years building since arriving in New Orleans as refugees. Because of their extraordinary work ethic, they rebuilt what nature had destroyed – only to face another threat in the form of a toxic landfill the government planned to build in their neighborhood. The documentary film “A Village Called Versailles” chronicles the experiences of the Vietnamese-American community in New Orleans. It airs on public broadcasting stations this month. I watched it twice and, in light of the oil spill disaster, the timing of the broadcast makes the subject particularly poignant.

The image I have chosen to accompany this blog posting is that of a piece of jewelry from the Gulf Coast collection by Mignon Faget. Mignon Faget is one of my favorite jewelry lines and I always make it a point to visit her shop when I am in New Orleans. She also has a website and catalog for online sales. She writes, “it is a heartbreaking statement to make with jewelry originally designed to celebrate the abundant gifts of our coast. The reality: we need to make people aware of this disaster and the long-term effects it will have on this region. We all need to do what we can.” Mignon Faget is donating 10% of all sales of this jewelry line to the Coalition to Restore Coastal Louisiana.

Deadlines Loom for Commercial Property Tax Assessments

Wednesday, June 2nd, 2010
File Your Appeal on Time

File Your Appeal on Time

Many communities close their fiscal years in June or July, which means that business owners need to keep an eye on pending deadlines to appeal commercial property tax assessments. The states, desperate for revenues to meet their own budget shortfalls, did not take into consideration the full impact of the recession on property valuations. The result is that many businesses are burdened with inflated tax assessments. Business owners simply cannot afford to overpay their tax obligations, particularly in this difficult economy. Accounting firm Grant Thornton LLP recommends that commercial property owners who suspect that their assessment may be overvalued should retain the services of a certified, independent appraiser, experienced in commercial valuations. According to Terry Conley, a partner at Grant Thornton, “an independent appraisal is the biggest influencer for an appeal. A business owner can get a truncated appraisal that that allows them to compare their business to similar properties in the area, which is usually enough for an appeal. When more proof of overvaluation is necessary, we conduct an in-depth assessment that considers everything from infrastructure to landscaping to entryways.” Business owners also need to establish where to file their property tax appeals, as commercial properties are often considered by separate agencies than those that treat residential properties. Appeals can be challenging, but those who undertake them have a high rate of success. Of course, if you own your own home, you should consider your residential property valuation as well. Every dollar of tax relief is a dollar you should fight to obtain.