Tag Archives: October 2008

At your service 2008

At Your Service

By Kerry Duff

When Margret Thomas of Tucson was suffering from an agonizing headache in the middle of the night, her husband, Harold, called their primary care physician on his cell phone. The doctor met them at the hospital and an hour later she was in surgery having a brain aneurysm removed. Without the surgery, Margret would have died.

The Thomases were able to reach their doctor after hours because they contract directly with Dr. Steven D. Knope, an internist and sports medicine expert in Tucson, for concierge medical care. The couple pays him an annual out-of-pocket fee in exchange for personalized medical services such as 24/7 accessibility by beeper or cell phone and house calls.

“My wife and I can’t live without Dr. Knope,” says 76-year-old Harold. “Whether we’re at home in Tucson, Cincinnati or somewhere else, we can call him day or night and he gets back to us in 10 minutes or less. That’s worth a lot to us. A concierge doctor is like having insurance.”

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Knope has been a concierge physician in the Tucson area for eight years. He has 125 patients that pay $6,000, or $10,000 per couple for concierge care. The fee includes a two-hour comprehensive physical, stress test, full cancer screening, health and fitness consultation and a personalized exercise and nutrition program. The doctor also accompanies patients to see specialists, and if they are hospitalized, he is the attending physician at the hospital — not a hospitalist who is unfamiliar with their health care, he says.

“Concierge medicine is very much patient driven,” Knope says. “Patients want a different model of care today and they’re willing to pay for it. The difference between concierge medicine and fast-food medicine is that the concierge doctor has time to perform correctly. If a doctor only has seven minutes to deal with a complex patient, he can only do so much. Doctors need time with their patients to do a good job.”

Scottsdale internist and geriatric physician, Scott Bernstein, converted his 2,000-patient practice to concierge medicine in July. What pushed him in that direction, he says, were Medicare constraints and the rising costs of running his practice.

“I was being squeezed from both ends,” Bernstein admits. “Now my patients and I contract directly without the constraints of the Medicare program. I can see patients the same day they call and I have time to provide the type of care they need and I want to provide. I can also do house calls and telephone appointments, which are not covered by Medicare.”

Bernstein sent a letter to his patients in April to let them know he was converting to concierge medicine. Since then, more than 200 people have joined the practice and agreed to pay his $2,000 annual fee.

“It was very bold to make this kind of change after working so hard for 12 years to build my practice,” he says. “I had to say goodbye to 80 percent of my patients and that was scary. But now I couldn’t be more thrilled. I give my patients the time and care they need, and most nights I have dinner with my family, which never happened before.”

Douglas Liebman of Scottsdale, a longtime patient of Dr. Bernstein’s, says he fully supports this type of care, but had to carefully weigh the costs before making a decision.

“I had to think about this carefully because I already have a $2,500 annual payout to Blue Cross Blue Shield,” Liebman says. “But then I realized that staying with Dr. Bernstein was a quality decision at any cost because it concerns my health care. He is genuinely concerned about my well-being and that’s really important to me. I also like being able to reach him after hours and weekends. But what I like most is the house calls. In the world of medicine today, it’s amazing that a doctor will come to your house if you can’t make it to the office.”

Bernstein transitioned to concierge care with the help of Dr. Helene Wechsler, a family physician in Scottsdale, who after 15 years of being in private practice with four other doctors started her own concierge practice in 2004. Wechsler’s practice is limited to 300 patients who pay $2,000 ayear.Patients with children under 18 pay $1,000 annually per child.

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“When I first started practicing 19 years ago, I scheduled patients for 30-minute appointments,” Wechsler says. “But when the healthcare system moved to managed care, I could only see each person 15 minutes or less. In that amount of time you can only treat part of a person and I like to treat the whole person. As a traditional family physician, I also had mountains of paperwork and stress. But I eliminated both when I reduced my patient load and stopped accepting insurance and Medicare. “My concierge practice is peaceful and happy, and when patients walk in the door it’s a pleasant experience,” she adds.

McCain, America's Next Leader - AZ Business Magazine Oct. 2008

America’s Next Leader

The last time an Arizona politician stood at the threshold of the White House was 44 years ago, when Republican presidential nominee Barry Goldwater introduced a new form of conservative politics to America before falling under the wheels of President Lyndon Baines Johnson’s campaign juggernaut.

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Now, another Arizonan, also the Republican nominee, has the White House within his grasp.
Within weeks, Sen. John McCain will either make history or repeat it in one of the most closely watched presidential elections in modern history as he squares off against Sen. Barack Obama, the first African-American presidential nominee of either major party.

“I don’t seek the office out of a sense of entitlement. I owe America more than she has ever owed me,” McCain says. “Thirty-five

years ago, I came home from an extended leave abroad. While I was away, I fell in love with my country. I have been an imperfect servant of my country ever since, in uniform and in office, in war and peace.”

That he has made it this far is remarkable considering his campaign seemed on the verge of collapsing in the months before the Iowa caucus.

McCain had trouble getting his primary campaign off the ground. Then, after securing the Republican nomination, McCain’s campaign began to drift, says Larry Sabato, a nationally recognized political science professor at the University of Virginia.

“He was the nominee for the Republican Party long before Obama had the Democratic bid, but he didn’t seem to use that time wisely,” Sabato says.

However, Sabato believes McCain’s campaign has since tightened up considerably.

“They are making decisions quickly and rolling the dice as needed,” he says.

Deeply involved in politics since leaving the U.S. Navy in 1981, McCain was first elected into the U.S. House of Representatives in 1982. He was elected into the U.S. Senate in 1986. When he was reelected for his third Senate term in 2004, McCain won by an overwhelming percentage of the vote.

In between, McCain ran for president for the first time in 2000, hoping to ride his Straight Talk Express campaign bus all the way to the White House. An underdog, he surprised supposed frontrunner Texas Gov. George W. Bush by winning the New Hampshire GOP primary. That’s when the campaign turned ugly, and in the South Carolina primary, very personal. Bush, of course, eventually won the Republican nomination and the general election.

Over the past eight years, McCain has clashed with Bush on numerous issues, but he has remained unwaveringly behind Bush on the Iraq War, telling radio talk show host Mike Gallagher earlier this year, “No one has supported President Bush on Iraq more than I have.”

McCain went on to add, “… there are many national security issues that I have strongly supported the president (on) and steadfastly so.”

Bush in turn has expressed his support for McCain’s 2008 presidential bid, giving his endorsement earlier this year and saying that McCain has the “character, courage and perseverance” to lead the country, according to an article on CNNPolitics.com.

Even Paul Johnson, the former Phoenix mayor who at one time expressed concern about McCain’s famous temper, believes the senator is maintaining a solid campaign.

“I am proud of the way he is running his campaign and the issues he’s bringing to the forefront,” Johnson says.

Besides taking flak for his temper, McCain has also been taken to task for breaking from the Republican Party on some high-profile votes, and even for his age; at 72, he would be the oldest president in U.S. history, if elected. But countering that is the fact McCain is also a respected war hero.

McCain spent five and a half years as a prisoner of war during the Vietnam War in the infamous camp dubbed the “Hanoi Hilton,” where he was forced into solitary confinement, denied medical treatment and beaten by the North Vietnamese. But he maintains he is not bitter — rather he is humble.

“There is no higher honor than sacrificing for a cause greater than my own self-interest,” he says.

He also believes this experience, as well as his leadership in the Senate Armed Services Committee, makes him the most-qualified candidate to be commander in chief.

McCain’s domestic platform for his potential presidency begins with a goal to present greater opportunity and prosperity for workers and their families.

“That agenda will ensure those workers are employed by businesses that invest in innovative technologies, are not strangled by excessive regulation, are not burdened by high taxes, do not face rising health costs that squeeze wages, and sell more products and services in world markets,” he says.

On the foreign policy front, McCain has made no secret of his support of the war in Iraq, but he admits, “I do not want to keep our troops there a minute longer than necessary to secure our interests. And I believe we can achieve that goal, perhaps sooner than many imagine, and must give Gen. (David) Petraeus and our troops the necessary time to succeed in Iraq.”

He adds that if elected president, he will ensure “al-Qaeda has no safe haven anywhere in the world, including Afghanistan, where U.S. and NATO forces continue to root out and eliminate the threat of remnants of the Taliban and al-Qaeda.”

McCain promises that with him at the helm, American families will be secure from threats domestic and foreign. “I will take on our damaging dependence on imported oil and make sure that oil will never again be a weapon against us,” he says. “America’s workers will be secure in the fact that they have portable health insurance and pension benefits, allowing them to move from job-to-job, job-to-home, and job-to-retirement without fear of losing their financial safety net.

“They will be secure in the knowledge that if the economic foundation of their employer or industry shifts, they will be prepared to make the transition to a new job and have access to community college-based training programs that provide the skills to acquire and hold a better job for the 21st century.”

McCain does not deny that there are major economic challenges that must be confronted and he has plans to amend these crises. “Americans are suffering under high gasoline prices, rising food prices, a housing crisis, and tough credit conditions that threaten even the ability of our students to get their college loans,” he says.

As part of McCain’s approach to ease consumers’ current pain, he pushed for a summer gas tax holiday and to stop filling the Strategic Petroleum Reserve. He has also proposed his so-called HOME Plan to provide robust, timely and targeted help to those hurt by the housing crisis. In addition, he called for a Justice Department task force to investigate wrongdoing in the mortgage industry.

To ensure that college remains a reality, McCain has proposed a student loan continuity plan that will coordinate policies with the states to keep the credit crunch from hurting students.

McCain also promises to address the challenge of rising health care costs by “transforming the health care system to focus on quality, cost, and being responsive to the needs of American families.” He adds: “Furthermore, I will not leave difficult tasks like securing our border, entitlement reform, or fixing our schools for another generation of leaders to solve.”

McCain has lofty goals for the future and security of America and its people. But he has one major obstacle standing between himself and the White House. In the minds of many Americans, the sheer fact that McCain would be replacing another Republican — and a highly unpopular one at that — is a detriment to his campaign, according to Patrick Kenney, professor and chair of Arizona State University’s political science department.

“The Republicans have been in power since 2001 and ‘peace and prosperity’ is not going well,” Kenney says. “The economy is down, the war is not entirely supported and (McCain) is linked to Bush’s war and economic program.”

For his part, Obama is hoping the link to Bush will work in his favor. He released a television spot in late July titled “The Low Road,” in which, The Huffington Post reports, “the Illinois Democrat (is) playing his trump card: tying McCain to George W. Bush, both in politics and in policy.”

However, Arizona’s other senator, Jon Kyl, believes McCain’s connection to Bush and the war has a positive side. “He was instrumental in helping Bush with the surge strategy after he returned from Iraq and saw first-hand the things that weren’t being done properly to win the war,” Kyl says.
It is this military expertise and experience that Kyl believes will help McCain gain support from veterans.

“I think that all Americans appreciate his service and it will help prepare him to make decisions and winning strategies in the war,” Kyle says. “It helps identify him with leadership, experience, courage and independence.”

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Grant Woods, the former Arizona attorney general from 1991-1999, thinks it is that very independence that makes McCain the ideal man to lead the nation. “He will never be a scripted, always ‘on’ message candidate,” Woods says. “This is frustrating to the professionals, but makes him more attractive to real people because he is a real guy.

“We face great international challenges militarily and economically,” Woods continues. “I believe his lifetime of service gives him the judgment we need to lead the country at this time. He has the experience to make his own decisions.”

As Election Day draws near, Americans will be responsible for making their own decisions, as well. Regardless of the outcome, change is on the horizon — and that is exactly what the American people seem to want for the future.

Big money tight times 2008

Big Money, Tight Times-SBA Loans Can Help

By Don Weiner

It may be true that numbers don’t lie, but they don’t always tell the whole story. When the 2008 fiscal third quarter ended June 30, statewide Small Business Administration-guaranteed lending showed a 25 percent decline from 2007 in both total loans and dollars lent, according to the Arizona District Office.

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In fact, District Director Robert Blaney says numbers have been dropping throughout the fiscal year, which is indicative of a slowing economy and business owners holding back.

“I think that we’re feeling the effects like everybody else,” he says. Even active SBA lenders have noticed a slowdown.

“The customers are not expanding as much,” says Dee Burton, an Alliance Bank of Arizona senior vice president dealing with SBA and commercial lending. “The customers are, you know, a little bit leery and they’re not expanding their business. So, yes, that has impacted the number of requests that we get to look at, simply because most of the customers are not in high-growth mode.”

Yet a closer look at the SBA’s third-quarter numbers shows some positive trends. Veteran lending jumped almost 70 percent. Rural lending dollar totals were up 93 percent. And loans for start-ups increased 147 percent.

“When the angels cry, sometimes they also sing,” Blaney says.

The upshot for small-business owners is that if they need money and can meet certain requirements, financial help is available.

“Here at Alliance Bank, we look at these type of slowdowns, if you will, as an opportunity to help people get a loan to expand and grow with them,” Burton says. “We’re definitely still in the lending process.”

Thankfully, business owners have no better friend than the SBA. It provides resources for those starting new businesses or expanding existing ones. And it has programs for businesses in need of capital.

When it comes to the financial side, it’s important to be clear: The SBA is not a lender. Instead, it works with banks, credit unions or other entities that make and administer loans. The SBA backs up loans with guarantees, which can run as high as 75 percent to 85 percent depending on the amount borrowed and the type of loan.

“For us, it’s a critical program,” says Lori Stelling, vice president and SBA lending manager for National Bank of Arizona. “We can serve so many more customers by givingthem a loan with an SBA guarantee, because the loans that we do under SBA we would not be able to do conventionally. And there’s a number of reasons for that. If somebody doesn’t quite meet our conventional cash-flow requirements, under SBA we can give them a longer term than we can conventionally.”

“For lenders, I would say SBA is a critical part of what we do.”

The SBA has several different loan programs.

The most common is the 7(a) loan, which serves a range of business financing needs with a maximum amount of $2 million. Another is the SBAExpress program. It makes smaller loans available, but the SBA only offers a 50 percent guarantee. One of the newest is the Patriot Express Initiative, a program that helps veterans and others in the military community with funding and training. Established businesses in need of long-term financing for major fixed assets can turn to the 504 program.

Not all active SBA lenders participate in all programs. Some specialize in 7(a) loans; others offer SBAExpress loans as their primary product. They also have varying restrictions and minimum loan amounts. Many lenders refuse to offer loans for start-ups. Also, only certain active lenders are approved for certain programs, such as Patriot Express. And some are given special status. Especially active and expert lenders qualify for the Preferred Lenders Program, which equates to a quicker turnaround on SBA loan applications.

Visit the SBA’s Arizona District Web site at www.sba.gov/az to find a completelisting of statewide lenders.

The SBA loan process is not that complicated. Take your proposal to a lender and, according to Blaney, if the lender is unwilling to do a loan without an SBA guarantee, they will deal with the agency’s loan processing center.

“It’s as simple as that,” Blaney says. “You have to fill out a couple of more forms for us. I mean, it is the government, we do have a form or two. But it’s not an arduous process. And it has been severely streamlined over time.”

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Before taking that step, however, Arizona small-business owners may want to take advantage of two other SBA programs: SCORE and the Arizona Small Business Development Network. Their experts can assist with business plans and help you understand lender requirements.

John Alig, branch manager and a counselor for the East Valley SCORE chapter in Mesa, says this may mean passing out what a fellow counselor calls “reality cookies.”

“Sometimes that includes telling people things that they don’t want to hear,” Alig says.

He warns that business owners who lack a proper credit rating, collateral and capital do have one thing: a big problem.

www.sba.gov/az
www.alliancebankofarizona.com
www.nbarizona.com

Calling the shots 2008

Calling the Shots

Many Americans are no longer satisfied with the U.S. health care system and want to exert significant control over their own medical care. They are no longer patients in the traditional sense, but consumers who are adopting a new, more active approach to making decisions about health care treatments, services and products. They demand greater access to information, online tools and services from their physicians. They want to explore alternatives to conventional treatments. And they want to share decision-making with their doctors.

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These changing dynamics are confirmed in the 2008 Survey of Health Care Consumers conducted through the Deloitte Center for Health Solutions. The survey reveals an increased desire to use technology to communicate with health care providers regarding records, appointments and answers to questions, and to gather health-related information. Findings in Arizona showed that 14 percent are willing to pay more for Internet access in order to make same-day appointments, and 22 percent want e-mail capability to ask their doctors health-related questions or treatment options. In all, consumers are interested in using in-home monitoring devices to allow them to be more active in their care; are open to new treatment approaches; and are increasingly comfortable with alternative therapies, retail health care clinics, and even traveling abroad for elective procedures.

The American health care market is far more complicated than previously thought, and is best interpreted through six consumer segments. These distinct consumer segments present opportunities — and risks — for all stakeholders in the U.S. health care industry.

The first consumer group is Content & Compliant, which accounts for 29 percent of the U.S. health care consumer market. These consumers report annual household incomes of $100,000 or higher and prefer traditional approaches to care. For this group, what the doctor says usually goes.

This is not the same for the Sick & Savvy, which make up 24 percent of the consumer market. Proportionally more consumers in this group, compared to others, report having one or more chronic conditions (52 percent). They also take greater charge of their care, are more self-reliant decision-makers and less dependent on their physicians.

Online & Onboard (8 percent) are frequent users of the system and prefer traditional approaches, but are receptive to care provided in non-conventional settings. They tend to rely more on themselves in making decisions, and use online tools and value-added services more than any other segment. They seek information and are sensitive to quality differences.

The smallest contingent — Shop & Save (2 percent) — tends to switch doctors, treatment and health plans, and make changes to their insurance more frequently than others. They are the most sensitive to the cost of health care services. They tend to prefer doctors who use traditional approaches, but are amenable to alternative and unconventional treatments. They’re more likely than others to purchase prescription drugs by mail order or online, use a retail clinic, and travel beyond their community and the United States for care.

Out & About (9 percent) are independent, preferring to make their own decisions. They use alternative approaches, consult alternative health care practitioners and substitute alternative or natural therapies for prescription medicines more than any other segment. They are sensitive to quality, seek information, use some value-added services and want to shop for and customize their insurance.

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Casual & Cautious (28 percent) is the healthiest group — only 19 percent report having one or more chronic conditions. Younger than most segments, they are also the least-insured.

In broad strokes, consumers are seeking change in three main ways:

  • Mass personalization — Consumers want their health care and insurance customized to meet their needs.
  • Evidence-based care — Consumers believe payments to doctors should be linked to evidence-based practices.
  • Disruptive innovation — Disruptive health care innovations such as medical tourism and retail clinics are giving rise to new players, new delivery models, new ways of partnering and new value propositions.

The doctor’s role and the status quo are changing, and hospitals, physicians and health plans will need to quickly adapt to capture market success. Consumers are taking greater control of decision-making and they demand better value, better service, increased transparency and personalization of services. For these reasons, the players who take the unique attitudes and preferences of consumers into account as they make strategic decisions will have a huge opportunity to win the consumer market.

Paul Keckley, Ph.D., is executive director of the Deloitte Center for Health Solutions. Kevin Wijayawickrama is a principal at Deloitte & Touche’s Arizona practice.

Diane Brossart -Describes Her First Step In The Industry, 2008

Diane Brossart – Describes Her First Step In The Industry

Diane Brossart

President, Valley Forward Association

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Describe your very first job and what lessons you learned from it.
My very first job was a part-time stint in high school at Jack in the Box. I learned to take people at their word. I was held up at gunpoint one afternoon when working the cash register and didn’t believe the perpetrator was serious. Another employee and I thought the guy was joking, so we refused to give him the money and chuckled at the idea of being robbed. It soon became apparent the heist was for real. I quit that job the next day.

Describe your first job in your industry and what you learned from it.
My first job as a journalism graduate from Wayne State University was as a reporter for a weekly newspaper in Gross Pointe Shores, Mich. I learned that no matter how thorough you think you are, you need to double and triple check your facts. In covering a political story that ran on the front page of the newspaper, I referenced one of the state’s legislators but mistakenly used his brother’s name. It turned out that both brothers held office, an honest error, but a major faux pas for a journalist.

What were your salaries at both of these jobs?
I made minimum wage at Jack in the Box — a little over $2 an hour (I’m a dinosaur).
I turned down a trip to Europe with some of my college buddies to take the reporting job right out of school (big mistake) and earned about $10,000 a year.

Who is your biggest mentor and what role did they play?
After the journalism stint in Michigan, I moved to Phoenix and sold my soul (according to my journalism school friends) and went into public relations. I got a job as an account coordinator with one of the largest agencies in town (it no longer exists today). It was there that I met Bill Meek, president of WFC Public Relations and my biggest mentor. Bill was and still is a curmudgeon, but he’s a loveable one and among the smartest people I know. I used to sit across from him, on the other side of his expansive glass desk, and take notes as he pontificated on every subject under the sun. He’d peer at me with penetrating blue eyes that seemed to defy the bifocals, which rested at the end of his nose, creating an intimidating image that Bill undoubtedly enjoyed. I learned all about Arizona history and every issue of significance to the state, from water management and health care to transportation and economics. He taught me about politics, how to run a public affairs campaign and who the movers and shakers were that influenced decisions in our fast-growing region. He encouraged me to get involved in the community, and it was through his prodding that I joined Valley Forward Association in 1982, the environmental public interest organization that I later became president of and have now served for the past 17 years. Bill has played a huge role in my life and I continue to learn from him. We have lunch at least once a month, but he doesn’t intimidate anymore.

What advice would you give to a person just entering your industry?
Be proactive, get experience (even if it means offering yourself for free as an intern) and follow your heart. Find something you like to do and it will never be work — it will become a passion and give you immense gratification.Always be nice and treat people with respect — you never know when you’ll need them on your side. Listen a lot and be open-minded. Network and build relationships. Articulate your goals, believe in yourself, work hard and always have fun.

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If you weren’t doing this, what would you be doing instead?
Probably consulting with the ultimate goal of supporting world travel. After 17 years of managing a nonprofit organization, I can’t see myself in the corporate world. As the years go by, it’s about balance for me. Professionally, I advocate for a balance between economic growth and environmental quality. Personally, I strive to work hard and make a difference while balancing a busy family and maintaining an active social life. If I weren’t doing this, I’d find another way to collect great memories.

Tourist Group 2008

The Tourist Trade

By Don Weiner

Arizona’s tourism industry expects to take more than a few hits from an uncertain economy. “Whenever we see a downturn in the economy like this, especially when the staples of life are so much more expensive — food, gas, that sort of thing — it does have some downward pressure on leisure travel. People are less inclined to travel,” says Jonathan Walker, president and CEO of the Metropolitan Tucson Convention & Visitors Bureau. “They’re traveling for shorter periods of time or cutting out travel altogether.”

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But for every hit from soaring fuel prices and consumer cutbacks, Arizona tourism can deliver some pretty effective counterpunches. Its luxury resorts and spas, gourmet dining establishments and world-class golf courses are no less attractive to high-value visitors. Scenic wonders such as the Grand Canyon and a favorable climate are still huge draws. Major events should continue to attract crowds. And visitors from near and far are still intrigued by the state’s mixture of Hispanic, American Indian and cowboy cultures.

“What’s great about Arizona is we have the whole package,” says Debbie Johnson, president and CEO of the Arizona Hotel & Lodging Association.

Cheryl Cothran, a Ph.D. and director of the Arizona Hospitality Research and Resource Center at Northern Arizona University, notes that the travel industry has historically been a big part of the state economy.

“Tourism has always been important,” she says. “It looks like going forward a couple of decades it’s going to continue to be that way.”

She also points to a few factors that, while not recession-proof, are still encouraging.

Cothran says state tourism is population-driven. As the metropolitan Phoenix and Tucson areas continue to grow, an increasing number of visitors are coming to see family and friends. In fact, a research presentation for last year’s Arizona Governor’s Conference on Tourism shows that 46 percent of nonresident overnight visitors indicated they came here specifically for that reason. It was still the main reason when it came to Arizona’s resident overnight visitors. In other words, don’t expect Mom and Dad to give the kids a pass on visiting just because they’re feeling some pain at the pump.

Then there are those who fill the resorts, book the tee times and top off their days with some fine dining.

“Those high-income visitors who travel to the expensive resorts and spas are probably not going to change their plans that much,” Cothran says.

In fact, a report she prepared, “Arizona’s Tourism Future: Effects of Population & Demographic Change,” states that the bulk of travel spending is by the top 20 percent of affluent households.

Even with this market segment, however, there are some definite challenges.

First, experts agree that Arizona is primarily a fly-in market, and the fact is that airlines are trimming routes and downsizing some planes heading to various destinations.

Also, according to Johnson, visitors may be doing some downsizing of their own.

“I think what you see generally sometimes is that people who might have stayed at a … luxury resort are maybe dropping down a tier,” she says.

This has resort operators working extra hard, says Rachel Sacco, president and CEO of the Scottsdale Convention & Visitors Bureau.

“The only thing that you can do in a destination like this, where you are very dependent on a fly-in market, is really to just look at your customers and hopefully you’ve done a very good job of creating value, a great experience and (are) making it very, very difficult for your customers to say, ‘Oh, I’m going to skip my trip to Scottsdale this year,’” she says.

This may equate to credits that can be used for spa treatments, meals or golf. It may even mean gasoline credits.

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“Maybe there are high-end customers less concerned about discounting, but they certainly want value,” Sacco says. “And the smart approach is make them feel like they’re always getting more than what they’re giving.”

Sacco also says area restaurants and retailers are feeling the pinch. Some have told her tourism accounts for as much as a third of their bottom line.

“And for a restaurant to even say 20 (percent) or 25 percent, that’s a large amount,” she says.
One sensible marketing strategy, according to Johnson, is to reach for what she calls “lower-hanging fruit.”

“I think what we’re finding and what we’re seeing already is that people are traveling closer to home,” she says. “And so for us, what that means is kind of changing a little bit of our marketing strategy and make sure that we’re doing a good job of marketing to our residents and to people that are within a good driving distance to Arizona.”

www.visittucson.org
www.azhla.com
www.nau.edu
www.scottsdalecvb.com

The Long View 2008

The Long View

By Melissa Bordow

In real estate, as in love, beauty is in the eye of the beholder. So when you ask major players in the Valley’s office-condominium market how attractive it is, you’ll get wildly divergent answers.

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On one hand, brokers, bankers and economists can tell you what the numbers say: Office-condo sales have lost velocity, slowed by a struggling housing market and banks that have reined in credit to commercial and residential borrowers.

On the other hand, you have developers who know that even during slow economic times, there always is growth on the Arizona horizon. They see beauty in the Valley’s long-term prospects and say they are committed to a long-term relationship.

Growth that occurred three years ago during the freewheeling days of the housing boom, they say, has produced enough roof tops in far flung areas of the Valley to still require their services.

What happened
Four years ago, office-condos were an up-and-coming niche market, and real estate advisory firm Grubb & Ellis touted Phoenix as “the office-condo capital of the nation” in a survey of 41 cities. With plenty of property available and under construction, Phoenix was “ground zero” for office-condos, according to the survey.

Today, construction has slowed and transactions are down, figures compiled by commercial brokerage firm CB Richard Ellis show.

“It’s kind of like a bouncing ball, what goes up must come down,” says Kelley Ahrens, a director in the brokerage side of CBRE’s office-condo division. “It’s down now, but like a ball hitting cement it will bounce back up.”

According to CBRE’s figures, between 2005 and 2006, developers added 3.69 million square feet of office-condo space for a total of 10.93 million square feet.

Calculations show absorption that year was about 3.3 million square feet. By the fourth quarter of 2007, with 2.63 million more square feet added, absorption was 1.4 million square feet. By the second quarter of this year, only 360,000 square feet was added to inventory, with about 330,000 square feet sold.

Figures from commercial brokerage firm Lee & Associates show the vacancy rates are hovering around 29 percent in the East Valley and 24 percent in the West Valley. Scottsdale vacancies are at 17 percent.

“Is the market overbuilt? I would consider it overbuilt, but not grossly,” says Andrew Chaney, an associate at the firm. “You need to get that vacancy number down close to 12 (percent) or the mid teens before you get people excited to build.”

Developers and brokers say less activity is due in part to banks tightening credit and underwriting requirements.

“It’s just harder to come by capital,” Ahrens says. “Developers still believe in the office product. It’s getting someone on the financial side to believe in the product.”

Valley bankers, on the other hand, say they are willing to lend, but potential buyers must show they have a viable business plan with enough potential earnings to withstand the economic downturn.

“If I have a real good, strong buyer, I’m going to finance that office-condo,” says Kevin Kinerk, vice president of Western National Bank.

There simply is not the same demand, as many small businesses that bought office-condos were affiliated with the construction and housing industries, Kinerk says.

“The last thing they’re going to do right now is buy a piece of real estate,” he adds.

In the last six months, Kinerk says he’s approved financing for 20 office-condos, about half of what he approved in the first six months of 2007. Valley wide, transactions dropped from 410 in 2007 to 130 in the first two quarters of this year, according to CBRE figures.

Troy Toolson, vice president of Valley Capital Bank in Mesa, agrees that well-established businesses that meet due-diligence requirements should be able to get a loan. Startups, though, may have a tougher time.

“We’re really positive about office condos, particularly end-users, right now. It’s just the tough economy. People are a little gun-shy right now, but there are loans available,” Toolson says.

Bob McGee, president of Southwestern Business Financing Corporation, a nonprofit corporation that partners with banks to administer Small Business Administration loans to commercial borrowers, says conventional lenders are analyzing businesses more closely and asking for more equity, historic cash flow and cash flow to debt service.

Location, location, etc.
Office-condo developments that were strategically placed and well constructed still are luring small business owners who want to own their own space.

Sales are occurring in areas where housing is built-out, but necessary amenities have yet to reach, developers say.

“It’s a good time to be strategically aggressive,” says Terry Tobey, senior vice president of business development for UTAZ. Pinal County and Queen Creek, she says, are prime locales for office-condos designed for the professional doctor, dentist or insurance agent.

“Not everyone is in a recession,” Tobey says. “There is no recession for death and taxes and health. People still need to go to the doctor.”

And they would prefer to do so, she says, close to home.cover october 2008

The medical end of the office-condo market has held up better than most, Tobey says, and UTAZ has projects under construction across from the Banner Ironwood Hospital under construction at Combs and Gantzel roads in Queen Creek, and Mercy Gilbert off the 202 Freeway and Val Vista Drive, among others.

“We’ve always picked great locations and we are still getting people wanting to purchase,” she says.

Siting an office-condo well is the key to maintaining sales, agrees Steve Beck, a vice president at COBE Development.

COBE does extensive research on an area’s demographics,schools, hospitals, traffic patterns, freeway systems, and potential growth before building. That has helped thecompany absorb 20,210 square feetthis year, says T.J. Zaharis, vice president of sales and marketing, an increase of 50 percent from 2007.

“As the market has its ups and downs, location will always pull you through,” Beck says.

www.cbre.com
www.lee-associates.com
www.wnbank.com
www.vcbaz.com
www.swbfc.com
www.utaz.com
www.cobedevelopment.com

The "B" Word 2008

The “B” Word-Bankruptcy isn’t always a bad thing

The word “bankruptcy” sends chills down the spines of many business owners and executives as they envision certain financial demise.

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But bankruptcy is no longer the frightening phenomenon it once may have been, particularly in the business realm. Chapter 11 bankruptcy has become an extremely useful business tool for a company to reorganize its operations, accomplish a sale of assets, obtain new financing or achieve a capital restructure.

The following are examples of challenges a business often faces:

  • A new business has not quite met revenue expectations.
  • The equity structure is outdated or unworkable.
  • The business owns excess real property it wants to sell or the business wants to acquire additional property.
  • The business has been threatened with litigation.
  • The business wants to refinance, but the lender has expressed concern about financial or other issues.
  • The owners of the business want to merge with another entity.

The most common use of the Chapter 11 bankruptcy process is one designed to restructure the company’s balance sheet. A company that wants to extend or refinance onerous debt, eliminate burdensome contracts or leases, and/or bring in new capital can generally accomplish these goals by a Chapter 11 filing that provides these opportunities and a temporary safe haven.

But Chapter 11 isn’t just for severely financially distressed entities. There are myriad other business reasons for filing a bankruptcy. For example, bankruptcy may be a good alternative for a client who owns some troubled properties and other healthy ones. Structuring a “roll up” and then using the bankruptcy process to propose a long-term solution can provide the necessary and ultimate protection for the distressed properties. Other common business transactions such as sales, mergers and acquisitions may be accomplished in a more beneficial fashion for all parties under the protective umbrella of Chapter 11.

A general knowledge of bankruptcy and the benefits it can provide will arm business owners, management and their advisors with a repertoire of creative solutions to meet business challenges and attain the companies’ ultimate goals.

An overview
The purpose of a Chapter 11 bankruptcy is to reorganize. It may include restructuring debt, altering operations, eliminating equity, selling assets or any combination of these things. The reorganization is accomplished through a document called a “plan of reorganization” in which the debtor describes how it intends to pay creditors or treat equity interests. Creditors and equity interests have the opportunity to vote in favor of or against the plan. The aim is to have the plan confirmed by the bankruptcy court, at which time it becomes a binding contract on all affected parties.

A Chapter 11 proceeding is commenced quite easily by filing a simple two-page “petition” with the bankruptcy court. At the time of the filing, an “estate” is created and all assets owned by the debtor prior to the filing are considered to be property of that estate. The debtor is referred to as the “debtor in possession” (DIP). Filing of the case triggers an immediate imposition of an injunction called an “automatic stay.” The stay prevents creditors from proceeding with any action against the DIP, and entitles the DIP some “breathing room” while assets are marshaled or while a reorganization is being developed.

In many respects, the general operations of a business continue in Chapter 11 as they did prior to the filing. The DIP can continue to buy inventory, produce products and sell merchandise as long as the transactions are in the ordinary course and scope of business. Nevertheless, certain actions such as the payment of pre-petition debt, the use of cash proceeds that may be subject to a lien, and the sale of major assets are prohibited unless the bankruptcy court approves them.

The plan of reorganization sets forth the means for payments to the company’s creditors. The general rule is that all claimants on the same level must be treated equally and must be paid in full before the next level can receive payment. Other provisions include financing arrangements or capital contributions and the composition of the company’s management.

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The final step is plan “confirmation” by the bankruptcy court. In order for the DIP to confirm a plan, it must obtainthe affirmative vote of all the classes of creditors it has proposed. However, the bankruptcy code permits the DIP to confirm a plan even if it doesn’t have all the needed votes, as long as the plan complies with certain specific sections of the code. Once the plan is confirmed, a bindingcontractbetween the debtor and its creditors is created and the debtor emerges from bankruptcy. All previous obligations to and claims by creditors are discharged and are replaced by therepayment orother obligations created by the plan. The “reorganized” debtor can have a fresh start.

Of course, there are many specifics and nuances to each bankruptcy case. For a comprehensive read on bankruptcy, you can download this guide at www.jsslaw.com/publications.aspx.

Carolyn Johnsen is a member of Jennings Strouss & Salmon. She can be reached at 602-262-5906 or cjohnsen@jsslaw.com

Good nutrition for schools

Chef Eddie Matney Pushes Good Nutrition For Schools

Ants on a log are an old favorite of parents trying to sneak some nutrition into their children’s diets. Now this classic treat has made its way to several Valley schools, thanks to the clever tricks of renowned Chef Eddie Matney.

Parents and administrators alike were worried about the lack of nutritional choices on schools’ lunch carts. Chips and cookies certainly satisfy those junk food cravings, but not the balanced diet Mom and Dad want for their children.

Scottsdale Unified School District Foodservice Director Sue Bettenhausen wrote a letter to parents with a fresh idea to revamp the cafeteria. Luckily, Matney offered his help, and a new favorite was born. On his decision to offer his expertise, Matney shrugs it off as a no-brainer.

“The biggest reason was our kids,” Matney, a father of two, says.

Chef Eddie’s Snack Wagon offers healthy treats not found in a typical school. Fruit on a stick and hummus and pita chips are just a few of the delicious options for students to diversify their diets.

“These kids need to know that if they make the right choices with food it will not only affect their day, but they’ll make the right choices when they get older,” Matney says.

Matney goes on to say that the old perceptions of children’s knowledge about food are completely outdated.

“Kids nowadays are much more educated about food. A lot of parents take their kids out to dinner and they understand what edamame is and what different types of food are,” he says.

Serving the food in a unique way has also proven to be a hit. Traditional fruit cups have been transformed into fruit kebabs and “it becomes fun for the kids to eat,” Matney says.

So what is the outcome of this daring voyage into healthy foods for our kids? It seems safe to say that the most important critics of all — the kids themselves — have embraced their new and tasty treats.

“Kids love it, parents love it, (the) school loves it,” he says. “It’s gone over very well.”

And Matney hopes to continue his involvement with the schools, changing the landscape of lunchtime for the better.

Taka Group 2008;Flickr, Michael Ruiz

Aaron Kilby & Amanda Toney: The Taka Group

By Noelle Coyle


A good partnership is born out of a recipe of success, and Amanda Toney and Aaron Kilby have clearly found the right ingredients to make it work.

“He’s a good 8-to-5 husband,” Toney says with a laugh. By Noelle Coyle

Kilby adds, “We trust each other,” as he ticks off the components that have made their company, The Taka Group, flourish. “Honesty, open communication, truly believing in that person’s capability.”

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Both Toney and Kilby grew up east of the Mississippi — Illinois and Pennsylvania, respectively — but after visiting Arizona, they fell in love with the weather and the “entrepreneurial spirit” found here. Prior to founding their own company, they had worked together for six years at two different companies that became products of mergers and acquisitions. Fed up with the pitfalls of corporate America, they opted to become business partners and The Taka Group was born.

A full-service marketing and creative services agency, The Taka Group offers myriad services, including event planning and marketing, display and merchandising, product graphics, logo design, photography, custom printing, direct mail, ad campaigns and Web site design, among many others.

Located in Kierland Commons in office space above the retail stores, the coffee-loving duo have plenty of options for their daily cup of joe and the perfect setting for research.

“It’s nice to walk downstairs with clients to see what other brands are doing in retail marketing,” Toney says.

Launching their business during tough economic times was a challenge, Toney says, but they believed in their ability to work together and create something they could be proud of. And after just four months in business, their client list already reflects their hard work. Guess Eyewear, Banana Republic Eyewear, Paul Smith Eyewear, Oliver Peoples Eyewear, Xiascapes, and Earthborn are on the who’s who list.

An ironic achievement for the company occurred when it added Oakley to its client list. Toney and Kilby had previously worked for a company associated with Oakley and were offered jobs to help the company launch a new brand. The opportunity would have meant moving to California and working long hours, but they wanted to stay in Arizona.

“If we’re going to work 24/7, it will be for ourselves,” Kilby says. cover october 2008

Toney adds: “It was a tough decision, because we were invested professionally and emotionally in it. But then, when we got them as clients, it was the best of both worlds.”

They were also recently able to hire an additional employee. Sarah Colleran, who used to work withthe pair at another Valley business, joined The Taka Group as its art director.

Looking to the future, they would like to open satellite offices on both the West and East coasts to better serve clients located in California, New York and New Jersey. They also want to open a location in Italy, where they draw a lot of inspiration for campaigns.

“The bulk of our business is the sunglass and eyewear industry,” Toney says, “but we also want to touch all other sides of retail — purses, clothing, shoes — we want to hit all of the markets.”

www.thetakagroup.com

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Chef Eddie Matney Returns With Eddie's House, 2008

Chef Eddie Matney Returns With Eddie’s House

Chef Eddie Matney, Eddie's House, AZ Business Magazine Oct. 2008

The Valley’s original celebrity chef, Eddie Matney, would like to invite you to his house for dinner. Well, it’s not his actual house, but at Eddie’s House, Matney’s newest Valley restaurant, it’s like eating home cooking as only this chef can make it.

It’s been a couple of years since Matney had an eatery in town that bears his moniker, but the wait was well worth it. Eddie’s House in Old Town Scottsdale combines all the things Matney is famous for, plus some new and comforting elements.

Overall, the decor strives for a stylish, but inviting and casual vibe. Those who sit at the head of the table get to relax in large, comfortable armchairs upholstered in a mix of leather and green and purple striped fabric.

But you don’t go to Eddie’s House for decorating tips. You go there for the food, and once again, Matney doesn’t disappoint. His food has always lived in a region where America meets the Mediterranean.

The appetizers reflect all of these influences. Matney’s flatbread and tartar starters change daily. The day my party went, the flatbread was topped with smoked salmon and roasted garlic, while the tartar selection was a tuna blend that had my dining companions raving.

We followed that with the soup and salad portion of the dinner. I jumped at what the menu dubbed the “serious” lobster bisque cappuccino. Unlike other bisques that tend to have a cream base, this lobster bisque appeared to be made primarily of a lobster stock that allowed the sweet, rich taste of the lobster meat chunks inside to really shine.

On to the entrees, where Matney kept to his tradition of hearty portions. The special that night was a pork chop dish, which quickly became a favorite at the table. The chops were tender and tasty, with everyone claiming more than one bite. Another favorite was the bacon-infused meatloaf. Oh Eddie, you had me at bacon. Add to that Yukon gold mashed potatoes and onion strings and we all forgot our diets that night.

Arizona Business Magazine October 2008 Cover

Earning special notice was the EHC or Eddie’s House Chicken. The chicken was cooked to perfection, but what captured everyone’s attention wasthe presentation. While the breast was served on a dish, the legs and thighs were placed in a small, whimsical ceramic “basket” painted to look like a bucket of chicken from that famous colonel.

Although I thought I couldn’t eat another bite, dessert is de rigueur for me. The dessert that earned the most “ooos” and “ahhhs” was the crème brûlée, so rich and sweet and surprisingly light. While the crème brûlée was very good, my personal favorite was the baked chocolate pudding topped with whipped cream. It was almost like a mousse. I became even fonder of the dessert after Matney told the story behind it; he was inspired by his memories of his mother making a similar dish while he was growing up. How appropriate for a restaurant named Eddie’s House.

www.eddieshouseaz.com

Shore Leave 2008

IT Offshore Outsourcing Is Getting Competitive

These days, one is more likely to hear a politician or corporate executive use the term “offshore” than a sailor. That’s because offshore outsourcing and the more general offshoring have become common and controversial business practices — especially when it comes to information technology.

First, the controversial part: When you hear politicians griping about companies shipping jobs overseas, they are talking about offshoring.

Simply defined, offshoring is the practice of relocating certain aspects of a business to foreign countries primarily to take advantage of lower-priced skilled labor. This can involve manufacturing or services. Plus, it comes in many forms, including one where parent companies sets up an offshore operation.

shore leave 2008

Offshore outsourcing, a practice more common to IT, involves shipping certain business operations or processes to third-party providers that utilize overseas locations. This can involve multinational service providers such as IBM, Unisys and EDS, which is scheduled to become part of Hewlett-Packard this year. Or it can involve foreign companies, such as India’s Tata Consultancy Services, Wipro Technologies, Infosys, Cognizant and HCL Technologies.

You’re more likely to hear candidates talk about offshore outsourcing than business leaders.

“It’s still a very popular business practice nowadays,” says Benjamin Shao, associate professor of Information Systems at Arizona State University’s W.P. Carey School of Business. “But I think U.S. companies now have learned from their own experience or from their competitors’ experience over the last few years. So now they also try to be a little bit more discreet and careful when it comes down to the idea of offshore outsourcing.”

TechsUnite.org, a high-tech workers union site, claims 528,478 U.S. jobs have been offshored since Jan. 1, 2000 through early August of this year.

The main reason for offshoring, according to Shao, is cost reduction, which may equate to a savings in salaries alone that ranges from 30 percent to 50 percent. Other considerations include incentives from foreign governments and access to highly skilled technical employees in such countries as India, China and Malaysia. Also, the move overseas has been facilitated by advances in technology.

“It makes it easier now for companies to manage an IT project on the global scale, which was not possible before the Internet era,” Shao says.

Ross Tisnovsky is vice president of ITO research for the Everest Research Institute, a subsidiary of the Everest Group. The global consultancy organization serves a number of Fortune 500-level buyers of outsourcing services, including several with interests in Arizona.

He separates IT outsourcing into three main categories: infrastructure outsourcing, application development and maintenance outsourcing, and IT consulting. The first deals with running such operations as servers, networks, etc. The second includes writing code for new applications and maintaining code for existing applications. The third ranges from setting up data centers to consulting on infrastructure.

IT offshoring offers two choices.

“I would loosely break down offshoring into two components,” Tisnovsky says. “One, you outsource to an external supplier that has major operations offshore. And then, if you go with a multinational supplier … then you are likely to get a lower percentage of your resources offshore. But if you go with an offshore supplier … then you will get a much larger percentage of your work force located offshore.”

Tisnovsky says the worldwide pool of developers serving the United States in application development and maintenance amounts to about 25 percent located offshore.

When it comes to outsourcing IT operations and infrastructure, Tisnovsky says there are two components: the asset-heavy model where a supplier takes ownership of a company’s IT assets and the asset-light model where the service provider merely manages and controls a company’s IT assets.

“If a U.S. company would like to consider the use of offshoring as a value lever in infrastructure outsourcing, there’s a more important decision for them to make before that, which is what they plan to do with their IT assets,” Tisnovsky says.

Multinational providers are the most likely options for the asset-heavy model, while foreign providers become a viable option in the other case.

Neither of these options is without risk and that’s where a company like Jefferson Wells comes in. Jefferson Wells is a professional services firm with an office in Phoenix. MacDonnell “Don” Ulsch is its director of technology risk management and author of the new book, “Threat! Managing Risk in a Hostile World.”

His company helps clients make informed judgments when it comes to IT offshore outsourcing. For example, it’s important to make sure a providercan protect data. Don’t choose one based on price alone.

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When selecting an offshore service provider, considerations include knowing a country’s history, investigating a company’s hiring process, understanding physical and geographic risks, and documenting a company’s security-related policies and procedures.

Ulsch says IT offshore outsourcing is a reality of business.

“Clearly there is a certain amount of work that is going to go offshore. I don’t even think that’s a question,” he says. “To be competitive in a global environment, there’s probably no other solution.”

wpcarey.asu.edu
www.everestresearchinstitute.com
www.jefferson-wells.com

Custome Fit EDU 2008

A Custom Fit EDU

By Don Harris

From two hours to two years, customized education programs are being offered to boost the performance and expertise of executive-level employees — and as a result improve a company’s bottom line.

Often, businesses struggle with putting the right person in the right leadership position. Even then, there might be gaps between what the person knows and needs to know. Customized programs are designed to fill those gaps.

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The focus of universities is on education, not necessarily training. There is even an executive education program that puts upper-level employees directly into community service through nonprofits as a way to help those in need and at the same time generate new skills and ideals that will benefit the employee’s own business.

Andy Atzert, assistant dean of the W. P. Carey School of Business at Arizona State University, and director of the school’s Business Center for Executive and Professional Development, says the center aids companies by expanding the knowledge and skills of managers and leaders, but doesn’t do tactical training, such as how to write a business plan.

The types of industries that utilize the center, Atzert says, include financial services, health care, technology, semiconductors, automotive, agribusiness, supply-chain services, information systems, and two major out-of-state oil companies.

“There is a demand outside Arizona for the expertise that we have,” Atzert says. “In fact, a majority of the companies are from out of state, and many of those are engaged in our online program.”

When Atzert says customized, he means customized.

“Some companies want a two-hour seminar, others want a customized MBA program that will take two years,” he says. “We deliver the program at company locations, at ASU or online.”

Because many companies have global work forces, the online option is getting increasingly popular. It’s more costly to send a person to an off-site location, not because of the travel expenses, but because of the time involved in being off the job, Atzert says.

Many of the courses offered focus on supply-chain management, which is a business discipline that has to do with how goods and services are bought and moved from one location to another.

For example, Toyota faces several supply-chain challenges in obtaining all the parts and materials needed to build an automobile. Atzert identifies questions the ASU program helps answer, such as what is needed, where does it come from, how do they buy it, how do they decide what to buy, how do they work with their designers, and what’s the best way to optimize their efforts and expenditures?

At the University of Phoenix, AZ LeaderForce is a program that pairs key business leaders with local nonprofits in a yearlong project to help improve the various organizations’ services and train those executives seeking leadership guidance.

Rodo Sofranac, University of Phoenix curriculum developer, says the program benefits businesses in a number of ways, including quality-of-life awareness, increasing leadership skills, and ethics.

“The issue is for participants in a project to take what they have learned and experienced back to their workplace and incorporate it in their personal life,” Sofranac says.

The University of Phoenix, which provides classroom facilities, produces a curriculum and donates its services for AZ LeaderForce, works with the Collaboration for a New Century, an organization formed about 10 years ago through the efforts of Phoenix Suns Chairman Jerry Colangelo. Topics covered include ethics, integrity, leadership, critical thinking skills and the social responsibility of business.

Steve Capobres, executive director of the Collaboration for a New Century, says the organization targets poverty issues and enlists the business community to work with human service agencies.

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“At the same time,” Capobres says, “we have an executive leadership development program going on. We not only want their time, we want to mold them, cultivate them to become the next generation of business leaders. It’s a yearlong curriculum that takes them through the issues of what a good corporate citizen is. What does it mean to work in the community? What is your own leadership style, your ethics? It’s all about building good corporate leaders who are going to replace our older, retiring leaders.”

Among the corporate participants are Salt River Project, Bank of America, UBS Financial Services, State Farm Insurance, Lennar Homes and American Express.

“By taking people outside the world of business and putting them in the community to deal with the issue of poverty,” Capobres says, “those employees are going back to the company to be a better manager.”

wpcarey.asu.edu
www.phoenix.edu
www.thecollab.org

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