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VOL. 37, NO. 6
FEBRUARY 8 - 14, 2016
Business of Life
MANUFACTURING: Outlook It’s a mixed bag for industry in 2016
Ice wine
P. 6
How frozen grapes
SPORTS: Arena football
become a sweet drink
Cleveland is rare AFL success story
P. 20-21
P. 8
CLEVELAND BUSINESS
FOCUS: Middle Market Heinen’s downtown move paying off P. 15
The List NEO’s largest software developers P. 27
A to Z podcast making a mark kkleps@crain.com @KevinKleps
Zac Jackson casually tells a reporter that he didn’t get an iPhone “until like a year ago.” Andre Knott, his best friend and podcast partner, immediately chimes in, “And he still doesn’t know how to use it.” The scene was a Panera’s in North Olmsted, but it might as well have been one of the undisclosed locations (Jackson and Knott prefer to keep their audience wondering) at which the two record their increasingly popular A to Z podcast. They like to say they’re “just two fat kids from Akron,” but that’s more of a self-deprecating bit than it is an accurate description of their appearance. It’s all part of the fun that is A to Z — two 30-somethings with fulltime jobs who decided to turn their all-the-over-place conversations into what might be the most popular Cleveland-centric sports podcast. Jackson, a writer for Pro Football Talk, and Knott, the Indians on-field reporter for SportsTime Ohio, became friends while working for the Cleveland Browns for the majority of the 2000s — Knott as the sideline reporter for the team’s radio network and Jackson as a writer for the Browns’ website. “We’re out boozing one night with our friend, just being ourselves,” Jackson says of a night he estimates was in 2005, “and our friend says, ‘When are you guys going to get a show?’ He says, ‘We already got the name, A to Z.’ ” In 2014, after a couple of failed trial attempts, the A to Z podcast debuted at 603brown.com, a website run by Mike Burgermeister, a friend of Jackson’s. After a year of doing the podcast basically just for fun (there were no sponsors), Jackson, 36, and Knott, 37, took a brief break from the podcast prior to the 2015 football season. It was then that Vince Grzegorek’s
frequent inquiries led to a partnership that really helped the podcast take off.
Here to stay “I bugged them for a long time,” said Grzegorek, the editor-in-chief of a pair of alternative weeklies, Cleveland Scene and the Detroit Metro Times. Grzegorek said he would call Jackson “at least once a month” and ask him if “it was time for us to have a serious conversation.” Late last summer, Scene made an offer — it would pay Jackson and Knott a fee for the podcast, which would be streamed on the publication’s website (in addition to iTunes and the hosts’ atozpodcast.com), and they would share the revenue from any podcast sponsorships. Jackson and Knott committed to producing a couple podcasts per week, and Scene’s sales team got to work on selling the podcast after its late-September relaunch. By January, the podcast’s downloads had jumped 50% and three sponsors, including a presenting sponsor and a social media sponsor, had come aboard. “In a very short time, it’s turning a profit,” Grzegorek said. Jackson said the hosts have reinvested all of the money they’ve made from the podcast into recording equipment, their new website and such expenses as paying a designer (another friend of Jackson’s) to illustrate a logo for the show. “We’re in this for the long haul,” Jackson said. “Some day, this is what we’d like to do. In the meantime, we are having fun with it.” The often-hilarious nature of the podcast — Knott once played parade music while Jackson went on a rant about Browns fans celebrating little victories such as on-field progress by Johnny Manziel — has contributed to its growing appeal. Another key factor for two guys who still work part-time at a pair of Cleveland radio
Entire contents © 2016 by Crain Communications Inc.
SEE PODCAST, PAGE 23
A display of LED technology at GE Lighting’s Nela Park campus in 2015
Shakeup at GE Lighting Unit gets new CEO, igniting more sale rumors BY CHUCK SODER csoder@crain.com @ChuckSoder
GE Lighting is undergoing major changes — just like the rest of the lighting industry. General Electric cut the business into two parts last fall, which sparked a shakeup at GE Lighting and reignited rumors that it might be sold. For one, it has a new CEO. Bill Lacey, who previously served as chief financial officer, has replaced Maryrose Sylvester. She recently moved to Boston to lead Current, the new business unit that GE carved out back in October — a unit tasked with commercializing some of GE Lighting’s biggest ideas. And she’s not the only GE Lighting employee who has joined Current. On LinkedIn, it’s not hard to find former GE Lighting employees who now say they work for Current. Some of those employees will move to
Boston, and some will continue working from GE Lighting’s headquarters in East Cleveland, according to a statement from the company, which wouldn’t say how many people work for Current or GE Lighting. The company also wouldn’t comment on a recent Bloomberg article stating that GE is open to the idea of selling its retail lighting business. The article cited “a person familiar with the company’s thinking.” But one GE executive — Lacey’s new boss — did reveal some of her thinking in that Bloomberg article. From Bloomberg: “The lighting industry has become somewhat commoditized,” said Beth Comstock, vice chair and head of the business innovations unit that includes lighting. “We like where we are, but the focus on our future really is on the smart, connected, commercial space for lighting.” GE Lighting is in charge of the other part of the business: Consumer
Bill Lacey, CEO, GE Lighting lighting and the sale of incandescent bulbs and other traditional light sources. Two of three industry insiders SEE GE, PAGE 26
REBECCA R. MARKOVITZ
BY KEVIN KLEPS
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z FEBRUARY 8 - 14, 2016 z CRAIN’S CLEVELAND BUSINESS
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In an effort to right the finances of the state unemployment trust fund, the Ohio House of Representatives is considering a bill that would reduce benefits to unemployed workers and temporarily raise the unemployment insurance tax on employers. HB 394 is being pushed to solve a long-standing problem — the amount employers pay in taxes isn’t sufficient to build up a large-enough reserve to cover the payout in benefits during a recession, when unemployment rises. The bill would boost the amount employers pay in unemployment taxes by requiring employers to pay state unemployment taxes on the first $11,000 of each employee’s salary, up from $9,000 at present. That increase would last only until the state unemployment fund reaches a minimum safe level — probably two to three years — and the state pays off a $775 million debt to the federal government. After that, the cost to employers would fall back to the $9,000 threshold, though the cost to employers could fall further if the fund remains financially strong. According to an analysis by the Ohio Legislative Service Commission (LSC), the nonpartisan adviser to the Ohio General Assembly, the bill would reduce employer contributions by $313 million annually between 2018 and 2025. At the same time, it would cut benefits by about $475 million a year, according to the LSC analysis.
The key cut would be a reduction in the maximum number of weeks an individual can receive unemployment benefits from 26 weeks to a range of 12 to 20 weeks, depending on circumstances. Federal and state taxes support the unemployment insurance system with the federal system also acting as a financial backstop to the state programs. The federal government also can extend benefits nationwide, at a cost to the federal government, in times of high unemployment. State Rep. Barbara Sears, a Republican from suburban Toledo, introduced HB 394 in November. “We need to have solvency before we go into another recession� she told Crain’s in a phone interview. The issue became critical when the Great Recession hit and unemployment — and unemployment compensation payments to unemployed workers — soared. The state had to borrow from the federal government to keep the unemployment trust fund afloat. Without advances from the federal unemployment system that the Ohio Department of Job and Family Service reports totaled $2.6 billion, the Ohio Unemployment Compensation Fund would not have been able to pay monthly benefits to out-of-work Ohioans. Since that time, employers have paid more than $960 million in increased federal unemployment taxes, and the state unemployment systems has paid back the federal system $1.55 billion, including interest. That has meant that, in 2014 for example, Ohio employers paid federal unemployment taxes of $126 per employee, $84 above the $42 per
employee base rate, according to a calculation by Cohen & Co., a Cleveland accounting firm. A debt of $775 million to the federal system remains. As long as some portion of the debt is outstanding, the federal government raises the amount employers pay for the federal share of unemployment insurance until the debt, with interest, is repaid. While the raising of the state tax rate to employers would be temporary, the bill currently being discussed in the House Insurance Committee would permanently cut into the payouts to unemployed workers. That brought employee advocates to the state capitol to argue against the benefit cuts at hearings in November and January before the Insurance Committee. Zach Schiller, research director of Policy Matters Ohio, a nonprofit economic policy think tank, told the committee that by reducing benefits, the bill misdiagnoses the problem, arguing that reducing benefits to a maximum of 12 weeks would put Ohio at the bottom of state programs. In a December survey, the Washington, D.C.-based Center on Budget and Policy Priorities found only eight states that offer fewer than 26 weeks of regular unemployment. Rep. Sears said she hopes the bill moves out of committee and is passed by the House so the Senate can consider it after the March 15 Ohio primary. She acknowledged that the Senate and Gov. John Kasich may have their own ideas, though she said members of the governor’s policy staff told her they agreed with the need to bolster the system’s finances.
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z FEBRUARY 8 - 14, 2016 z CRAIN’S CLEVELAND BUSINESS
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Manufacturing is a bit of a mixed bag right now. On one hand, there’s the booming automotive business, where consumers are continuing to buy new cars at record levels. On the other, there’s the struggling steel industry, which has taken a hit from a strong dollar and an influx of imports. “2016 is going to be really two tracks for manufacturing,” said Mekael Teshome, an economist with Pittsburgh-based PNC Financial Services Group. There will be strong segments, like automotive and housing, as well as weak ones tied to the energy industry. Markets with global exposure, like steel, are struggling because of currency issues and cheap imports. Teshome expects auto sales to be even better in 2016 than in the already strong 2015, and for housing to see slow growth. Overall, he’s expecting 2016 to look a lot like 2015 for manufacturing, and he’s not anticipating a turnaround until 2017. Chris Wimmer, vice president and senior credit officer for New York City-based Moody’s Investors Service, has a slightly gloomier outlook on the sector. Moody’s took its rating outlook for industrial manufacturing, which excludes consumer products, from stable to negative in October. The slowdown in the energy sector, along with the strong dollar and pain in the agriculture and mining sectors, pointed to something negative and meaningful, Wimmer said. Additionally, the slowing economy in China has a strong secondary effect, as it means the country then invests less in oil and gas and commodities. The low commodity prices, strong U.S. dollar and weakness in emerging markets made for a tough 2015 for North Canton-based Timken Co. The full-year results for the maker of bearing, transmissions and other products included $2.9 billion in
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sales, about 7% lower than 2014, or about 2% lower if currency factors are discounted. And executive vice president and CFO Philip Fracassa said he is expecting 2016 to be “challenging,” as well. The company is expecting revenue to be down 4% to 5% in 2016 due to currency factors and decreased sales in both its mobile industries and process industries segments. Timken serves a diverse set of industrial markets but many, aside from automotive and wind energy, are flat or struggling, Fracassa said. Teshome said diverse companies will be able to best weather this soft patch, a point Wimmer also made. It will still show in their results, Wimmer said, but the smaller, more-focused companies will suffer more.
Trying something different That need for diversification is something with which Fairlawnbased plastic compound and resin supplier A. Schulman Inc. is familiar. The company embarked on an M&A strategy to add more specialty businesses in 2010, said CEO and president Bernard Rzepka. Before that, it was a more commodities-based company. And the oil and gas and commodities markets are struggling, Rzepka said, and the whole market is “diverse and challenging.” But demand is strong in the automotive, household and electronics markets, which A. Shulman supplies. Net sales for the first quarter of 2016 were up about 5.6% to $649.2 million (though the company noted that discounting negative currency impacts and revenue from its Citadel acquisition, net sales would have declined about 2.4%.) Injection molder Thogus in Avon Lake also works with customers in a wide variety of markets — from healthcare and hunting supplies to automotive and small appliances. “When you’re tied to one market, you’re subject to the ebb and flow of that. But we’re diversified,” said CEO Matt Hlavin. Instead of just operating as a contract manufacturer, Thogus pro-
vides services like consulting, engineering and prototyping through its family of companies. It looks to be an expert in different areas, like 3-D printing through rp+m and medical regulatory systems through Jalex Medical. Last year, Hlavin said the company did some reorganizing after significant sales growth from 2010 to 2014, and he’s expecting to see growth in 2016. The company’s pipeline is promising, he said, and Thogus may even have to expand or invest in new equipment and technology if some of those opportunities in the pipeline come to fruition. And Thogus isn’t the only company taking that approach. A. Schulman continues to invest in research and development and in new products and new plants, Rzepka said. At Timken, the company is focused on “operational excellence,” which in this business climate tends to mean cost reductions, Fracassa said. And it’s trying to outgrow its current markets and expand market share. He said the company thinks it is well positioned for when markets do turn around.
Nothing wrong with flat T.J. Monico, director of KeyBanc Capital Markets in Cleveland, said there’s uncertainty in the industry, but the firm’s clients are “opportunistic.” It gives them a chance to “play offense,” he said — launching new products and investing in research and development. Companies also are looking to supplement their organic growth, which may be lagging, with mergers and acquisitions, he said. Overall, Monico said he is expecting the broader industrial base to be flat this year, because some markets are up while others are down. He’s looking for companies to invest in their business and their people. Matthew Nipper, KeyBank’s commercial team lead for Northeast Ohio, said companies have the chance to broaden and diversify their manufacturing base when conditions slow down a little. “Flat isn’t necessarily a bad thing,” Nipper said.
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CRAIN’S CLEVELAND BUSINESS z FEBRUARY 8 - 14, 2016 z PAGE 7
THE DISH
Something special is brewing in city’s coffee scene Brendan Walton first discovered coffee in the late 1980s when he was booking and managing The Janglers, a popular Cleveland rock band. “I remember talking to my buddy and I said, ‘This morning stuff, bro, it’s rough,’ ” Walton recalled. “He said, ‘You ever tried coffee?’ The rest is history.”
Lee Chilcote Chilcote is a freelance writer and editor who has written for Vanity Fair, Next City, Belt and other publications. He is the founder of Lit Cleveland. Soon he began working as a barista and roasting his own coffee on the side. Years later, he set his sights on opening his own coffee shop and launched A.J. Rocco’s in the Gateway District in September 2001. Around the same time, he also started Cleveland Coffee Company, a small batch roaster whose coffee is now available at more than 40 retailers and restaurants across Northeast Ohio. Recently, Walton inked a deal with Cleveland Cavaliers star Matthew “Delly” Dellavedova to introduce G’Day Mate, a custom blend of specialty-grade Peruvian and Sumatra coffees. Walton approached Dellavedova after learning that he drinks coffee during Cavs games. The Australianborn basketball player was keen on
the idea, and they worked out a deal to donate 10% of the proceeds to All Faiths Pantry. Walton is also gearing up to give Cleveland Coffee Co. a storefront presence in a building he owns at West 58th and Lorain Avenue in Cleveland’s Detroit-Shoreway neighborhood. He explains the appeal of his coffee, which is made from high-grown Arabica beans he roasts himself, this way: “It’s fresh. When we start rolling, it could be on a shelf within 24 hours.” Cleveland Coffee is one of a growing number of artisan roasters in Cleveland. While purveyors like Phoenix Coffee Co., Caruso’s Coffee and Red Cedar Coffee Co. have been around for some time, newer small batch roasters like Rising Star, Six Shooter and Duck-Rabbit are growing rapidly and opening new storefronts. “It’s a really exciting time, actually,” said Peter Brown, founder of Six Shooter Coffee, which is opening a 900-square-foot café in the Waterloo Arts District later this month. “I think our culinary scene has been on point for a while, and our brewing scene is great, but the missing ingredient has been coffee. There’s going to be an explosion in the next couple of years.” “There’s room for everyone,” he added. “I think that more customers will appreciate the product once they’ve been educated about it.” Cleveland Coffee currently has four employees. Walton has deliberately kept things small because he wanted to focus on whole bean packaging
Brendan Walton’s Cleveland Coffee Company is one of a growing number of artisan roasters in the city. (Lee Chilcote) while managing A.J. Rocco’s. He also does ground fractional packaging for restaurants. So far, he has received a very positive response to the G’Day Mate blend, which was released on Jan. 25, which also happens to be Australia Day. Sales have been strong ever since Dellavedova posted about the product on social media to his 200,000-plus Facebook followers. “(Dellavedova) enjoyed the idea and got a chuckle out of it,” said
Walton, who has made several appearances on local television and radio stations. “It’s a darker roast, which he enjoys, and he liked the fact that there was a charitable component.” Walton has been fixing up the building where he plans to put his new café for years. In that time, he’s been waiting for the right moment to launch his new venture. With Lorain Avenue on the rise thanks to Platform Beer Co., Jack Flaps and
other local food businesses, plus a new streetscape in the works, Walton decided to go for it. Getting to this point wasn’t easy. The building had sat empty for at least a decade when Walton agreed to buy it from the previous owner. When the two buildings on either side of it deteriorated, the city tore them down, leaving behind grassy vacant lots. “It’s like the little urban house on the prairie,” Walton joked. In the past few years, some neighborhood leaders wanted to tear it down, but he insisted that the property was worth renovating. The slender storefront may be the last standing wooden A-frame building in the Lorain Avenue Historic District, he noted. Recently, Walton installed all new wooden lap siding on the exterior. He has a mechanical permit and aims to start renovating the interior soon, with the goal of opening before the Republican National Convention in July. The 850-square-foot storefront will include a small counter area, indoor seating and possibly open air windows. Walton would also like to build a back patio. He plans to finish the interior with reclaimed wood finishes, and to offer baked goods for sale. “I really feel like it’s going to be a good cornerstone on Lorain,” he said. “Between 50th and 58th, there’s nothing. I want to kick-start Lorain.” To contact Chilcote, send an email to clbfreelancer@crain.com. You also can follow him on Twitter @leechilcote.
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z FEBRUARY 8 - 14, 2016 z CRAIN’S CLEVELAND BUSINESS
‘Biting the bullet,’ AFL downsizes BY KEVIN KLEPS kkleps@crain.com @KevinKleps
When the Arena Football League season kicks off in April, there will be no defending champion, since the San Jose SaberCats’ owners decided last fall that they would “no longer continue as members� of what is now an eight-team league. In 2008, the Gladiators’ first season at Quicken Loans Arena after then-owner Jim Ferraro moved the franchise from Las Vegas to Cleveland, the AFL had 17 teams. As recently as 2014, there were 14 clubs. The league’s current total, with all eight teams guaranteed to make the postseason in 2016, is its lowest franchise count since 1991. “We probably don’t want to be less than that,� said Scott Butera, a gaming industry veteran who was named AFL commissioner following the 2014 season. “We’ll probably add two to six (teams) in the following year.� During Butera’s debut season, the AFL had to take control of two struggling franchises, the Las Vegas Outlaws and New Orleans VooDoo, that later folded. The Spokane Shock, as the Iowa Barnstormers did the year before, left for the 8-year-old Indoor Football League. “The first step was to get the platform straightened out, get the finances secure and get a good core group of owners,� said Butera, a former CEO of Foxwoods Resort Casino in Connecticut. “I think some people in the past came in focused on growth, but it’s more important to have the right group and not fo-
cus on the numbers.� Financial problems aren’t new to the league, which is entering its 29th season. The AFL, which reportedly owed $14 million to its creditors at the time, suspended operations in 2009 and adopted a single-entity model when it returned in 2010. All players and coaches are league employees, with investors then purchasing shares in the league. “When the owners can’t pay their bills, in the single-entity model that the AFL is, it puts a strain on the other owners,� said Mike Ostrowski, a Cavaliers vice president who serves as the chief operating officer of the Gladiators and Lake Erie Monsters. The Gladiators, who joined Dan Gilbert’s family of companies when the billionaire purchased the team in 2012, have been one of the AFL’s few business standouts. Cleveland drew more than 10,000 fans for eight of its nine home games in 2015, tying Orlando for the league lead. The Gladiators’ average attendance of 11,558 was second in the AFL and was a 9% jump from a 10,609 norm that ranked third in 2014. The Gladiators tripled their season-ticket base in 2015, and group sales doubled year-over-year. The numbers are on pace to increase again this year, Ostrowski said. “The Gladiators really are the standard for what we want to be — great owner, good personnel, good people,� Butera said. “They put on a good show, and what they’ve done with the arena, the scoreboard and the whole experience is the standard. When we talk to new teams, we have them talk to the Gladiators quite a bit.�
The Gladiators averaged 11,558 fans per game in 2015. (John Saraya)
Roll up your sleeves The Glads, however, have what many former AFL franchises do not — Gilbert’s strong financial backing, combined with the powerful marketing and cross-promotional arms of The Q’s other two inhabitants, the star-studded Cavs and the American Hockey League’s Lake Erie Monsters. Cleveland’s AFL franchise has what Ostrowski calls a “dedicated� team that focuses its year-round sales, marketing and promotional efforts on the Gladiators. “During the 2015 season, in June, July and August, we had already moved the (sales) calendar to next
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year,� Ostrowski said. “On the business side, we’re doing well. We expect to continue to grow it.� Butera believes the league eventually will grow, too. But the AFL won’t add teams as indiscriminately as it might have in the past. “There’s a lot more to running a football team than hosting some people and having a couple drinks in a luxury box,� Butera said. “It’s hard, roll-up-the-sleeves type work. It’s marketing, promotions, and investing in your teams and players. It’s got to be somebody that really understands that. That’s as important as their financial where-
withal.� Ostrowski, Cavs CEO Len Komoroski and president of business operations Kerry Bubolz serve on the AFL board of directors. Komoroski and Bubolz are also on the AFL strategic planning committee, and Ostrowski is a member of the competition committee. Ostrowski said owners with “multiple properties� — ones with an NBA or NHL team, plus a minorleague club that shares an arena — are ideal. “Those are the types of owners we need in this league,� he said. “We can still have other types of owners, but that’s who we’re trying to attract to this league. When the league was at its peak, those are the types of owners we had.� The AFL has certainly had its share of valleys, but Butera, who added to his reputation as a casino turnaround specialist after helping Foxwoods trim its debt from $2.3 billion to $1.7 billion in his four-year tenure, believes brighter days are ahead. “When you see a team go away, I think people don’t quite know how to interpret the news. ‘What’s that about? What is going on?’ � he said. “But everything we’re doing is going according to plan. It always takes more time than everybody hopes. We spent a good, solid year biting the bullet and getting the platform correct.� And in true creative marketing fashion, the AFL commissioner said the scaled-down league should produce better games. “I think what we’ll find,� Butera said, “the one hidden gem in all this, is with eight teams the quality (of play) is going to be terrific.�
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20160208-NEWS--9-NAT-CCI-CL_--
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CRAIN’S CLEVELAND BUSINESS z FEBRUARY 8 - 14, 2016 z PAGE 9
The Week
CLEVELAND BUSINESS 700 W. St. Clair Ave., Suite 310, Cleveland, OH 44113-1 1230; Phone: (216) 522-1 1383; www.crainscleveland.com
THE BIG STORY
FOLLOW THE MONEY
Cleveland Mayor Frank Jackson proposed a raise in the city’s income tax from 2% to as much as 2.5%. He said an increase to 2.5% would raise an additional $83 million annually. The mayor said any increase would be put to the voters either in November or in a special election in early 2017. See editorial, Page 10.
The Greater Cleveland Partnership says its top priority in the upcoming state capital budget is securing $8.5 million in funding for the pedestrian bridge that will connect downtown Cleveland to the lakefront. GCP described 10 other projects, with price tags totally $39.6 million, that it will push the Kasich administration and the state Legislature to include in their 2016-2017 capital plan. Among the other projects were seven GCP categorized as “Tier 1,” or higher priority projects. They include $1 million for a bridge that would improve access to Wendy Park on the lakefront.
GOING SOUTH? Columbus officials asked the state to kick in $5 million to help the Cleveland Browns move their training camp to Columbus. The documents submitted to the state request $5 million in funding from the biennial capital improvement bill for what it calls an “athletic practice and training facility.” The request has angered some — most notably State Rep. Mike Dovilla, R-Berea, who said that moving the team’s training camp from Berea to Columbus is an “absurd idea.” The team, though, has entertained the idea of a training camp move for several years.
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THE WAIT IS OVER A long-awaited downtown Cleveland hotel project is about to make its debut. Kimpton Hotels & Restaurants of San Francisco announced Feb. 3 that it will open The Schofield Hotel in March. In the works since 2009, when it was proposed in the depths of the real estate credit crunch and Great Recession, the $50 million renovation of the former office building at 2000 E. Ninth St. will be Ohio’s first Kimpton. Kimpton is part of Cleveland-based developer CRM Cos.’ renovation of the 1902vintage building as an apartment and hotel. The Kimpton part of the 14story structure includes a 122-room hotel with six suites, 3,800 square feet of banquet space, and Parker’s Downtown, a restaurant and bar.
CRAFTY MOVE Craft retailer The Michaels Cos. said it’s buying Strongsville-based Lamrite West Inc. — the company that runs Pat Catan’s arts and crafts stores — for $150 million. Irving, Texas-based Michaels said Lamrite West “will maintain its team and facilities” in Strongsville and will “continue to operate as a distinct business within Michaels.” Michael Catanzarite, whose father founded the company in 1954, will continue to lead the team as CEO of Lamrite West and will serve on Michaels’ executive committee. Lamrite West operates 34 Pat Catan’s stores in Ohio, Pennsylvania, Michigan and West Virginia. Michaels said no stores will close and there will be no layoffs due to the ownership change.
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THOUGHTFUL GIFT University of Akron alumni Dr. Gary B. and Pamela S. Williams pledged more than $10 million to the school. University president Scott L. Scarborough this week will recommend to the board of directors the renaming of the school’s honors college as the Dr. Gary B. and Pamela S. Williams Honors College. The couple fund an endowed lecture series in biology and a scholarship for gifted students, and the additional gift will allow the university to establish the Dr. Gary B. and Pamela S. Williams Honors College Endowment Fund, which will support a variety of academic programming.
RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax and consulting firms. Visit rsmus.com/aboutus for more information regarding RSM US LLP and RSM International.
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Opinion From the Editor
How far have we really come? The past few weeks have felt like a time warp for women in the workplace. z “She couldn’t possibly be qualified to the same level that a man could be qualified.” z “The gal that’s running against me is a 30-year-old, you know, mom, mother of two infants. … And I don’t know if anybody explained to her we’ve got to spend three nights a week in Columbus.” z “And this is the bimbo that’s asking presidential questions?”
Editorial
Make the case The city of Cleveland has been, on balance, a good steward of the money it collects from taxpayers. Unlike Detroit, with its wrenching bankruptcy, and Chicago, with its crushing debts and pension mess, Cleveland has enjoyed relative fiscal stability despite dealing with the same problems — a shrinking industrial base, a still-sluggish economy and a stagnant-to-declining population — that strain the budgets of many older, Midwestern cities. Given that record of accomplishment, we’re inclined to offer early support — with some conditions — for Mayor Frank Jackson’s proposal to raise Cleveland’s income tax to 2.5% from the current 2% to help cover a budget deficit that’s projected to top $42 million in 2017. Jackson, who seeks to put the issue on the ballot either in November or in early 2017, says that bumping the tax rate to 2.5% would generate an additional $83.5 million a year for the city. Those funds would both cover the expected deficit and enable the city to spend more to improve existing services. Even though the city’s income tax hasn’t been raised since 1981, a 25% hike is a big ask. Cleveland gets a lot of attention for the comeback of its downtown, but citywide, it still struggles to attract companies and jobs, and an ill-conceived tax hike could make that task even harder. There’s an inherent skepticism of the tax, too, since the city estimates about 87% of its total income tax collections come from suburban residents who work in Cleveland. Those suburbanites won’t have a vote on the matter, but many of them do represent business interests that will need to be won over to provide support that would lead to passage of a tax hike.
Jackson intends to present the tax increase to city council in a few months, following completion of a study on the city’s financial needs. It’s critical that the study be absolutely clear about how additional money would be spent, and how that money would bolster city services significantly. An increase of half the size proposed, to 2.25%, would raise enough to cover the projected deficit. That should be an option if the administration cannot articulate a viable plan for spending additional funds — and explain how those funds would improve the quality of life for city residents and make it a better place in which to locate a business. The normally reticent Jackson should be prepared to talk frequently and forcefully about why a tax hike is needed to keep Cleveland on solid financial ground. Beyond that, if a tax hike is to have any chance of passing, Jackson will need to make the case that improvements in services like snow clearing and police response are every bit as important to the city’s future as some of the investments in glittery downtown attractions. He’s right to point out that policy changes at the state level — most notably cuts to the Local Government Fund that Gov. John Kasich used to help balance Ohio’s budget — have hit urban centers hard. Four years ago, Cleveland was receiving $52 million a year from the Local Government Fund. Cleveland now receives about $25 million annually, a significant cut for a city with a budget of about $566 million. There’s a price to the state’s budgetary shell game, and it’s now coming due for Cleveland. We’re open to the tax hike, but Jackson needs to step up in the coming months and offer a vision of a city that operates more efficiently, for all its residents, than it does today.
ACTING PUBLISHER AND EDITOR: Elizabeth McIntyre (emcintyre@crain.com)
CLEVELAND BUSINESS
MANAGING EDITOR: Scott Suttell (ssuttell@crain.com)
These are just three examples of public statements made about women in positions of power since mid-January. Trust me. There are more. Makes you wonder whether working women have made many strides these past few decades. A sobering thought, isn’t it, especially when you realize how casually these statements were made. You can thank Cleveland sports talk radio host Kevin Kiley for the first comment. Kiley took to the airwaves two weeks ago to denounce the Buffalo Bills for making NFL history by naming Kathryn Smith as special teams quality control Elizabeth coach, the first woman appointed as a full-time member of an NFL coaching staff. McIntyre “There’s no place for a woman in professional sports, in football, coaching men,” Kiley said. “Men will not take to it.” Kiley ignores the fact that Smith has been part of the National Football League since 2003 and that many Bills players tweeted their support for her. Does Kiley believe “men will not take to” a woman in leadership at any level? What about one who runs a radio station? Shortly after Kiley’s nonsense, state Sen. Tom Patton of Strongsville, who is running for a House seat, questioned whether his opponent in the March primary could handle being away from home if she was elected to serve in the state legislature. Speaking on the Jan. 18 America’s Work Force radio show, Patton also referred to Jennifer Herold patronizingly as “sweetie” and “young gal.” He later apologized, saying his words “appear to have been misunderstood.” That then brings us to Republican presidential candidate Donald Trump, who recently retweeted one of his supporters who called Fox News anchor Megyn Kelly a “bimbo.” That really isn’t much of a shock coming from a notorious sexist like Trump. What I found alarming was the misogynist vitriol that was hurtled at Kelly on Twitter after Trump announced he was backing out of the debate because Kelly was moderating it. A Vocactiv analysis looked at 80,000 tweets referencing Kelly’s Twitter account in the 24-hour period after Trump announced he was skipping the debate. Among the onslaught of insults aimed at Kelly, the word “bimbo” was used 404 times; “bitch” 423; and “whore” 88 times. I’m deeply saddened that we are still having this conversation in 2016, that women still face such hostility. And these are just the high-profile cases that get media coverage. What does it tell us about the sexism, both overt and hidden, that women still face in the everyday workplace, where they make up 47% of the workforce? So, here’s my challenge to men, many of whom are champions of equality in the workplace and many who still need to evolve: Consider whether anything you do, in your thoughts or in your words, denigrates women in any position in your workplace. If you find the answer is yes, change. Have you recently referred to your administrative assistant as your “girl?” Stop it. Have you evaluated your pay scale accordingly for experience and gender? If there’s an imbalance, fix it. Have you challenged misogyny and sexism when it rears its head in the boardroom or the locker room? Silence is akin to encouragement. Have you considered the wealth and workplace happiness that will surely come when you create an environment that truly values not only the work of women, but the value of women? Maybe it’s time. Because words matter. Actions matter. And equality matters.
WRITE US: Crain’s welcomes responses from readers. Letters should be as brief as possible and may be edited. Send letters to Crain’s Cleveland Business, 700 West St. Clair Ave., Suite 310, Cleveland, OH 44113, or by emailing letters@crain.com. Please include your complete name and city from which you are writing, and a telephone number for fact-checking purposes.
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You worked hard. You saved.
Web Talk Re: Browns paying those former coaches The stupidity of guaranteed contracts can only happen in the world of professional sports. A normal business could not survive it. If you want to guarantee something, have it be performance and something far less for non-performance (i.e., getting fired). — Douglas Bosnik I agree, but golden parachutes for CEOs are nothing different. — Stephen Jerome
Re: NASA Glenn’s work on a hybrid plane I don’t consider NASA exactly on the forefront of airplane technology. It is a large, poorly and inefficiently run bureaucracy paid for, as usual, by us taxpayers. Leave it to the private, innovative firms like Boeing, Airbus or Lockheed to develop this technology on their own dime. This is just another excuse to keep public egghead workers employed. — killdeer5 What happens if one jet engine fails and has to be shut down? Can it fly on thrust from the other engine and the electric power generated by its single generator? — Jim Wilday
You planned for retirement. see that after 10 years, deconstruction and reuse is getting legs. Hopefully, it will be the standard soon. — Paula Wise
Re: Cleveland’s role in cancer moonshot Well of COURSE landing on the moon was easier (than curing cancer) — that was simply a matter of technology, and most of that technology was built on tried and true principles we knew for centuries beforehand. But more importantly, there was a political will to do it. The problem with “curing” cancer (or even just making better inroads) is that we still don’t know 0.1% about the mechanisms of the biology involved. Worse,
there are MANY political hurdles to overcome, not the least is the medical establishment isn’t at all aligned with the best way to proceed. I’m not about to suggest that big pharmas have an agenda to NOT cure cancer, but they certainly have a lot of vested interest in maintaining the status quo as to how we currently treat it. Trying to overcome that is beyond the power of a President, or even Congress. It’s a noble goal and, just like the moon program, any efforts along these lines are likely to pay dividends in ways we can’t envision. But no one should hold out hope that we will come up with an all-inclusive solution in even our children’s children’s lifetime. — Kelleytoons
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Re: GE dumps CFL bulb Haha. I never bought one of those ugly, too-bright, unflattering-to-allhuman-skin curly bulbs. Now I won’t have to! Of course, I still have a hoard of incandescent NORMAL lightbulbs. — 207868
Re: The greenest building is the one already standing After reading Valerie Molinski’s Feb. 1 guest blog, I suggest there are several other very important components to be measured whether new or rehab. Going for LEED certification only solves a part of the problem. I would like to see building owners and others also focus on getting to carbon neutral (not zero) over the next decade, which deals as much with operations as the building itself. (As those of us involved with Cleveland 2030 District are doing.) The other factor is to move away from fossil fuel consumption toward renewable energy, which is harder since the big utilities, especially here in Northeast Ohio, will do very little to help make that happen. I want to see more people get frustrated like me so we can work harder to make it happen. — Neil Dick It’s our obligation to inform the public about the benefits of reuse. At times over the years, it felt as though we were beating our heads against the wall. I’m so happy to
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20160208-NEWS--12-NAT-CCI-CL_--
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z FEBRUARY 8 - 14, 2016 z CRAIN’S CLEVELAND BUSINESS
TAX LIENS
SALT • SALT • SALT
The Internal Revenue Service filed tax liens against the following businesses in the Cuyahoga County Recorder’s Office. The IRS files a tax lien to protect the interests of the federal government. The lien is a public notice to creditors that the government has a claim against a company’s property. Liens reported here are $5,000 and higher. Dates listed are the dates the documents were filed in the Recorder’s Office.
• Water Softener • Industrial • Food • Ice Melt • Sea Salt
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LIENS FILED 20021 US ROUTE 19 LLC 161 Crocker Park Blvd., Westlake Date filed: Dec. 11, 2015 Type: Partnership withholding tax Amount: $344,707 7910 US ROUTE 30 EAST LLC 161 Crocker Park Blvd., Westlake Date filed: Dec. 11, 2015 Type: Partnership withholding tax Amount: $307,133 AMARA HOME CARE INC. 5285 Northfield Road, Bedford Heights Date filed: Dec. 11, 2016 Type: Employer’s withholding, unemployment Amount: $266,613
1-800-547-1538 Salt Distributors Since 1966
1
of the largest wind providers in our region
V-8 8 SHOP INC. 560 Golden Oak Pkwy., Oakwood Village Date filed: Dec. 11, 2015
10
$
Type: Unemployment, employer’s annual federal tax return Amount: $212,363 PMI PRODUCTS LLC 21693 Drake Road, Strongsville Date filed: Dec. 11, 2015 Type: Employer’s withholding Amount: $111,927 PRECIOUS MEDICAL HEALTH SERVICES LLC 25000 Euclid Ave., Suite 200, Euclid Date filed: Dec. 11, 2015 Type: Employer’s withholding Amount: $87,951 GOLDEN HARVEST MARKET LLC 3038 Payne Ave., Cleveland Date filed: Dec. 11, 2015 Type: Employer’s withholding, unemployment Amount: $66,762 APPLAUSE INTERNATIONAL MODEL AND TALENT DEVELOPMENT INC. 30701 Lorain Road, Suite B, North Olmsted Date filed: Dec. 11, 2015 Type: Employer’s withholding, unemployment, failure to file complete return Amount: $64,334 PAUL F SMITH JR. DDS INC. 20119 Farnsleigh Road, Shaker Heights Date filed: Dec. 11, 2015 Type: Employer’s withholding Amount: $62,303
BILLION invested in environmental protection efforts
nearly
100
%
HAHN & POLLOCK LLC 820 W Superior Ave., Suite 510, Cleveland Date filed: Dec. 11, 2015 Type: Employer’s withholding, unemployment Amount: $62,200 WILL REPAIR INC. 2901 E. 65 St., Cleveland Date filed: Dec. 11, 2015 Type: Employer’s withholding, unemployment Amount: $19,519 JWT & A L L C, AN LLC 3615 Superior Ave., Suite 1J, Cleveland Date filed: Dec. 11, 2015 Type: Employer’s withholding Amount: $19,013 6405 PEARL ROAD LLC 6405 Pearl Road, Parma Heights Date filed: Dec. 11, 2015 Type: Employer’s withholding Amount: $18,665 ABLE COUNSELING & ASSOCIATES INC. 14100 Cedar Road, Suite 300, Cleveland Date filed: Dec. 1, 2015 Type: Employer’s withholding Amount: $15,506 LITTLE MIRACLES CHILD CARE AND LEARNING CENTER INC. 22683 Euclid Ave., Euclid Date filed: Dec, 11, 2015 Type: Employer’s withholding Amount: $13,925
of our power plants are lowor non-emitting
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FOILTEK INC. 1700 London Road, Cleveland Date filed: Dec, 11, 2015 Type: Employer’s withholding, unemployment Amount: $13,752
FRC PROJECT LLC 1902 Old Detroit Road, Rocky River Date filed: Dec. 11, 2015 Type: Employer’s withholding, unemployment Amount: $10,276
PIDALA ORNAMENTAL IRON INC. 7600 Pleasant Hill Drive, Parma Date filed: Dec. 11, 2015 Type: Unemployment, failure to file complete return, corporate income Amount: $12,126
JOE & SON II INC. GAS & GO 4322 Clark Ave., Cleveland Date filed: Dec. 11, 2015 Type: Employer’s withholding, unemployment Amount: $9,823
MENDREA CONSTRUCTION LLC 10225 Berea Road, Suite B., Cleveland Date filed: Dec. 11, 2015 Type: Employer’s withholding, unemployment Amount: $11,607 KOCON MASONRY & DESIGN LLC 558 Vineland Road, Bay Village Date filed: Dec. 11, 2015 Type: Employer’s withholding Amount: $10,445
ABLE GRINDING CO. INC. 10015 Walford Ave., Cleveland Date filed: Dec. 11, 2015 Type: Employer’s withholding Amount: $9,800 ABLE COUNSELING & ASSOCIATES INC. 14100 Cedar Road, Suite 300, Cleveland Date filed: Dec. 11, 2015 Type: Failure to file complete return, corporate income Amount: $9,765
CARS COLUMBUS LLC 8004 Lorain Ave., Cleveland Date filed: Dec. 11, 2015 Type: Employer’s withholding Amount: $10,313
AMERICORE EMPLOYMENT LLC 5933 Mayfield Road, Mayfield Heights Date filed: Dec. 11, 2015 Type: Employer’s withholding Amount: $9,222
R ENGINEERING TEAM LLC P.O. Box 91746, Cleveland Date filed: Dec. 11, 2015 Type: Employer’s withholding Amount: $10,304
CIVIL CONSTRUCTION SERVICES INC. 4500 Lee Road, Suite 230, Cleveland Date filed: Dec. 11, 2015 Type: Employer’s withholding Amount: $8,077
LIENS RELEASED 1701 E. 12 LLC 1701 E. 12 St., Cleveland Date filed: Jan. 8, 2010 Date released: Dec. 11, 2015 Type: Employer’s withholding Amount: $10,846 ACADEMY MUSIC CO. 1443 Warrensville Center Road, Cleveland Heights Date filed: April 14, 2008 Date released: Dec. 11, 2015 Type: Employer’s withholding Amount: $5,713 AMERICAN LITHUANIAN CITIZENS CLUB 877 E. 185 St., Cleveland Date filed: Sept, 3, 2015 Date released: Dec. 11, 2015 Type: Employer’s withholding Amount: $21,375 ATLANTIS CO. 105 Ken Mar Industrial Pkwy., Broadview Heights Date filed: Oct. 13, 2009 Date released: Dec. 11, 2015 Type: Employer’s withholding Amount: $162,071 ATLANTIS CO. 105 Ken Mar Industrial Pkwy., Broadview Heights Date filed: Aug. 3, 2010 Date released: Dec. 11, 2015 Type: Employer’s withholding Amount: $68,895
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20160208-NEWS--14-NAT-CCI-CL_--
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Firms fighting rising health costs BY RACHEL ABBEY MCCAFFERTY rmccafferty@crain.com @ramccafferty
When Darrell McNair, president and CEO of MVP Plastics Inc., went to renew the company’s health care plan for 2016, he learned that the renewal rate for an unchanged plan would mean an 11% increase. He had his provider look into what it would be if he abandoned the plan and went to the Affordable Care Act marketplace. McNair learned that the best deal would still increase his premium, as well as the co-pays and deductibles for employees. He decided to stick with his original plan, because he didn’t think the alternative was good for workers. “I don’t like it,” McNair said. “It unfairly burdens employers and employees.” It’s a familiar story for business owners, who have been struggling to keep up with rising health insurance costs. And manufacturers in particular point to those increases as a concern. The most recent outlook survey from the National Association of Manufacturers listed rising health care-related costs as the secondlargest “primary” business challenge, behind only unfavorable business conditions. But local companies say offering health insurance and other benefits gives them a competitive advantage when it comes to retaining employees, so it’s a challenge they have to tackle. The rising cost of health care has led companies to try a few different tactics, said Steve Ligus, vice president of employee benefits at insur-
ance brokerage Hylant Group Inc. in Independence. Some have increased limits, while others have started offering more choices of plans for employees. While there was fear that companies would stop offering insurance, that hasn’t borne out. Companies have been moving toward a model where employees act more like consumers when they go to the doctor, instead of just going ahead and getting a lot of tests done, said benefits consultant Dan Bilek of Solon-based human capital management firm CPI-HR. Northeast Ohio was a pretty early adopter of some of the alternative plans, including health savings accounts, or HSAs, he said.
Multiple options At cutting toolmaker E.C. Kitzel & Sons Inc. in Cleveland, the company offers employees a choice between an HSA plan with lower premiums, a standard deductible plan and a higher deductible plan, said president Tom Schumann. Employees on the lower deductible plans pay the difference over 12 months, and the company makes a payment to employees who choose the HSA, because the premiums are lower for Kitzel. Schumann said he’s looked into ACA compliant plans a few times, but they’re substantially more. The company, which has about 32 employees, will be required to make the switch in 2017, he said. The Technology House in Streetsboro also offers multiple plans — one in which rates increase and the other with higher co-pays, said CEO
Chip Gear. The prototyping and production company, which HR/payroll manager Nicki Gear said has about 76 employees total and 55 on its health insurance plan, has been offering this since 2010. Ligus said aside from these more familiar options, there’s been greater interest in self insurance, in which an employer pays insurance claims as they come up, rather than trading premiums for assumption of risk. Historically, this is something companies with 100 to 150 employees or more would start to explore. But that limit has “come down considerably,” Ligus said, and companies of all sizes are looking into it. One of those companies was custom injection molder MVP Plastics in Middlefield. McNair said he started looking into it for this year, though he’s opted to not make that change, as long as his company is grandfathered in. But McNair said he would opt for a self-insured model before going to the marketplace. The company has about 70 insurance-eligible employees, with about half who use it.
Something wild Self-insuring has become more realistic with the increases in health care, said Pradeep Saha, CEO of Cleveland-based gear maker Horsburgh & Scott. He has looked into it in the past and said he plans to research it again in 2017. The company has about 160 hourly and salaried employees. Horsburgh & Scott has seen “significant” increases the past two years, Saha said.
Both years started out in the double digits, but the company was able to get this year’s increase reduced to 7% or 8%. It makes a big impact, because it could add up to $10 off a paycheck. “That’s real money,” he said. Pipe, tube and roll form tooling maker Roll-Kraft in Mentor took a creative approach to its insurance in 2015-2016 with a shared funding
Companies have been moving toward a model where employees act more like consumers when they go to the doctor, instead of just going ahead and getting a lot of tests done, said benefits consultant Dan Bilek of Solon-based human capital management firm CPI-HR. plan, said president Sanjay Singh. He referred to it as a quasi-selfinsured plan, where they signed up for high deductibles and lower premiums. The coverage offered to the nearly 100 employees on the plan, as well as their rates and contributions, looks the same. The company’s broker looked at Roll-Kraft’s claims and told them they were paying a lot in premiums, Singh said. Under this plan, they took on some risk, but it worked out, though he expects prices to rise in May because prescription prices have been increasing.
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to give pay raises. Nicki Gear said the company wants to keep offering auxiliary benefits, but if prices continue to increase, they will have to look into whether it’s worth offering options like dental. Singh of Roll-Kraft said offering benefits is critical for retention. He said he recently received an application from someone who was looking to change jobs because his employer decided to stop offering insurance. “We’re a growing company,” Singh said. “We want to retain people.”
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Focus MIDDLE MARKET
ECHO’S GROWTH - P. 16
z
ADVISER - P. 17
z
TAX TIPS - P. 19
Heinen’s catering to downtown markets Early success of East 9th Street store has added to amenities city has to offer, visitors say BY DOUGLAS J. GUTH clbfreelancer@crain.com
It has been almost a year since Heinen’s opened its downtown supermarket in the historic Cleveland Trust Building. Tom Heinen, who owns the grocery chain along with his twin brother, Jeff, is happy with the impact his new store has had on both Cleveland’s image as well as the company’s bottom line, even if there’s still room for improvement. “It’s doing better than my worst fear and not as great as my greatest hope,” said Heinen, somewhat tongue-incheek. The 27,000-square-foot store on the corner of East 9th Street and Euclid Avenue, which welcomed its first shoppers on Feb. 25, 2015, is performing as projected in a downtown continuing to cultivate its residential base, Heinen said. “Urban stores by definition cater to smaller basket sizes, prepared foods and people looking for quick-meal solutions,” he said. “It’s a good location, even if we’re a little ahead of the population.”
HEINEN’S GROCERY STORE
Making a commitment Heinen’s has 18 Cleveland-area locations, with a 26,000foot-store set to open in Chagrin Falls this fall. The $600 million company, a third-generation grocery business founded in 1929 by Joe Heinen, has four other stores in suburban Chicago. Although the downtown Cleveland store is the chain’s only urban location, its early success has helped reinforce Heinen’s as the region’s longtime local grocer. “People want to get back to basics by supporting local food,” Tom Heinen said. “We made a commitment to the city and got some great publicity by going downtown.” A foray into the heart of Cleveland has come with a learning curve, he added. Apartments with limited kitchen facilities mean shoppers may need hints on how to prepare a steak or other items over an electric burner. Display cases in the store’s central rotunda packed with meat, fish and prepared foods can be great places for downtown’s young professionals to get cooking advice. “In the millennial lifestyle, there may not be as much cooking from raw ingredients,” Heinen said. “We’re SEE HEINEN’S, PAGE 18
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ECHO Health’s sales grew 27-fold in five years BY CHUCK SODER csoder@crain.com @ChuckSoder
These days, a lot of startup companies focus on building a “minimum viable product” — the simplest version of a product that a customer might actually buy. Bill Davis didn’t do that. And that’s one reason why ECHO Health didn’t fall to pieces as sales grew from $2.4 million to $66 million in just five years. The Westlake company was able to process $10 billion in health care claims last year partly because of a decision Davis made when he started developing the technology back in the 1990s: He wanted the software to be able to process billions upon billions of dollars — if needed. Granted, unlike other entrepreneurs, he didn’t have to build a series of cheap prototypes in an effort to figure out what customers would actually buy. Davis had an advantage, though. He originally designed the software for one customer and one customer only — a joint venture formed by Chase Manhattan Bank and Tandem Computers. So he knew exactly what they wanted: A system that would allow them to take lots of payments headed to the same health care provider and combine them into a single check. It had to work perfectly, and it had to be extremely scalable from the beginning. “We were dealing with very big guys who said, ‘Oh, you’re going to want to design it this way, because,
you know, you’re going to be processing $100 billion,’ ” Davis said. But it didn’t really start needing massive scalability until 2010. That’s when ECHO Health released a technology that gave its clients an easy way to take advantage of a new payment option in the health care industry: The virtual card, which allows health care providers to accept payments via payment card networks run by companies like Visa and MasterCard. The growing number of payment options presented an opportunity for ECHO Health. Not only did it start processing virtual card payments, but it developed a system that would allow its clients — the third-party administrators who manage corporate health plans — to automatically select the best payment option, taking into account their preferences and the preferences of the health care provider. In other words, the so-called “waterfall” system would consolidate payments going to a single provider and then determine whether the
money would be delivered via a virtual card, an electronic check or a printed check. “We were breaking ground then. No one was doing anything like this,” Davis said, noting that ECHO Health offers even more payment options today. The company got two major clients to start using the waterfall technology in 2010, and “the volume just exploded from there,” according to Kristopher Kern, vice president and chief financial officer. The result: ECHO Health’s revenue was more than 27 times higher in 2015 than it was in 2010. The size of its staff has grown, too. It employs 44 people today, up from 13 in 2010. Notice that the revenue is growing faster than the staff. That speaks to the scalability of the company’s software and its business model, according to Davis. He formed ECHO Health in 1997, after both Chase Manhattan Bank and Tandem Computers were acquired by other companies. The new owners had no interest in the health
care payments industry, so Davis offered them a deal: The companies could keep the $1 million in cash that remained on the joint venture’s balance sheet if he could keep the intellectual property. Though it turned out to be a fantastic bargain for Davis, times were tough in the early years. Like many entrepreneurs, he had to rely heavily on credit cards and his personal savings. But in the early 2000s, ECHO Health started winning more and more customers, since it allowed them to spend less time and money printing physical checks, shipping them and managing the process. HealthSCOPE Benefits came on as a client about five or six years ago, after ECHO Health had started expanding its capabilities. HealthSCOPE CEO Joe Edwards said the Westlake company’s technology gave him confidence that he would know “where every dollar was going.” The Little Rock, Ark.-based company gets daily records confirming the location of those dollars. “The money is taken care of. There are no loose ends,” he said. He also lauded the system’s scalability. Davis is really hoping to see just how scalable the system is. By the end of 2016, ECHO Health expects to be processing claims at a run-rate of $18 billion per year. And in 10 years, the company aims to hit that dollar figure Davis has been preparing for since the ’90s: $100 billion in claims processed per year. “We’re not even close to that now, but we could do that $100 billion if we had to,” he said.
Millennials, it’s time to meet Generation Z BY DOUGLAS J. GUTH clbfreelancer@crain.com
When college graduate Rachel Nicholson joined brand development firm Studio Graphique as a full-time design consultant last June, she heard all the jokes about fetching coffee and the other less-thanfulfilling tasks those new to the workforce have to endure. However, like many of her contemporaries in Generation Z — classified by many as those born in the mid-to-late 1990s, on the cusp of the so-called millennial generation — Nicholson desired meaningful work in an atmosphere that supported her talents as well as her opinions. Nicholson, 22, said she has received all she could want and more in her eight months with the design company based out of Shaker Square. Among her recent assignments was creation of signage for the latest Progressive Field renovations. “I immediately felt like a team member that had a part in what the company was doing,” said Nicholson, who also interned with Studio Graphique in summer 2014. “I’m not just taking orders and producing someone else’s work.” The University Heights native’s workplace wishes are echoed by other newly minted grads ready to SEE GENERATION Z, PAGE 19
CONGRATULATIONS Newly Elected Officers and Board Members of Cleveland Plumbing Contractors’ Association
Daniel Miller, Vice President Miller Plumbing and Heating Co.
Terry Bumgarner, Treasurer Coleman Spohn Corp.
John Marotta Chairman of the Board Ridge Plumbing Inc.
Jeffrey Epstein, Board Member Commerce Plumbing
Michael J. Gallagher Board Member John F. Gallagher Co.
James J. Roddy, Jr. President of CPCA President of Northern Ohio Plumbing Co., Inc.
James E. Jones, Board Member Jones Technologies Enterprises, Inc.
Layne Kendig, Board Member Relmec Mechanical, LLC
Timothy Lavelle Board Member Gorman-Lavelle Corp.
THE CLEVELAND PLUMBING CONTRACTORS’ ASSOCIATION, INC.
950 Keynote Circle Suite 40 Cleveland, OH 44131 Phone: 216.459.0770 www.mapic.org/members/cpca
Scott Wallenstein Board Member Neptune Plumbing and Heating Co.
Keith Willkomm Board Member United Mechanical Contractors, Inc.
Thomas Wanner Executive Director
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Our customers say we’re …
ADVISER: Julie Boland
Asking the right questions Momentum is on Cleveland’s side. We’re experiencing an uptick in economic and cultural growth. Our city hosted the 2013 National Senior Games and the 2014 Gay Games, we’ve seen new jobs created in the health care and technology industries, and we’ll be welcoming the Republican National Convention this summer. Cleveland, let’s embrace these changes. Let’s prove every day — despite the naysayers — that we are and will remain a center of industry and culture in the region, the country and the world. To do that, we can’t just use the successful formulas from the past. The world continues to speed up. If we are to gain ground, we need to do much more. We need to ask the right questions. Not just the same old questions that get us to the same old answers — new questions, better questions. When we ask better questions, we challenge ourselves, inspire others and unlock new solutions. With better questions, we can usher in the kind of innovation that will keep our businesses, our city and our region leading the way into the future. Best of all: It’s easier than you think.
Be one step ahead As a business leader, start by identifying the current trends affecting your market. Ask yourself and your teams: “What are the major opportunities and threats facing our clients?” and “What evolving technologies are capable of disrupting our business?” The answers to these questions will help you gain foresight and push for continual improvement. Complacency has never been a successful business strategy. Prepare for inevitable changes and you’ll be better prepared to capitalize on them. This is only part of the equation, however. You must also think about what might happen along the way. Here are just a few examples of future-facing questions you should be asking: z What are the emerging trends that will significantly impact our future growth potential? z How will cyber threats continue affecting our day-to-day operations? z How and where is the need for our products/ services evolving? z Where will we find the best talent to help execute our strategy?
Better questions, bigger issues Sometimes, asking what seems like an obvious question is necessary, but if you build in the tension of choice, it can break us out of our usual thought processes and lead to new insights. For example: “What are the tough decisions we are making between short-term success and sustainable growth?” Here, you may discover where your priorities lie, uncover conflicting priorities and pinpoint setbacks. Answering this question forces teams to dig for the root of the issue and find a better out-
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come. And a really good question will lead to many more. Questions like “What are the big issues we are navigating and how are we handling them?” can lead to “Is there a better way?”, “Are these issues really as important as we think?” or “How are we defining success?” While you may not always have the answer, probing pain points (rather than avoiding them) may lead teams to achieve stronger results. Here are more tough questions to ask yourself and your teams:
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But why? “Why” questions are the scariest to ask because we are typically uncomfortable questioning leadership or long-standing practices. Yet having a “Why?” mentality in business can help you dig deeper and assess organizational practices and issues on a more profound level. Asking “Why do we continue using this same process?” or “Why do we have success with method X over method Y?” will lead to better thinking. Perhaps the most daunting part of asking “Why?” is the very different answer you will inevitably receive from different stakeholders. Being direct and negotiating conflict may feel like you’re disrupting balance in the office. The truth is, issues can never be resolved if they are not discussed. Innovation can come from the most unlikely places, and asking hard questions, then debating various solutions, may actually strengthen relationships. It will certainly help you identify your most valuable assets, people and processes. Like the city we work in, we must be bold, disruptive and thought-provoking in order to continue advancing. We must look ahead, dig deeper and invite discussion for greater examination. Cleveland leaders, it’s time to ask yourselves, “Am I asking the right questions?”
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*U.S. News & World Report Ranking
CONTINUED FROM PAGE 15
A unique destination
adapting to what our customers are telling us.” Andrew Zelman, 33, visits the downtown Heinen’s a couple of days a week for lunch or to grab an easily prepared meal. For Zelman, it’s a matter of convenience, as his office at the Euclid Media Group is nearby, while his residence at the Ivory on Euclid is next door to the bank-turned-grocery. “There was such a big hole on that corner,” Zelman said. “Now it’s both a grocery store and an attraction.” Zelman, who has lived downtown with his wife, Shannon, for three years, previously shopped at the West Side Market or Constantino’s Market in the Warehouse District. A centrally situated, full-service shopping experience is critical for a metro aiming to increase its population to 25,000 within 10 years, he believes. “This store is another checkmark that Cleveland didn’t have previously,” Zelman said.
Heinen’s has no current plans to expand into other urban centers, according to its owners. Instead, the company will take additional steps in making its downtown store a unique destination. A second-floor mezzanine, for example, will continue to be a wineand beer-tasting area with cafe tables and banquets. While traditional grocery shelves and aisles draw the everyday shopper, area office workers can enjoy lunch under a stained glass-topped ceiling as live music drifts down from above. Cleveland resident Cory Johnson, 26, made his first trip to the new facility on a Saturday afternoon in late January. Johnson came to buy groceries but stayed to enjoy a glass of wine while gazing at the store’s distinctive architecture and artwork. “This is bringing a culture and sophistication downtown,” Johnson said of the refurbished 1908 Cleveland landmark. The $10 million-plus store can
also serve as an anchor for a population expected to balloon to 18,000 within the next two years, said Michael Deemer, executive vice president of business development with the Downtown Cleveland Alliance. More than 300 apartment units came online in 2015 alone, with mixed-use residential projects including the 925 Building on Euclid Avenue currently in the works. Retail development like a new furniture store on East Ninth Street and a 4,200-square-foot clothing and activewear store next to Heinen’s can be viewed as spinoffs of the urban supermarket, Deemer maintained. “The store’s presence is becoming a key piece to the amenity package Cleveland offers,” he said. Preserving the building’s historic nature and charming design does not mean the Heinens have lost sight of the bigger picture, however. “We’re still a grocery store,” Tom Heinen said. “You can’t develop downtown living without the basics. We’re very excited to be here.”
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FIG. 4-B
TAX TIPS: Carl Grassi
native to dividends. The most significant tax issue for a C corporation is when the business is sold in a transaction structured as an asset sale. In these transactions, the C corporation pays tax on the gain at ordinary income rates, and a second level of tax is paid by the shareholders on the distribution of the sales proceeds. Assume the assets of a C corporation (with no basis in its assets) are sold for $10 million. The tax on the sale would likely be close to $3.5 million for the C Corporation. The shareholders would in most cases pay another 23.8% tax on the aftertax proceeds from the sale, for an additional tax of nearly $1.55 million and a total tax bill of more than $5 million — more than half of the sales price for federal taxes alone. Compare this to a probable total federal tax of $2.38 million if the business was taxed as an S corporation. If the owners are active in the business, the tax bill would be even lower. A common reason for not making an S election is exposure to the BIG tax that S corporations pay if assets that were held when the business was a C corporation are sold during a period of time, historically 10 years, following the S election. While Congress has made changes to the 10-year waiting period from time to time over the last decade, often these changes were made at the very end of the year, when it was much too late to do any tax planning. The 2015 Act, however, permanently reduces the waiting period to five years. Even if the five-year timeframe is too long for the exit plan of a particu-
GENERATION Z CONTINUED FROM PAGE 16
tackle their first job. Compared to the current crop of millennials, research shows that members of Gen Z choose opportunities for career growth and work-life balance over salary when selecting a business to work for. In addition, this demographic prefers in-person communications with managers as opposed to emailing or instant messaging. While Cleveland-area employers are still hiring older millennials, the opportunity to catch the next wave of workers means responding to their aspirations in some important areas, observers said. Entering the working world postrecession has made Generation Z more career-oriented and better prepared for life after college, according to a recent study from research firm Millennial Branding, which queried about 1,000 individuals ages 16 to 32 across 10 countries. About one-third of Generation Z respondents (34%) said they were most motivated by opportunities for advancement, followed by more money (27%) and meaningful work (23%). This compares with 38% of Generation Y participants — those commonly referred to as millennials, typically born between the 1980s and the year 2000 — who cited money as their top incentive. Gen Z also has a slightly stronger desire for managers to listen to their ideas (61%) over Gen Y (56%). “Owning their career and controlling their fate is relevant to this gen-
eration,” said Cary Chaitoff, director of marketing at Skoda Minotti, a certified public accounting and consulting firm headquartered in Highland Heights with offices in Akron and Tampa, Fla. “They want to be heard and have their voices be acted on.” The company engages in an extensive college recruitment effort that includes internships for juniors and seniors. Skoda Minotti’s operational transparency, promoted with respect to the millennial craving for instant info via social media, has helped result in an 80% retention rate over the last two years from internship to fulltime work. Chaitoff expects that trend to continue moving forward. “This (Generation Z) grew up with information at their fingertips,” he said. “They want to understand the culture they’re going to be growing into.” Contrary to the assumption that younger workers want constant connection to technology, 51% of Generation Z participants in the Millennial Branding report said they prefer face-to-face interactions over the less-than-personal electronic variety. Accounting giant Ernst & Young provides those connections as early as a prospective employee’s freshman year of college, said Joe Matuszewski, an assurance partner and recruiting leader for the company’s Northeast Ohio offices. After identifying a potential staff member, the firm maintains that rapport through campus-based workshops on resume writing, thinking with a global mind-
Successful in business
Family person
Consider classifying as an S corporation Congress’ year-end legislative bonus to business owners in the form of the Protecting Americans from Tax Hikes Act of 2015 included the permanent enactment of several beneficial tax provisions that previously had only been extended from year to year. The permanent enactment of one such provision — the reduction in the built-in gains (commonly known as BIG) recognition period — should cause C corporation business owners to consider an S corporation election for 2016. C corporations can be tax efficient in years that dividends are not paid. In fact, tax rates for C corporations are in most cases lower than the rates for S corporations. This tax efficiency for C corporations is lost, however, if dividends are paid by the C corporation, because dividends will generate a second level of tax to be paid by the shareholders at rates as high as 23.8%. In the early years of a business where profits are put back into the business, C corporation status may make sense. When the business matures and profits are available for distribution, the second level of tax on dividends makes C corporations very inefficient from a tax standpoint. This might cause the business owner to hold the cash in the corporation to avoid the double tax, but if a C corporation accumulates too much cash, the Internal Revenue Service will assert a penalty for accumulating earnings beyond the needs of the business. Other methods of taking profits out of a C corporation, such as salaries to shareholders/employees, are not an effective long-term alter-
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Grassi is president of McDonald Hopkins LLC. lar business, the amount of gain subject to the BIG tax is limited to the gain built into the assets at the time of the S election. When the company sells its assets for $10 million in 2020 (prior to the expiration of the five-year BIG recognition period), the BIG tax is only applicable to the $3 million in “built-in gain” that existed in 2016. The $7 million balance of the gain is taxed only once at the lower individual capital gains rates, even when the proceeds from the sale are distributed to the shareholders. Of course, there are very specific requirements that must be satisfied for a business to qualify to make an S election, but many closely held businesses will satisfy these requirements. An S corporation election for 2016 is due March 15. Because of the reduction in the BIG recognition period, this is a good time to review those requirements and consider or reconsider the S election. set and dining etiquette. “We’re building a relationship with students while educating them about our brand and the value of working here,” Matuszewski said. Explorys, a downtown health care intelligence cloud company formed out of the Cleveland Clinic in 2009, hosts an annual recruiting event to draw mission-oriented software engineers more interested in improving quality of life than selling a product. “Being on the leading edge of technology is exciting for them,” said CEO Steven McHale. “This is an environment where these kids can thrive.” Members of Generation Z are expected to be even more entrepreneurial, loyal and realistic in their approach to careers when matched up to millennials. Ernst & Young offers new employees continued education via “EY and you (EYU),” said Matuszewski. The program teaches general business skills along with career development, with counselors available on-site for instant feedback and assistance. “On campus, we’re mentoring future professionals,” Matuszewski said. “But when they join us, EYU is a framework that’s front and center throughout their careers.” Ultimately, employers have an opportunity to build retention by addressing the factors that motivate a new generation to work hard and stay on board. Nicholson of Studio Graphique felt welcomed at her firm right from the jump, and has no plans on leaving any time soon. “People are very nurturing here,” she said. “I knew this would be an environment where I could grow.”
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35th Anniversary
35th Anniversary VOL. 36, NO. 47
35th Anniversary VOL. 36, NO. 47
CLEVELAND BUSINESS VOL. 36, NO. 47
PROMOTE.
NOVEMBER 23 - NOVEMBER 29, 2015
ALLYSON O’KEEFE, 37 Partner; Porter Wright Allyson O’Keefe started her legal career at Porter Wright in 2004 after completing a summer internship there as a Case Western Reserve University law student. Since then, she has worked on many significant deals across Cleveland, including Flats East Bank, The Metropolitan at the 9, Uptown in University Circle and Steelyard Commons, and has been promoted to real estate partner. “Young professionals who live downtown are so excited about the city,” said O’Keefe, a Columbus native who lived downtown for 10 years before moving to Rocky River. “The ones who aren’t from here are often more excited about it. When you move here from somewhere else, you don’t take it for granted.” When O’Keefe is not working or spending time with her husband and two children, she can be found volunteering on the boards of nonprofit organizations and watching college football. WHAT INSPIRES YOU ABOUT YOUR WORK? Just seeing what Cleveland has gone through in the time that I’ve been here, there’s obviously a lot of excitement around real estate development. I started in 2004 when we were crazy busy with development. That was sort of the boom from ’04 through ’08. I saw it go through the downturn, then I saw it rise again, even stronger than before locally.
Why not?
MANY OF THE PROJECTS YOU WORKED ON ARE MIXED-USE URBAN PROJECTS. IS THAT AN AREA OF EXPERTISE? Yes, definitely. Real estate is extremely interesting because every deal is different. You can never get bored because there’s so much variety there, from tax credits to historic renovations, from ground-up development to rehab, from mixed-use to residential. HOW WOULD YOU DESCRIBE YOUR LEADERSHIP STYLE? I definitely believe in leading by example. I expect the people with whom I work, my associates, to work hard, and they see me working very hard. For me, it’s all about working hard and doing good work. WHAT OTHERS ARE SAYING: WHAT WAS IT LIKE TO WORK WITH O’KEEFE ON THE FLATS EAST BANK PROJECT? “Allyson is extremely bright and quick witted, but what truly distinguishes her from most successful attorneys is her exceptional people skills. She has an uncanny ability to encourage the ‘adversaries’ in her negotiations to work in concert with her to achieve win/win solutions to difficult problems,” said Scott Wolstein, CEO of Starwood Retail Partners and co-developer of the Flats East Bank project. — Lee Chilcote
Reprinted with permission from the Crain's Cleveland Business. © 2015 Crain Communications Inc. All Rights reserved. Further duplication without permission is prohibited. Visit www.crainscleveland.com. #CC15040
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Business of Life
A wine built by winter BY JEREMY NOBILE
T
he traditionally harsh winters in Northeast Ohio are warmly welcomed by at least a handful of people: Those who see the season’s first deep freeze as a harbinger of the ice wine season. The sweet libation can be enjoyed year-round, of course, despite being most suited for special occasions and particular palates. Ultimately, though, it’s because of the unique climate in places like the Great Lakes that ice wine even exists. Northeast Ohio is among only a couple regions in the country, and even the world, where grapes can be harvested in a fashion true to the ice wine style. Roughly twice as sweet as an average sweet red, ice wine is the epitome of the narrowly defined dessert wine category. Considering that, Donniella Winchell, executive director of the Ohio Wine Producers Association, suggests that ice wine is the dessert. However, ice wine, which is particularly fruity and aromatic, is generally paired with similarly sweet treats like chocolate almonds or cheesecake, for example. It might also be enjoyed with other rich dishes, like foie gras, Winchell said. The taste is unique and may be off-putting to some, but even fans tend to drink only a little at a time. It’s thicker compared to other wines and usually served cold.
A pour is usually only a couple ounces for a couple reasons. The taste can be intense, and it’s inherently more expensive. It’s generally not a wine most will be quaffing by the glass during that relaxing summer afternoon on the deck. Gene Sigel, owner of South River Vineyard in Geneva, has been producing ice wine since 2001. He said that around here bottles may go for $28 to $50. In Canada, where ice wine is even more popular compared to the United States, they’re more like $75-$100 each. Some of the most expensive wines hail from Germany. The naturally occurring frost is the key to the process. That’s why ice wines aren’t coming from California. Farmers typically harvest all their grapes lest they die in the frost, but wineries in areas where winters come fast and cold, like Northeast Ohio, may leave some grapes on the vine to use for ice wine because they’ll freeze quickly and without spoiling. Sigel harvested ice wine grapes in January — a function of the uncharacteristically mild winter we’ve had so far that actually caused some farmers to lose some, if not all, of their fruit this season to spoilage. Grapes with tough skin are best suited to withstand the shock of the temperature swing. Sigel uses Vidal Blanc or even Concord. The former has been the most popular, he said. The latter, by comparison, has a more jam-like taste compared to the former and a less-dry sweetness.
Once frozen, the dehydrated grapes as hard as marbles are smashed using a special, wood basket press, releasing an exceptionally sweet, syrupy, concentrated juice. There’s also no cellar process with ice wine, which is what creates the unique features of other wines. The juice is simply aged until fermented and bottled. A small but devoted following for the wine has materialized here since a variety of Northeast Ohio wineries began producing it within the past 15 years or so. That’s when interest in ice wine began to trickle down from Canada, Sigel said. At Sigel’s winery, only a tiny sliver of all the grapes grown are collected in winter for ice wine. But he estimates ice wine sales still make up about 10% of all retail sales — he doesn’t ship out their ice wines and only sells the wineries two ice wine varieties from the Geneva store. Interest has definitely grown over time, Sigel said. For example, in 2003, Northeast Ohio wineries joined together for the first Grand River Valley Ice Wine Festival. The event has grown from just one Saturday afternoon in March to three. This year’s festival will be held from noon to 5 p.m. on three Saturdays next month — March 5, 12 and 19. “The festival was started as a way to get people out to the wineries in the off months,” Sigel said. “It’s definitely a specialty for our region.”
We don’t just see people for who they are; we see
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Above, the vines that are used for growing the ice wine grapes at South River Vineyard in Geneva, just a few weeks after harvest. Below, owner Gene Sigel stands in front of the special presses used for making the ice wine. (Rebecca R. Markovitz photos)
In the past nine months,
98% of kids participating in United Way-funded literacy programs are now reading at grade level.
them for who they can become.
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Source Lunch The same sense of altruism that led Thomas Campanella to serve as a Cleveland City Councilman years ago drove him to a 35-year career in health care. Campanella, now the director of the health care MBA program at Baldwin Wallace, said politics turned out not to be for him, but consulting work gave him experience and a start in health care, which he calls the best of both worlds — alturism and business. His health care experience ranges from legal to insurance to financial to education. Though he stepped back from formally teaching at Baldwin Wallace last semester, he remains involved in the classroom. There, and in his role as director, he continues to help train leaders and future leaders in health — Lydia Coutre care.
What has changed the most in your 35 years in the health care industry?
What are the biggest issues they’re trying to address in the classroom and in the industry?
It has become a business with winners and losers from an organizational standpoint, but it also has advanced tremendously, and I think the speed of it has been just phenomenal in different ways to be able to address the big three of health care: costs, access to care and quality.
Well, everything’s different, but I think the cost side of the equation is a major part of it. Because if you’re a health insurance company, for example, and you work there, you know the cost side because employers have to pay for it. … If you’re a hospital or a physician group, you know funding for health care for Medicare employers and that there’s a big strain in regards to how much money is available to fund it. There’s not unlimited dollars, so you need to find a way to do it better. And then within that context, the quality side of it where now that we’re finally changing the way we pay and trying to focus more on value and health and wellness, there’s a focus of hey, if we can keep people healthy, it’s a classic winwin.
Is there a specific set of experiences or goals that make people a good fit for the program? All of our students work in the health care industry, first of all, so we don’t have kids right out of college that don’t have a job in the industry. Diversity is probably our biggest value … . We’ll have people with strong clinical backgrounds, sales, marketing, health insurance, pharmaceuticals, pharmacists, people in public policy, government relations — all different backgrounds. And we sort of get them in the classroom where basically they’re bouncing off of each other, which really makes it even that much more interesting. About 50% of the work is teambased, so you’re with people with different backgrounds. We’re really breaking down the silos of healthcare. People that normally wouldn’t interact with each other in health care are now interacting, so I think it even adds to that much more excitement, not just in the classroom but for what these people can do after they graduate.
Where do you hope to see this program progress? We’re evaluating — I’m not saying I want to do this — online and hybrid over and above what we were doing. The classroom experience has been so rich and in getting feedback from alumni, they really don’t want to water that down. So we’re very sensitive about doing that.
Thomas Campanella
Any advice for people in the health care field who are considering stepping into the administrative, management or business side of health care? As they look at our program or any of the others that are out there, a couple of things. One, as you can see from the stock market and what it’s going through right now, investing in the market can be a real challenge. But I think over time, based on long-term returns, investing in yourself is the most important thing, and so I think that’s really critical. One form of investment obviously is education. There’s different ways to do that. I think as you evaluate the different programs, one of the key things you need to do is get an understanding of the students that are in the program. Because your fellow students really set the stage overall for the quality of the program. … And I think it’s important to talk to alumni and current students to get their feedback, especially the alumni as to what they were able to do. That’s one area we’re really proud of is our alumni are in leadership positions throughout health care in Northeast Ohio and outside of Northeast Ohio, and I think that’s an important thing to be aware of.
HEALTH CARE
FIVE THINGS: WHAT FICTIONAL CHARACTER DO YOU IDENTIFY WITH? Peter Pan. I don’t want to grow up. I don’t want to give up.
WHAT BOOK ARE YOU READING?
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“The Quest” by Nelson DeMille. (He reads two or three at once. One on tape in his car, another on his nightstand and one on his Kindle while he’s on the treadmill.)
The meal
WHAT DID YOU THINK YOU’D GROW UP TO BE?
The vibe
A history professor maybe at a high school level.
MORNING ROUTINE? I work out in the morning. That’s how I start my day. (Three days a week he plays full-court basketball at 6 a.m.)
SKILLS OR HOBBIES? Basketball and tennis are my sports. And then genealogy, which I really love.
Bourbon-glazed salmon with wild rice, sauteed vegetables and a decaf coffee; spicy black bean veggie burger with coleslaw and an iced tea.
The small brewpub fits in well with a small college town. The restaurant, which has a second location in Madison, was pretty quiet during a weekday lunch with a couple of patrons nursing drinks at the bar and several seated for lunch. Cornerstone’s menu offers a decent selection, from pizza and burgers to some seafood and a couple of vegetarian options.
The bill $28.05, plus tip
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PODCAST
it’s done is killed the personality of radio.” To which Jackson quickly added, “They train these guys to say, ‘Hey, what do you think? Call!’ No! We could have a live phone line (during podcast recordings). We’d never answer it.”
CONTINUED FROM PAGE 1
stations is the podcast lets them say things they couldn’t in a more traditional format. “The one thing about the podcast, I would have buddies who have known me my whole life and they’d hear me on the radio and be like, ‘Yeah, that’s cool, but that’s not you,’ ” Knott said. “They hear one podcast and they go, ‘Oh my God. That’s you.’ It’s helped because people get to know us.”
No ‘threat’ to radio?
Bulking up its audience By day, Craig Lyndall works in the family business, Lyndall Insurance in Chargin Falls. At night, he is the first recipient of the latest A to Z podcast. “That’s half the fun for me,” said Lyndall, who has hosted more than 450 podcasts for Cleveland sports website Waiting for Next Year and has a music-centric Scene podcast. “I feel like I get to listen to them first.” Once Lyndall is sent the latest A to Z episode, he checks the audio levels, “tunes them up” and posts the show on iTunes. That’s often on Monday
night. By Tuesday morning, Knott is busy retweeting and responding to podcast reactions from some of his 28,600-plus Twitter followers. Lyndall said the monthly listeners are already in the “tens of thousands.” “I hope it goes national at some point,” Lyndall said. “I think it’s great. They’re building an audience. They know how to do radio, but they’re building reps in the podcast world.” Radio is a bit of a sensitive subject
for Knott, who got his start in the business. Knott still works occasionally for WTAM-AM, 1100, and Jackson is part of the Browns’ pregame crew on WKRK-FM, 92.3, but they look at podcasts as a medium at which they can do and say what they want. “It’s not fun the way the business is set up right now,” Knott said. “I’m not blaming anybody. It is what it is. You have three companies that own every freaking radio station. What
REAL ESTATE Phone: (216) 522-1383 Fax: (216) 694-4264 Contact: Denise Donaldson E-mail: DDonaldson@crain.com
Anthony Lima, a 92.3 personality who has made a couple appearances on the A to Z podcast, works in the medium his friends often criticize. He doesn’t view independent podcasts as a threat to traditional talk radio. “If anything, it can be a supplement to what’s already out there,” he said. “Our shows (on The Fan) are podcasts now. We’ve evolved.” Aaron Goldhammer, ESPN Cleveland’s program director and a lateafternoon co-host of the Golden Boyz on WKNR-AM, 850, rattled off a list of podcasts he listens to that was large enough to fill almost every hour in the day. He said he’s an A to Z fan, and, like Lima, he takes a there’s-enough-room-for-everyone approach to podcasts and talk radio. “There’s such an insatiable thirst for sports content in Cleveland,”
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Goldhammer said. “I don’t see it as a threat. We don’t see ourselves as traditional radio, either. Most of the people who listen to us aren’t listening on traditional radio anyway.” What Jackson and Knott bring to their podcasts is so nontraditional, however, that Lyndall and others believe A to Z could eventually gain a national following. In some ways, they already do — Jackson said 16 people in Hawaii listened to their breakdown of the Golden State Warriors’ destruction of the Cavs on Jan. 18. What’s more certain is Jackson and Knott are going to keep trying to increase their audience and acquire more sponsors. The current partners are on sixand 12-month trials, Jackson said. A bulked-up website, with a writer or two, could be a possibility. And now that they’re “making real money,” they soon will sign paperwork to start a podcast LLC. “That’s a little bit scary for us,” Jackson said. “But we’re very much open to this thing being big. The door is open for nontraditional media, for podcasts.” How big it gets, they have no idea. They just know it will be on their terms, and in their voices.
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Crain’s Executive Recruiter Job Opening: AIA Cleveland Executive Director The Board of the Cleveland Chapter of the American Institute of Architects is seeking a qualified candidate to fill an immediate opening for Executive Director. Our ED is the media-relation face of the chapter locally and the day-to-day manager of active volunteers to ensure that AIA Cleveland professionally fulfills its mission. For more information, please visit our website: www.aiacleveland.com/ executivedirector. We invite strong candidates to apply by 5pm on Sunday, February 28, 2016 by sending their resume and references to EDSearch@aiacleveland.com. Please no phone calls. Questions to same email address.
PUBLIC NOTICE Application has been made to the Federal Communications Commission (FCC) for a new communications structure along railroad right of way near Mile Post B 185.40, Cleveland, OH 44113. The FCC Form 854 file number is A0996643. The structure type is an non-lighted monopole with a total height including antenna of 63 feet to tip. Interested persons may review the application by going to www.fcc.gov/asr/applications and entering the Form 854 File Number. Interested persons may raise environmental concerns about the proposed structure by filing a Request for Environmental Review with the FCC. The FCC strongly encourages interested parties to file online any Requests for Environmental Review; instructions for making such filings can be found at www.fcc.gov/asr/ environmentalrequest , or by paper copy to FCC Requests for Environmental Review, Attn: Ramon Williams, 445 12th Street SW, Washington, DC 20554.
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LAW
MANUFACTURING
MANUFACTURING
Ted M. Traut
Ward J. Dumm
Nick N. Ezzone
Matthew P. LoPiccolo
Shareholder
Vice President, Continuous Improvement and Quality
Vice President, Global Sourcing and Logistics
Vice President, Customer Service and Supply Chain
Swagelok Company
Swagelok Company
Swagelok Company
Weltman, Weinberg & Reis Co., LPA Weltman, Weinberg & Reis Co., LPA is proud to announce the election of Ted M. Traut. Mr. Traut focuses his practice on general consumer collection matters with a particular emphasis on insurance subrogation services. A member of the National Association of Subrogation Professionals, he is a Certified Subrogation Recovery Professional. Mr. Traut is licensed in Ohio and Pennsylvania and admitted to practice before the U.S. District Court (N. District of OH) and the Sixth Circuit Court of Appeals.
Swagelok Company announces the promotion of Ward J. Dumm to vice president, continuous improvement and quality. He is responsible for managing continuous improvement efforts, new technology, safety, and sustainability. Dumm joined Swagelok in 1991 and has held leadership positions in engineering and operations management. Most recently, he served as director of manufacturing strategies and engineering systems.
MANUFACTURING
Nick N. Ezzone has assumed the newly created role of vice president, global sourcing and logistics, Swagelok Company. In this role, Ezzone is responsible for all global procurement responsibilities including component, raw material, and expense purchasing, as well as supplier development and scheduling. He also leads the corporate warehouse and logistics teams. Most recently, Ezzone served as vice president, customer service and supply chain.
Matthew P. LoPiccolo has assumed the role of vice president, customer service and supply chain at Swagelok Company. He is responsible for leading the areas of customer and technical service, supply chain planning, forecasting, inventory, and product data management. LoPiccolo served as vice president of information services and Chief Information Officer from 2007 to 2015 and successfully led the company's recent business systems transformation.
David E. Krabill
NONPROFITS
REAL ESTATE
Vice President of Information
Bridget DeLeon
Mike Corcoran
Services and Chief Information Officer
Grants Manager
Certified Property Manager
Vice President, Operations Swagelok Company
Swagelok Company
The Char and Chuck Fowler Family Foundation
Playhouse Square Real Estate Services
MANUFACTURING Timothy G Rosengarten
Timothy G. Rosengarten has been named vice president of operations with responsibility for Swagelok Company's general industrial manufacturing activities. Since joining Swagelok in 2006, he has held leadership roles in the organization's fitting services and valve services groups. Most recently, he served as vice president, continuous improvement and quality, where he established consistent metrics across the organization and continued the development of Swagelok quality methodology.
Swagelok announces the promotion of David E. Krabill to vice president of information services and Chief Information Officer. He is responsible for leading all functions within information services and optimizing the company's new enterprise resource planning business system. He joined Swagelok in 1992 and has held leadership positions in key areas, including human resources and customer service. Most recently, he served as director of information services strategy, governance, and architecture.
The Char and Chuck Fowler Family Foundation announces Bridget De Leon as the Foundation’s Grants Manager. She will manage the grant-making program, work on specialinitiatives, and represent the foundation in collaborations with grantees and other foundations. Ms. De Leon most recently served as the Grants Managerat the Saint Luke’s Foundation. Previous experience includes grant-making roles at the Mandel Foundation and the Morris and Gwendolyn Cafritz Foundation in Washington, DC.
Playhouse Square Real Estate Services is pleased to announce that Mike Corcoran has achieved the Certified Property Manager (CPM) designation through the Institute of Real Estate Management (IREM), considered to be among the industry's premier real estate management credentials. Corcoran has more than 15 years of experience of management and real estate experience. He joined Playhouse Square Real Estate Services in 2011 and currently manages five properties. playhousesquarerealestate.com
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who spoke with Crain’s said they believe GE is trying to sell its lighting unit, echoing comments that have been made by stock analysts. Why? For one, GE is trying to get out of other consumer-focused businesses. It sold NBC and GE Finance, and last month it struck a deal to sell its appliances unit to a Chinese company called Haier. Plus, the rising popularity of LED lamps is disrupting a business model that the industry has relied on since Thomas Edison invented the light bulb. The problem: Most light-emitting diodes won’t burn out for decades. So pretty soon, there won’t be much of a market for replacement bulbs.
Intelligent design But LEDs do have other advantages that could give GE other ways to make money. They’re essentially computer chips that emit light, so it’s easier to monitor them, control them and connect them to sensors and other electronic equipment. Thus, the Current business unit will use those capabilities to turn lighting into a service business. The goal of that unit — which includes GE’s solar, energy storage and electric vehicle operations — is to help
commercial customers transform how they use energy. Current is commercializing what GE Lighting previously held up as some of its promising technologies. For instance, GE is starting to help cities install LED streetlamps that could be used for all sorts of purposes, such as monitoring traffic, measuring snowfall and even identifying the location of gunshots. Current also aims to help retail stores use light to send Morse Code-style messages to the smartphones of customers as they walk through the store. GE is doing some innovative things on the consumer side as well, however. For instance, it has already released a line of bulbs that you can control with a smartphone, and it has developed bulbs that emit light specifically designed to help you wake up in the morning and fall asleep at night. GE Lighting also is “creating intelligent LEDs for homes that can sense and hear” — bulbs that will turn homes into “smart homes,” according to a statement from company officials.
Seeing the light? Even so, it will be hard for GE Lighting to replace the cash flow generated by the constant sale of in-
GETTY IMAGES
GE
candescent bulbs, according to Randy Reid, who runs a lighting industry website, www.edisonreport.net. Reid expects that many of GE Lighting’s “best and brightest” employees will join Current. He believes GE wants to sell the business, but a few factors could stop it from doing so. For one, Nela Park houses GE’s LED research and development team. So that team
Volume 37, Number 6 Crain’s s Cleveland Bus sines ss (ISSN 0197-2375) is published weekly at 700 West St. Clair Ave., Suite 310, Cleveland, OH 44113-1230. Copyright © 2015 by Crain Communications Inc. Periodicals postage paid at Cleveland, Ohio, and at additional mailing offices. Price per copy: $2.00. POSTMASTER: Send s Cleveland Bus sines ss, Circulation Department, 1155 Gratiot Avenue, Detroit, Michigan 48207-2912. address changes to Crain’s 210-0 0750 1-877-824-9373. REPRINT INFORMATION: 212-2
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could work with Current to develop new products for commercial customers. Plus, GE might have a hard time selling the lighting business for a decent price, given the challenges that the business faces, Reid said. Other big companies — including Philips and Osram — already are trying to sell their lighting units. Chinese investors had prepared to buy Philips’ lighting unit, but U.S. regu-
lators scuttled the deal. Could GE also find a buyer in China? Maybe one that wanted the GE brand? Maybe, but China’s economy is slowing, Reid said. Still, he noted that GE distribution channels might be valuable to other companies in the lighting business. Lighting industry veteran Bill Attardi said GE probably is asking itself whether it can be a player in the effort to digitize lighting without GE Lighting — the company with the hardware expertise. He thinks the answer is yes: They could do it by partnering with other companies. “They can cut deals with anybody,” said Attardi, who runs Attardi Marketing, an energy management firm in New Jersey. Terry McGowan believes that GE does place significant value on its Nela Park operation. McGowan is a former GE Lighting employee who now serves as director of engineering and technology for the American Lighting Association. He said that the company has turned Northeast Ohio into a worldclass “lighting hub” and would be reluctant to give up such an asset. He described how he gets lunch twice a month with groups of local GE retirees and lighting technicians. “How many other cities can you do that in?” he said.
Subscriptions: In Ohio: 1 year - $64, 2 year - $110. Outside Ohio: 1 year - $110, 2 year - $195. Single copy, $2.00. Allow 4 weeks for change of address. For subscription information and delivery concerns send correspondence to Audience Development Department, Crain’s Cleveland Business, 1155 Gratiot Avenue, Detroit, Michigan, 48207-9911, or email to customerservice@crainscleveland.com, or call 877-824-9373 (in the U.S. and Canada) or (313) 446-0450 (all other locations), or fax 313-446-6777.
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The List NAME THIS ADDRESS YEAR PHONE/WEB SITE
LOCAL SOFTWARE DEVELOPERS Ranked by full-time local employees NUMBER OF LOCAL FULL-TIME EMPLOYEES FT LOCAL 1-1-2016 1-1-2015 PROGRAMMERS INDUSTRY SPECIALIZATION
SOFTWARE PRODUCTS
YEAR FOUNDED
TOP LOCAL EXECUTIVE TITLE
1
Hyland, creator of OnBase 28500 Clemens Road, Westlake 44145 (440) 788-5000/www.hyland.com
1,515
1,339
172
Health care, higher education, government, financial services, insurance, manufacturing
OnBase, enterprise content management software suite
1991
Bill Priemer president, CEO
2
MRI Software LLC 28925 Fountain Parkway, Solon 44139 (800) 321-8770/www.mrisoftware.com
345
334
102
Property and investment management solutions for the global real estate industry
Version X, MRI Commercial Management, MRI Investment Management, MRI Residential Management
1971
Patrick Ghilani CEO
3
TMW Systems Inc. 6085 Parkland Blvd., Mayfield Heights 44124 (216) 831-6606/www.tmwsystems.com
310
300
116
Transportation management and logistics software, fleet maintenance management
TMWSuite, TL2000, TruckMate, Innovative, TMW Business Intelligence, Netwise, ExpertFuel, TMT Fleet Maintenance
1983
David W. Wangler president
4
Snap-on Business Solutions Inc. 4025 Kinross Lakes Parkway, Richfield 44286 (330) 659-1600/www.sbs.snapon.com
245
245
80
Global electronic parts catalogs
Global EPC
2006
John A. Wolf president, OEM Solutions
5
OEC 4205 Highlander Parkway, Richfield 44286 (330) 523-1800/www.oeconnection.com
218
210
63
OEM distribution networks, serving dealership and repair customers
D2DLink, CollisionLink, RepairLink, ConsumerLink, MyPriceLink
2000
Charles Rotuno president, CEO
6
Brandmuscle 1100 Superior Ave., Suite 500, Cleveland 44114 (216) 464-4342/www.brandmuscle.com
208
176
NA
Local marketing software and services
BrandBuilder, Instant Impact, DesignTracker
2000
Clarke Smith chief strategy officer
Explorys, an IBM Co. 8501 Carnegie Ave., Suite 200, Cleveland 44106 (216) 767-4700/www.explorys.com
200
140
43
Health care data analytics
Explorys Platform, EPM: Explore, EPM: Measure, EPM: Registry, EPM: Engage
2009
7
Charlie Lougheed, president, chief strategy officer; Stephen McHale, CEO; Anil Jain, M.D., chief medical officer
8
Fleetmatics USA LLC 31500 Bainbridge Road, Solon 44139 (216) 896-7243/www.fleetmatics.com
157
150
NA
Delivery and service, cable and telecommunications, HVAC and plumbing, construction
Fleetmatics REVEAL, Fleetmatics WORK
2004
Matt Brett vice president, global customer care
9
Turning Technologies 255 W. Federal St., Youngstown 44503 (330) 746-3015/www.turningtechnologies.com
143
132
58
Instructional, assessment delivery and data collection solutions
TurningPoint, TurningPoint Cloud, TurningPoint Lite, TurningPoint Lite Plus, ExamView Assessment Suite
2002
Mike Broderick, CEO, co-founder; Greg Simmons, sr. v.p., chief sales officer; Dave Kauer, president, COO
10
Foundation Software 17999 Foltz Industrial Parkway, Strongsville 44149 (800) 246-0800/www.foundationsoft.com
129
113
25
Job cost accounting software for the construction industry
FOUNDATION construction accounting software, FOUNDATION mobile, FOUNDATION SaaS, ThinkHR
1985
Fred J. Ode CEO, chairman, founder
11
1 EDI Source Inc. 31875 Solon Road, Solon 44139 (440) 519-7800/www.1edisource.com
82
72
7
Software development
Electronic Data Interchange (EDI) software includes EDI/PX, EDI/HQ managed or SaaS
1989
John Onysko CEO
12
MIM Software Inc. 25800 Science Park Drive, Suite 180, Cleveland 44122 (216) 455-0600/www.mimsoftware.com
78
70
NA
Medical imaging
MIM, Mobile MIM, MIMcloud, MIM Symphony, MIM Encore, MIM Maestro
1999
Andrew Nelson CEO
13
Software Answers Inc. 6770 W. Snowville Road, Suite 200, Brecksville 44141 (440) 526-0095/www.progressbook.com
58
58
21
Web-based K-12 student, classroom, school and district management software
ProgressBook Suite: GradeBook, ParentAccess, StudentInformation (SIS), SpecialServices, DataMap, VendorLink
1994
Paul Chaffee CEO
14
Tribute Inc. 1696-F Georgetown Road, Hudson 44236 (330) 656-3006/www.tribute.com
54
49
15
Industrial distribution, fluid power, fluid handling, hose, conveyor belt, gaskets, seals
Tribute Software, TrulinX Software
1981
Timothy Reynolds president, CEO
15
Dakota Software 1375 Euclid Ave., Suite 500, Cleveland 44115 (216) 765-7100/www.dakotasoft.com
50
40
17
Environment, health and safety
ProActivity Suite, Dakota Profiler, Dakota Auditor, Dakota Tracer, Dakota Scout, Dakota Metrics
1988
Reg Shiverick president
16
New Innovations Inc. 3540 Forest Lake Drive, Uniontown 44685 (330) 899-9954/www.new-innov.com
49
48
13
Medical
Residency Management Suite
1995
Steve Reed CEO
17
BuyerQuest Inc. 343 W. Bagley Road, Suite 300, Cleveland 44017 (866) 937-0670/www.buyerquest.com
48
25
NA
NA
NA
2010
Jack Mulloy CEO
17
FeneTech Inc. 260 Campus Drive, Aurora 44202 (330) 995-2830/www.fenetech.com
48
45
18
Fenestration ERP, sales automation
FeneVision
1996
Ronald W. Crowl president, CEO
19
Main Sequence Technology Inc. 4420 Sherwin Road, Hamilton Hall, Willoughby 44094 (440) 946-5214/www.pcrecruiter.com
47
46
10
HR applicant tracking, recruiting CRM, staffing software
PCRecruiter, PCRecruiter Resume Inhaler, PCRecruiter Outlook Portal
1998
Martin H. Snyder, president Gretchen A. Kubicek, CFO
20
e2b teknologies Inc. 521 Fifth Ave., Chardon 44024 (440) 352-4700/www.e2btek.com
44
37
12
Accounts receivable credit and collections software, enterprise resource planning
Anytime Collect by e2b teknologies; custom development for Sage 100 ERP, Sage ERP X3, Sage 500 ERP and Epicor ERP
2001
Bill Henslee, CEO Lynne Henslee, president
21
Data-Basics Inc. 600 Broadway Ave., Cleveland 44146 (216) 663-5600/www.databasics.com
43
43
15
Service management and accounting
Sam Pro Enterprise, TechAnywhere for Android, DBAnalytics, CRMAnywhere
1974
Arthur K. Divell CEO
21
StreamLink Software 812 Huron Road, Suite 350, Cleveland 44115 (216) 377-5500 /www.streamlinksoftware.com
43
37
9
Software
AmpliFund, BoardMax
2008
Adam Roth CEO
23
Segmint Inc. One Cascade Plaza, Suite 1800, Akron 44308 (888) 734-6468/www.segmint.com
41
27
25
Financial services, retail, insurance, health care
SegmintOne campaign management system, SegmintEngage, SegmintReach, SegmintConnect, SegmintExplore
2007
Russel R. Heiser II president, CEO, co-founder
24
Pointe Blank Solutions Ltd. 30400 Detroit Road, Suite 400, Westlake 44145 (440) 243-5100/www.pointeblank.net
40
35
20
Health care, government
CasePointe, MatrixPointe Software
2000
Thomas J. Coury chairman, chief software architect
25
Squirrels 121 Wilbur Drive NE, North Canton 44720 (855) 207-0927/www.airsquirrels.com
36
22
7
Education
AirParrot 2, Reflector 2, ScreenToss, Reflector Director, Reflector Student
2012
David Stanfill CEO, founder
26
Onosys, a LivingSocial Company 1220 W. Sixth St., Suite 200, Cleveland 44113 (216) 426-0000/www.onosys.com
27
28
12
Ecommerce, SaaS (Software as a Service)
Onosys Online Ordering
2005
Adam Heintz president
27
ID Networks Inc. 7720 Jefferson Road, Ashtabula 44004 (440) 992-0062/www.idnetworks.com
26
36
NA
Software solutions for law enforcement agencies
Jail Management, Records Management, ImageNet, FingerRoll Livescans, CAD and Mobile Systems
1991
Douglas G. Blenman Sr. president
RESEARCHED BY DEBORAH W. HILLYER Source: Information is supplied by the companies unless footnoted. Crain's Cleveland Business does not independently verify the information and there is no guarantee these listings are complete or accurate.
20160208-NEWS--28-NAT-CCI-CL_--
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