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Leading Edge - Fall 2012 Document Transcript

  • 1. fall 2012 published by Advice & information to help you manage your businessNo more Why business owners need to stop waitingExcuses for the economy to improve and act nowPLUS: Hot global industries Ex-employees as assets
  • 2. Advice & information to help you manage your business Achieving Growth Among Uncertainty Realize your organizational goals through the one-of-a-kind solutions Sikich, a Every day, we hear conflicting reports in the news regarding the leading accounting, advisory, technology condition of the United States’ economy. Some say it’s still distressed; and managed services firm, brings to your others claim to have evidence of a recovering marketplace. Regardless of unique challenges and needs. With more which assertion is more accurate, the one thing we do know is that everyaspect of the economic situation is uncertain. than 400 employees across the U.S., we rank as one of the country’s top 50Uncertainty can create a wealth of problems within organizations, making expansion largest Certified Public Accounting (CPA)and growth seem impossible. However, surviving these uncertain times and even firms—yet you receive the personalizationachieving a competitive advantage is feasible by taking action. and attention you need to grow andTake a look at your organization’s productivity levels. If you’re not producing an experience success.optimal amount, determine what is causing those low levels. Your employees arecritical to high productivity—do you need to review your current performance- Get to know Sikich by taking a look at ourmanagement policy and procedures, develop a stricter training program or solicitemployee feedback on a more regular basis? Perhaps your organization’s low new website, launched at the beginning ofproductivity levels are due to operations. In this case, consider investing in a business September. There, you’ll find out how youmanagement solution that can give you daily insight into everything from your can gain value for your organizationfinancials and sales to manufacturing and supply chain management. through our dedicated industry teams,Also, talk to a professional about how you can save your organization money. Taxes, for client commitment and extensive list ofinstance, can be complex, especially if your organization is multi-faceted or operates services:internationally. An expert can uncover tax credits that your organization might be • Accounting, Audit & Taxmissing, saving you tremendous amounts of money now and for years to come. GiveSikich a call today to set your organization up for growth today and into the future. • Business Valuation • Dispute AdvisoryRespectfully, • Investment Banking & Corporate Finance • Financial Advisory • Human Resources • Marketing & DesignJames A. Sikich, CPA • Performance MeasurementCEO & Managing Partner • Business Software • Information Technology Infrastucture • Outsourced Services SUBSCRIPTION UPDATE Complete this form and fax to Rebecca Kruse at (630) 375-8840 or e-mail to rkruse@sikich.com. Please update your subscription list as follows: ■ Change address ■ Subscribe ■ Unsubscribe from Leading Edge Name __________________________________________________________________ Chicago | Decatur | Denver Title ___________________________________________________________________ Indianapolis | Naperville Company _______________________________________________________________ Rockford | Springfield | St. Louis Address ________________________________________________________________ 877.279.1900 | www.sikich.com City _____________________________ State ___________________ Zip ____________ Phone __________________________________ Email __________________________ Facebook: facebook.com/sikichllp Copy this form as necessary for multiple requests. Twitter: twitter.com/sikichllp YouTube: youtube.com/sikichllp Securities are offered through Sikich Corporate Finance LLC, a registered broker dealer with the Securities Exchange Commission and a member of FINRA/SIPC. Advisory services offered through Sikich Financial, a Registered Investment Advisor. General securities offered through Triad Advisors, Member FINRA/SIPC.2 fall 2012
  • 3. volume 13 • issue 1 • Fall 2012 Leading Edge www.LeadingEdgeAlliance.com contentsThe Leading Edge Alliance is an interna-tional professional association of inde-pendently owned accounting and con-sulting firms. The Leading Edge Allianceenables member firms to access theresources of a multibillion-dollar globalprofessional services organization,providing business development, pro-fessional training and education, andpeer-to-peer networking opportunitiesnationally and globally, around the cor-ner and around the world. featuresMembers are quality firms who are suc-cessful, have deep client relationships,and strong ties to the community. The 4 No more excusesAlliance provides members with animpressive combination: the compre- Why business owners need to stop waitinghensive size and scope of a large mul-tinational company while offering their for the economy to improve and act nowclients the continuity, consistency andquality service of a local firm.Member firms have access to extensive 14 The ‘ex’ factorteams of business advisors—a peer-to-peer connection that provides the right How companies can utilize former employees and business solutions for clients. other connections to drive growthTo find out more about the Alliance,contact Karen Kehl-Rose, president, at+1 630.513.9814 or kkr@The-LEA.com. 16 What’s hot Leading Edge Advisory Committee Despite global pessimism, some global industries Tricia Egry / Alpern Rosenthal are sizzling with opportunity George Brust / Lurie Besikof Lapidus & Co., LLP Jen Lemanski / PKF Texas departments Gary Voth / PKF Texas Karen Kehl-Rose / The Leading Edge Alliance 9 Technology outages: In affiliation with How to create an effective disaster recovery plan Smart Business Content Marketing www.sbnonline.com Ann M. Gynn / Editor 10 Identifying waste:Danielle Toth, Mark Scott, Greg Jones / Associate Editors 7 improvement opportunities for your business Stacy Vickroy / Art Director Andrea Jager & Lauren Beck / 11 Higher education: Graphic Designers How to manage student accounts receivablesLeading Edge is published four times peryear by Smart Business Content Marketing,835 Sharon Drive, Suite 200, Cleveland, OH44145. (440) 250-7000, (800) 988-4726, 12 Client Spotlight: Earth Friendly ProductsFAX (440) 250-7001, www.sbnonline.com.Periodicals postage paid at Cleveland, Ohio. 12 Industry UpdatesIRS Treasury Regulations require us to informyou that any tax advice contained in the bodyof this communication was not intended orwritten to be used, and cannot be used, by 13 Bits & Piecesthe recipient for the purpose of avoiding pen-alties that may be imposed under the InternalRevenue Code or applicable state or local taxlaw provisions. 18 On the BookshelfLeading Edge 3
  • 4. No more4 fall 2012
  • 5. cover feature Why business owners need to stop waiting for the economy to improve and act now By mark scott A recession can be a great excuse to do Most are not big enough to take on nothing with your business. Just significant risk and recover if it doesn’t turn don’t try telling that to Bob out well. But many do have some capital to Mitchell. work with and the wherewithal to make More than a year after the things happen — if they are willing to be economy crashed and banks started closing bold and take a chance. their doors en masse, Mitchells Family of “There are plenty of people who are too Stores looked to add to its portfolio. cautious and too comfortable,” Mitchell says. The Westport, Conn.-based upscale “They have the means to do it, but they are clothing retailer bought the Wilkes Bashford still not willing to take the risk. It’s like stores in San Francisco and Palo Alto, Calif., investing in the stock market. The best time in December 2009, at a time when the to invest is when everything is low. Not that troubled line of stores had just filed for everything is as low as it was three years ago, bankruptcy. but there is still a lot of uncertainty out there. For Mitchell and his team, it was an From an acquisition standpoint, things are opportunity that couldn’t be passed up. still at a different level today than they will “These may have been things we wouldn’t be when the economy takes off again.” have done in good times, because things were As a result, if you’re looking for a bargain good and we didn’t have to worry about it,” and have the means to buy, the time to act says Mitchell, co-president of the family- may be now. If you’re waiting for the owned business. “But by doing these things, economy to start growing again in a big way, it’s energized our team. We’re looking for you may be waiting for a long time. opportunities when maybe other people are “The recession was declared over in June being complacent.” 2009,” says Al Lewis, a columnist for Dow As the economy enters its fifth year of Jones Newswires and The Wall Street Journal. uncertainty since the 2008 crash, owners of “We’ve had three years of recovery since then mid-sized businesses face tough decisions. continued on page 6ExcusesLeading Edge 5
  • 6. continued from page 5and we still have 8.3 percent unemployment opportunities and forget about the economy,” Mitchell keeps a watchful eye on the stockand a mortgage foreclosure crisis that won’t Lewis says. “There were people who got very market, but it’s not out of a desperate hopequit. Now we have people warning we might rich during the Great Depression and there for direction. It just happens to serve as ago into another recession next year. So we’re were people waiting in bread lines. You just pretty accurate barometer for his business.going to have two recessions with a three- try not to be the person waiting in the bread “There seems to be a very high correlationyear recovery in between? To me, that sounds line.” that when people feel good about theirlike a depression.” It’s too stressful and too frustrating, and at investments, they are more willing to spend With all that in mind, what is the best the end of the day, just downright futile to on things that are not necessities, likecourse of action for an owner of a mid-sized look for signs from the economy that are expensive clothes or expensive jewelry,”business to take? going to magically help your business. Mitchell says. “The market is probably the “The only economic indicators I would biggest indicator of how our business is goingGet moving watch, if I watched them at all, would be to do.”According to the latest report from the housing and unemployment,” Lewis says. Most of the time, Mitchell is keenlyCongressional Budget Office, fiscal year “Those are the things that are hurting the focused on his customers and what he can do2012 is slated to close Sept. 30 with a economy the most. When we really see to satisfy them, whether the economy isfederal budget deficit totaling $1.1 trillion, improvement in those areas, then we’ll know booming or busting.the fourth year in a row with a deficit of the economy is indeed turning around.” “We’re just a big believer that, in ourmore than $1 trillion. business, it’s all about relationships and GDP is expected to grow at about customers,” Mitchell says. “You have to have2.25 percent in the second half of 2012, “Companies need the best products, but that’s kind of a given.compared with 1.75 percent in the first half,and unemployment will likely remain above to look at their It’s really the one-to-one personalized service and getting to know your top 100 customers8 percent. Little is expected to change from a own opportunities intimately. There is always more business available from your top clients. What thingsnumbers perspective, but even if those and forget about are you not selling them that you could?”numbers did change, how does that help youas the owner of a mid-sized business? the economy.” Getting in touch with your customers should not just be your job and it should not Not much, says Lewis. – Al Lewis, a columnist for Dow Jones just be the job of your low-level staffers on “Companies need to look at their own Newswires and The Wall Street Journal the floor. It should be everyone’s priority. “Ninety-five percent of our work force works on Saturday, which is our busiest day touching customers,” Mitchell says. “Everybody from finance to buying to anyone behind the scenes is there touching customers on Saturday. That, to me, is rule No. 1. In good times or bad times, everybody has to understand the customer is king or queen. They drive everything. Without customers, we have no business.” Lewis agrees that customer communication is the way to go for any business searching for a solution to the ongoing economic malaise. “You just have to accept that there is going to be this uncertainty,” he says. “You have to go find customers. Do whatever you can to find customers, hold on to customers, get revenue and find things that are making money, and get rid of things that aren’t making money. There’s only so much value that information from the economy or the markets really has to offer you. You’re pretty much on your own.”6 fall 2012
  • 7. cover featureUse your experienceFor business owners who need data or asignal to help guide their decisions, JohnGraves says there are numbers that can giveyou some sense of direction, even if theydon’t solve all your problems. “Most companies look at backlog or backorder,” says Graves, a chartered financialconsultant and author of The 7% Solution,a book geared toward helping people makesmarter investments for their futures. “If orders change or orders are cancelled,that’s a signal,” he says. “If orders are Three survivalextended, that’s another signal. You can alsolook at your accounts receivable. If people are30 days late and they extend it to 60 or 75days, that’s a signal. If we’re cleaning up ARsand the 90s and 75s are going away and tips for CEOs 1we’re banking capital more quickly, that’s alsoa signal.” Just because it worked once, don’t assume it will work again. You can also look at truck utilization Bob Mitchell could not be more pleased with his company’sfigures, wholesale diesel fuel prices,underemployment figures, rental property acquisition of Wilkes Bashford. But he didn’t take the move as ausage and vacancies and residential data, strict blueprint for all future decisions.Graves says. “The biggest mistake most people make in good times or bad But once you sort through all that data, it is doing something, having quick success and then trying tois still ultimately you that has to make the duplicate it very quickly and do it again and again,” Mitchell says.decisions. The numbers can only take you “We’re much more a believer that 90 percent of all success ispart of the way. execution.” 2 “We cannot create a formula to describethe future,” Graves says. “None of us can. Sodepending on the company, the industry, the Don’t worry about the economy.product or the service, there’s a significant Financial columnist Al Lewis says it’s really the best thing you can do.amount of guesswork. We have to make Make the decisions that you think put you in the best position to growdecisions. The informed part comes from our and don’t worry about what’s happening on the business pages.experience, our background, our current “Focus on what matters,” Lewis says. “Find somebody whobacklog of business, our inventory, how quick needs your goods and services, and that’s it. There are still peoplewe turn it around and what our clients or out there who need things. Find them. Don’t worry about theprospects are telling us. That’s all data driven. economy. If you have to make hiring decisions, don’t just sit there.Everything else is a guess.” Do it.” 3 Mitchell made the decision back in 2009to buy Wilkes Bashford and it has workedout well for his company. Stay out of debt. “If you have the capital financially and John Graves calls debt an addiction that you should seek to avoidintellectually in your organization to do at all costs.something, this is the time to do it,” Mitchell “People think, ‘If I take on more debt and I put more money intosays. “It will pay itself back. On the flip side, my product or service or inventory and I try to sell more stuff, I’llthis is not the time to make an acquisition become a bigger company and I’ll feel better,’” says Graves, athat would be betting the farm. If it’s chartered financial consultant. “That’s the wrong answer. Payingsomething that is make-or-break, it’sprobably not the right time to do it in case down debt is good. Taking on debt is bad.”we get into a small downturn again.” continued on page 8Leading Edge 7
  • 8. cover featurecontinued from page 7 Whatever you do, make sure that you’remaking decisions as a team and using all ofthe talent at your disposal to collectively sortthrough the pros and cons of a decision. “I find that, especially in times that aremore challenging, having everybody on thesame page is even more important so that weall win or lose as a team,” Mitchell says.“We’re not just dictating any one thing.We’ve made sure everybody believes in whatwe’re doing before we jump into it.”Don’t be paralyzedOne of the biggest unknowns looming is thepresidential election. The outcome of the raceand the decisions that are made in 2013could have a big effect on the economy. But just like all the other financial newsout there, Lewis says you can’t put your lifeor your business on hold. Don’t obsess “It can be quite paralyzing,” the columnistsays. “It would be better to just look at what’sgoing on with your customers and look athow you can be more involved with themduring these times.” over your competition The economy is going to do what it’sgoing to do and you can’t be swayed by onereport today and swayed back by a conflictingone tomorrow. If you do, you will driveyourself crazy. “For instance, we can get really good When Al Lewis sees a business owner studying his competition aemployees for a fraction of what we would little too much, he takes it as a lack of confidence.have had to pay them during an economic “You should have intelligence on your competitors and be awareboom,” Lewis says. “We should be looking atwho we can hire. Who is super smart that is of the tenor in your industry,” says Lewis, columnist for Dow Jonesavailable? People are suffering from declining Newswires and The Wall Street Journal.incomes, but what is the value you can deliver “But the most successful business owners aren’t sitting aroundto these people so that they can continue to worrying about what their competitors are doing. They’re plowinguse your product or service?” new fields and they are moving ahead. If you’re focused too much on Focus on your business and on what youdo really well, and you’ll have the best chance what they’re doing and not on what you’re doing, that means yourto find profitability. vision isn’t very strong.” “You can’t just sit there and go, ‘Well, we Bob Mitchell doesn’t worry about his competition, but he does keepcan’t hire anybody because we’re worried an eye on it. The co-president of Mitchells Family of Stores is curiousabout what Obama is going to do if he’s about what competitors do that works and what doesn’t work.re-elected, or we’re worried about something “You can learn from everyone,” Mitchell says. “But our bigelse,’” Lewis says. “You hire somebodybecause you can employ them immediately differentiating factor is still going to be the environment we create,and you can make a profit from them.” LE the relationships we develop and the service we provide for clients.”8 fall 2012
  • 9. inside: • Identifying waste: 7 improvement opportunities for your business • Higher education: How to manage student accounts receivables • Client Spotlight: Earth Friendly Products • Industry UpdatesTechnology outages:How to create an effective disaster recovery planI f you have ever been in the unfortunate position ofexperiencing a technology system and you will begin to realize what has the highest priority and what may not be procedures to use an alternate site, the main point-of-disruption—either due to power equally important to your contact and a backup.outages, loss of Internet organization. • Plan testingconnectivity, blown battery Plan for common incidents. schedule:backup devices, lightning damage Learn from history when Describe how youor, the worst case, natural disaster creating a disaster recovery plan. will test the plan, asdamage—hopefully your disaster What types of outages have you well as how often.recovery plan was in place, tested already experienced? Are Start small by testingand working. However, not all lightning strikes, tornadoes, specific areas orleaders prepare for a disruption, flooding or server failures departments. Often,which can critically damage your prevalent in your area? To help it is not possible tobusiness’s technology or overall you begin thinking about this, pull the plug on theoperations. An effective disaster here are the five main losses in entire organization,recovery plan typically includes order of most common to least declare a disaster and start the so starting smallfive steps: common: plan in motion, which during slower demand times Prioritize processes. • Human error loss: deleting locations are covered by the may be easier. Remember—Prioritization of processes is files, overwriting data and plan and the critical without testing your plan, it issometimes referred to as a everyday mistakes applications and facilities. not complete.business impact analysis. By • Data corruption: virus attacks In addition, list the major • Recovery plan maintenance:segregating each significant and application errors departments and their Many changes will impact theprocess into one of three • Storage loss: corrupt or process owners. plan, including contactcategories (mission critical—most malfunctioning hardware • Teams and contacts: information, personnelimportant; business critical; or • Site loss: flood, fire, tornado List the disaster recovery changes and the computerorganizationally important—least or hurricane team and responsibilities; network environment. Reviewimportant), you are prioritizing • Server loss: CPU failure, theft contact information for the plan once or twice a yearthe parts of the organization that or catastrophic virus process owners, IT staff and to keep up with theseshould be recovered first in the Communicate the plan. third-party vendors; off-site changes. Also, don’t forget toevent of an outage. This step is key because it’s storage information; and have paper copies on hand, Determine recovery important for staff at all levels to information about any just in case.objectives. understand what their roles are in alternate recovery site. • Appendices: Decide how long you can live a disaster or disruptive situation. • Environmental Include copies of importantwithout access to a particular The best way to communicate documentation: contracts, agreements andsystem. Additionally, ask yourself: the plan is to prepare a Include current network previous plan testing results.Should a system fail, how current document, place multiple copies documentation such as ISPis the data from which you throughout all business locations contacts and accounts, Creating a disaster recoveryrecover? Define what you and ensure everyone knows passwords, physical maps of plan may sound like anconsider a disaster and set the where it is located. Just as you all locations and recovery site overwhelming and time-maximum amount of time you know where the fire extinguishers information. consuming task. Start with whatcan go without access to your are located, you should know • Disaster you already know about yoursystem, otherwise known as where the disaster recovery plan implementation tasks: network and processes and thenrecovery time objective. Then, set is located. When documenting Detail recovery procedures, start to fill in the gaps. When itthe recovery point objective, the this plan, keep the following in alternate site information, comes to disaster recoveryacceptable amount of data loss mind: what the recovery planning, having something infrom the most recent complete • Organizational information: environment will look like place is always better than havingsystem backup. Do this for each Define who is entitled to and where to report, nothing in place. LELeading Edge 9
  • 10. Identifying waste:7 improvement opportunities for your businessT he current economic situation is forcing business owners totake a good look at their the resources you have available in the organization. • Gather your management team and conduct a “whiteboard” session with a Can you make the workplacecompanies to identify waste and more ergonomic for your waste auditor.key improvement opportunities. employees? When they sit • Write down the seven areasWhether cutting costs is a down to perform a service or of waste and discuss wherenecessity or you just want to run work on a project, do they the company is experiencinga leaner business, it’s beneficial to have all the parts, tools, plans waste in each critical area.constantly seek ways to reduce and schematics to complete • Brainstorm at least threewaste. There are seven areas the job, or do they have to get ideas per area about how towhere waste typically up and waste time looking for eliminate some waste. Ataccumulates. Explore these and something to complete the this point, do not thinkhelp your management team task? about time or costdevelop and implement an 7. Defects are likely the biggest considerations.effective waste-reduction plan. waste to your organization. • Estimate how much money1. Overproduction occurs when Where do defects occur in the company is spending or a company produces more of your business? The answer is losing because of each area an order in anticipation of everywhere. Most defects and of waste. waste or damage. For waste can be eliminated from mistakes occur due to poor • Rank each idea on a scale example, imagine you need to that path. Think about the processes, lack of training or of one to five, with one assemble a product that flow of work in your lack of proper equipment. being the easiest to requires eight component organization and ask yourself Defects and mistakes cost implement and five being parts. Your purchasing if it makes sense for your money and customers. the most difficult. At the department may actually buy business. end of this process, it will 10 component parts just in 4. Inappropriate processing After you’ve identified where be easy to identify the ideas case any parts are spoiled or occurs when you are using the waste accumulates in your that have the highest value damaged. In a service setting, incorrect tools and processes organization, it’s time to start with the easiest this happens when staff for a job. For example, do you developing a plan to eliminate, or implementation. spends too much time on a use a 20-ton press when a at least reduce, this waste. To do • Document your work. project that can only be billed 10-ton press can do the job? so, follow these six steps: Complete a one-page plan at a certain price. Is an experienced senior and give a deadline to2. Waiting is the time your executive doing a job a lower- complete the project. Also, product or service spends in ranking person should be have all members of the the system. It waits for doing? management team complete someone to add value before 5. Inventory is a huge waste their plans identifying it goes to the customer. If you culprit within organizations. individual strategies and can eliminate the waiting How often do you “turn” your objectives. time by 50 percent (which is inventory each year, and how ambitious), you can reduce much outdated inventory are It is essential that you set the your cost and improve your you keeping, storing and stage with your employees. This cash flow tremendously. counting each year that is not last step is critical for any3. ransport is the critical path T going to sell? If there’s too improvement objective in your your product or service takes much, consider finding a new organization because these through the plant, so consider place for it. plans provide a road map to the inefficiencies in its way 6. Motion and process ensure that the improvement and what kinds of time or improvement has to do with plan is complete. LE10 fall 2012
  • 11. Sikich LLP Higher education: How to manage student accounts receivables E ach year, it’s getting more expensive for students to attend a college or university. The cost of tuition, housing and books are all increasing, so students need more assistance and are taking out more loans. After graduation, student accounts receivables can be a significant asset of a higher education institution and, more importantly, can require a substantial amount of the institution’s resources to bill and collect these fees. By properly managing student accounts receivables, colleges and universities can focus on their core mission rather than spending time collecting past due balances. The effects of improper management When your college or university does not manage these accounts receivables well, it has a considerable effect on the entire institution. A few of the effects include: • Bill the tuition and fees in a The earlier you send • Revenue loss timely manner. The earlier students their bills, the • Slower cash flow you send students their bills, better chance they will • Improper write-offs of bad debt the better chance they will pay in a timely manner. • Opportunity cost of not pursuing outstanding balances pay in a timely manner. • Students registering for future terms without satisfying • Include a signed promissory note. This will ensure a legal prior debt agreement has been made for all multi-payment plans. • Shorten the term. Yes, this increases the amount students must pay Develop benchmarks for comparison during each installment, but it also wipes the debt from their In order to start improving the way your higher education account more quickly. institution manages accounts receivables, you should first • Set a maximum receivable balance. If students cannot carry more outline some benchmarks. These will allow you to compare this than a specified balance, it prevents them from registering for year’s numbers to last year’s, which will give you an idea of future terms. where not only your accounts receivable stand but the • Impose late fees. If your institution already has late fees for non- institution’s overall finances. Some benchmarks to consider paying students, increasing these fees may help. include but are not limited to: • Place holds on records or transcripts. This is important for • Total annual tuition students seeking full-time jobs or internships, as they may be • Total annual amount billed (other than tuition) required to provide these to prospective employers. • Average receivables balance per student • Block college or university services. This may be something small, • Percentage of students with receivables balances such as library access, or something significant, such as graduation • Late fees charged and collected ceremonies. • Total annual write-offs • Report delinquent students to creditors. Federal law requires that • Percentage of students placed in collection during higher education institutions regularly update credit statuses, and the fiscal year credit scores are important to students entering the workforce. • Receivables collected by a third party Different ways of improving collections work for each unique Improve the collection of accounts receivables college and university, but the underlying message is the same for Now that you have a better idea of where you stand compared all—student accounts receivables affect all institutions’ operations in to last year, you can determine how to make collection easier one way or another. Regardless of how you collect the fees, it’s on both the student and institution. imperative you do for your institution’s future. LELeading Edge 11
  • 12. Sikich LLPClient Spotlight: Earth Friendly ProductsFounded in 1967, Earth Friendly Products new ways to save moneymanufactures more than 150 all-natural through its taxes. Whetherhousehold and commercial cleaning for domestic production orproducts that are made from pure research and development,plant-based ingredients. With more than Sikich has provided support300 employees and five manufacturing and value to Earth Friendlyfacilities across the country, Earth Products’ business byFriendly Products creates green products catching missing taxin a sustainable fashion by reducing its credits and going backcarbon footprint and lowering costs. several years to ensureFor example, the company’s corporate the returns were amended.headquarters is home to the largest Through these savings, ascommercial solar array in Illinois. well as the company’s long-term vision, Friendly Products and learn more about Since Earth Friendly Products’ Earth Friendly Products has grown by 20 how Sikich added value to the company?partnership with Sikich began, the percent annually for the last few years. Watch the Client Spotlight video atgreen company has experienced many Want to get an inside look at Earth http://youtu.be/JzVXQ0oqxBMIndustry UpdatesKeeping abreast of statistics, trends and industry developments allows you to identify risks and uncover opportunities in the market.With better insight into the competitive landscape, you can make more informed, strategic decisions and gain a competitive edge. Ourquarterly industry updates offer intelligence from First Research* and focus on the critical facts that affect your day-to-day business. MANUFACTURING PROFESSIONAL ASSOCIATIONS Consumer confidence drops – U.S. consumer Business travel forecast dims – Business travel is confidence, a key demand indicator for manufactured expected to slow down for the remainder of 2012 in goods, fell in July 2012 to its lowest point in the year, light of continued economic concerns in the Unitedaccording to the Thomson Reuters/University of Michigan index of States and Europe, a signal that attendance at business andconsumer sentiment. The index reading fell to 72 from June’s 73.2; a professional association meetings could suffer. The Global BusinessBloomberg News survey of 69 economists had forecast a July 2012 Travel Association downgraded its outlook for U.S. business travelindex reading of 73.5. The drop in consumer confidence is likely due from 3.6-percent growth to a more modest 1.8 percent. Businessesto persistently high unemployment, the European debt crisis and its will also rein in international business travel expenses as economiccontribution to stock market volatility and low home prices. Household uncertainty continues to plague Europe. The forecast is a starkspending accounts for about 70 percent of the U.S. economy, so a contrast to the relative strength of the business travel market insustained decline in consumer confidence could reduce demand for recent years and underscores the concern businesses place onmany types of manufactured goods. overall economic conditions. *Industry intelligence from First Research, a division of Hoover’s (a D&B company). Data published Aug. 13, 201212 fall 2012
  • 13. bitsDoes your socialmedia policy violatefederal law?Many organizations have been grappling withwriting social media policies for theiremployees, but recent guidance from thegeneral counsel of the National Labor Relations & pieces How to keep your star players If your company can identify its top performers, and has been lucky in landing standouts from other companies, it is not alone. Eighty-six percent of companies have been able to do that. However, keeping the stars from leaving is another matter entirely.Board has shed light on the matter. NLRB’s Lafe Solomon stresses that all These observations are the key findingsemployees have certain rights under federal of an informal survey of 91 human resourceslaw that can’t be infringed upon in social professionals conducted in July by Sibsonmedia policies, and there are questions you should ask when defining your policy. Consulting. Almost all of those surveyed• Does your policy prohibit or restrict “friending” other employees? Workers have indicated they were concerned about losing the right to do so. A statement encouraging employees to “think carefully about their star employees. At the same time, ‘friending’ co-workers” was considered illegal. companies appear to be more selective in• Does your policy prohibit your employees from posting about the company? their retention practices; just 58 percent said Under federal law, employees may criticize their company and how it treats its they were interested in retaining their entire employees. workforce.• Does your policy prohibit talking about co-workers? The workforce has the right Companies may be waking up to the to discuss wages and conditions of employment with employees and others. importance of providing career growth to• Does your policy ban posting the trademarks, videos and pictures of the their best people. company, or of others, without permission? If a policy merely urges people to “In general, one of the things that keep “respect third-party intellectual property,” it is likely lawful. high performers around is giving them a• Does your policy prohibit talking to the press? Workers have the right to talk to sense that they the news media in certain labor disputes. have a future• Does your policy prohibit talking in an indecent manner? A provision warning with your employees to “avoid harming the image and integrity of the company” was not lawful. company,” says• Does your policy prohibit discussing inflammatory topics? Employees have the Jim Kochanski, a right to talk in a spirited manner about working conditions. senior vice• Does your policy ban the use of social media while at work? A complete president at prohibition of employees using social media with an employer’s resources or on an Sibson. employer’s time was unlawful. Three steps Executives can take some basic steps to 2. Be transparent and consistent in your to build build trust among employees and improve actions. While businesses often focus on business results, says Andy Atkins, chief results and ignore the process, if you are trust among innovation officer of Interaction Associates, transparent and consistent, your employees a global leadership development firm. employees will learn to rely on you. 1. nvolve people in decisions that directly I 3. ay attention to relationships. If you P affect them. Bring people in before the understand what matters to employees, call is made. Even if they oppose the they’ll trust you to act in behaviors that decision, they are more likely to support align with their interests. LE it if they were involved in the discussion.Leading Edge 13
  • 14. The ‘ex’ factorHow companies can utilize former employeesand other connections to drive growth W hen an employee leaves your company, do you view that person as disloyal or as a future resource? How you handle your former employees can make a big difference in how your business grows. Take Procter & Gamble, the $90 billion consumer goods giant, as an example. The P&G Alumni Network was started by a former employee and really took off 11 years ago when then-CEO A.G. Lafley put his support behind the group. Today, there are 45 active chapters with 25,000 members around the world. “Alumni groups are hard to get started initially because it takes a little bit of money and it takes people to volunteer to go do this,” says Mike Halloran, network director and board member for the P&G Alumni Network. “The fact that Procter was supportive of our effort and gave us encouragement to do this enabled us to get going and put this together. That was Lafley recognizing that this wasn’t a threat to P&G but a great asset to P&G.” Lafley was a big believer in the idea that not everything has to be invented inside of P&G, and the company’s alumni are a key part of that. “One way we partner with them is sharing with them specific innovation needs that we have where we are looking for solutions,” says Steve Baggot, P&G’s director of global business development. “We can activate networks that we have built outside the company and say, ‘We have this particular innovation challenge. We are looking for this particular technology or this particular go-to- market solution.’ We take that need, and we14 fall 2012
  • 15. strategic “The first thing you need is a strong group of volunteers to make this work.” – Mike Halloran, network director and board member for the P&G Alumni Networkcan spread that need very, very broadly in an that former employees still feel like they are programming,” Halloran says. “The lasteffort to identify potential solutions.” part of the P&G network, that they feel like thing is to develop ways to generate Alumni are often eager to respond to a they’re connected, they feel like they’re still funding. We’ve really thought throughneed because they have previously worked in valued and they feel like their contributions how to develop sponsors for individuala specific area, or they have a connection in a are still important.” events and how to generate enough cashspecific area that can help get potential To build that kind of network, you need to make those events self-supporting.”solutions back to the company. to establish that effort from top leadership. “The other broad bucket of how we interact Executives have to be visible to the alumni Other optionswith them would be helping them understand and assist them with programming and While alumni groups are a great resourcethat P&G is open for business and wants to financial support. The advantage to working to a parent company, not everyone hasdo business with alumni,” Baggot says. “Our with alumni is they already know the enough former employees to make thegroup provides a portal for alumni to reach business, speak the same corporate language idea work. And sometimes you really needback into the company to say, ‘I’ve got a and have the same shared values. a fresh perspective.particular business proposition, technology, a “You start a few steps down the road That’s where a network of industrynew brand, a new capability.’ Our charter is to versus somebody who hasn’t had a history of experts can help.help them and get that navigated to the right working with your company,” Baggot says. “The benefit that these experts bring isplace within the company.” “It makes it easier for both parties. They that they are on demand,” says Michael should have better-than-average insight into Rubin, vice president of marketing forSupport is vital to success the types of things that would be Your Encore, an organization thatP&G’s level of commitment and support to appropriate for your business, so it’s a good connects businesses with a network ofthe alumni group helped it succeed. use of your time to be sure that you engage 7,500 industry experts. “It’s a great way for “Two things are critical — one is support with them.” these companies to tap into advancedfrom the parent company, and the second is As much as company support can help, it expertise that may be difficult to findthat the governance and the organization is still dependent on the alumni to make the elsewhere on the open market.”come from the members themselves,” Baggot group successful. Many companies are now looking forsays. “It has to be something that comes “The first thing you need is a strong group on-demand talent. Networks like Yourfrom the population, and they have to want of volunteers to make this work,” Halloran Encore give those companies an outsideto do this. Equally, the company has to say, says. “Too often, some organizations try to perspective that alumni sometimes can’t‘This is a good thing, and we are very get going with two or three people, and it provide.supportive of that.’” really takes 10 or 12 to make it happen. “A lot of companies like someone from Approach your former employees with Second, you have to have a very clear short- the outside, either from their generalsupport and view them as potential assets or term vision and clear long-term vision. Keep industry or from a totally differenteven business partners to maximize their value. it simple, but have a very strong focus.” industry, to come in with fresh eyes,” “In a lot of companies, when somebody Alumni groups are not just about going to Rubin says.leaves their employment, they become cocktail parties and seeing somebody from The key is to look for relationships thatpersona non grata,” says Lisa Popyk, the past, and they’re not just about having can benefit your business. Regardless ofcommunications and external relations for guest speakers and talking business. whether it is through ex-employees orglobal business development at P&G. “You have to figure out what is that right outside experts, viewing everyone as a“They’re just not seen as part of the family. mix of personal connection events with potential business partner can help moveP&G made a concerted effort to make sure business events and build that into your your business forward. LELeading Edge 15
  • 16. What’s HOT W ith a sluggish global recovery and invented a way to bring sustainable local bleak news about the recession in housing to people by developing anDespite global Europe, many are pessimistic about the world’s economy. affordable, sustainable building material that is biodegradable and 30-percent lesspessimism, some However, there are some bright spots, particularly in the energy, health care, expensive than other housing materials. “Sustainable resources are very connectedglobal industries translation and localization and IT industries, and experts forecast all of these will stay hot to affordability,” Bujorean says. “People can’t afford to pay a lot for energy, so neware sizzling with in the short term. technology that can be identified to provide energy at a low cost that is more attainable isopportunity Energy The energy industry is of particular interest a big focus. In Bangladesh, in particular, it is important given the flooding and disasters in the United Arab Emirates, Pakistan, that have happened there. These technologies Bangladesh and Indonesia, says Ovidiu give them the possibility of rebuilding and Bujorean, program manager of the Global are also applicable in other countries that Innovation through Science and Technology can’t afford housing.” Initiative, which builds entrepreneurship in countries across the Middle East, Central Information technology and Southeast Asia and Africa by identifying, As technology continues to advance and coaching and funding entrepreneurs. The grow, more opportunities are opening up initiative is part of CRDF Global, an across the globe. independent nonprofit organization that Spain, for example, has a well-educated promotes international scientific and population with a strong emphasis on technical collaboration. advanced scientific and technological degrees, “The UAE is looking to diversify its says Mary Anne Thompson, founder and energy resources, so it has put a lot of effort president of Going Global Inc., which into renewable sources of energy. It wants to provides country-specific career and reduce its dependency on oil and lead the employment information for 30 countries. way for other more renewable energies,” Potential areas of growth in Spain include Bujorean says. “On the other hand, countries open-source software, which has strong like Pakistan and Indonesia have limited public support and a growing market, and access to traditional energy sources like oil, so e-health, e-commerce and mobile phone they are looking to build alternative sources auxiliary services. Spain has one of Europe’s of energy.” highest mobile phone penetration rates. For example, the GIST Initiative recently In addition, IT professionals are strongly recognized an entrepreneur from Indonesia in demand in Ireland. Two years ago, the who created a company named T-Files. The country issued almost 500 work permits to company develops marine turbines that turn non-European Economic Area software ocean currents into electricity, a valuable engineers and computer programmers to resource for the country. bring these much-needed professionals to These countries are also focused on the country. creating sustainable energy. A GIST “The Irish government will also be Initiative funding winner from Pakistan, for implementing two immigration programs to example, created a machine that turns farm encourage foreign investment and waste into natural gas that can then be used entrepreneurship: the Immigrant Investor as electricity. And in Bangladesh, a man Programme for non-EEA investors and the16 fall 2012
  • 17. Start-up Entrepreneur Programme for has also been entering emerging markets, This industry has steadily increasedentrepreneurs with proposals in innovation particularly those in Brazil, Russia, India and revenue and created jobs during the recession,sectors,” Thompson says. “Successful China, which will help the industry expand says Terena Bell, CEO of In Everyapplicants will be granted two-year residence and grow. Language, a provider of translating,permits for themselves and family, renewable The United States is also focusing on interpreting and localization solutions in theup to five years.” these emerging markets and expects to see United States and abroad. India is also expected to see strong growth strong growth in this industry. In addition, This industry is hot in the United Statesin the IT industry. In the second half of 2011, generic pharmaceuticals are expected to because, according to Title VI federal law,the sector generated 81,300 jobs, and about grow in the United States because many which prohibits discrimination based on race,130,000 new positions are expected this year. drug patents expire and the Patient color and national origin, any organizationThe sector is particularly thriving because of Protection and Affordable Care Act receiving federal funds is required to providestrong revenue from the country’s top four IT becomes effective, requiring all individuals translation and interpretation to people withfirms: Tata Consultancy Services Ltd., Infosys to have health insurance. limited English skills, Bell says. In addition,Ltd.’s IT division, Wipro Ltd. and HCL Bujorean says the GIST Initiative worked the Small Business Administration recentlyTechnologies Ltd. with many entrepreneurs in health care, issued State Trade and Export Promotion particularly in Mediterranean countries. The grants that help small exporters in the UnitedPharmaceuticals and health care initiative recently saw two health care States pay for the translation of theirPeople will always need medication, so the entrepreneurs from Lebanon, one who websites and marketing material.pharmaceutical industry is continually growing. developed a waterproof heart rate monitor Translation and localization is also a big The industry is hot in Spain right now, that attaches to swim goggles and another trend in Ireland, which has a largewhich has about 440 pharmaceutical who created a portable health monitor with concentration of localization and translationcompanies operating in the country and GPS that can predict heart attacks and industry professionals and is a hub foraccounts for 18.5 percent of the country’s transmits data that can detect anomalies. multinational companies including Microsoft,private research and development spending, “With the availability of Wi-Fi Cisco, Facebook, Google and LinkedIn.according to Thompson. technologies, there are a lot of opportunities In addition, the industry is gaining traction In 2011, for example, Celgene, a for new, technological health care products,” in China because, with a population of moremultinational biopharmaceutical company, Bujorean says than 1.3 billion, many businesses are looking toopened its first research center outside of the target the country’s vast number of consumers.United States in Spain as part of the Celgene Translation and localization “Businesses are looking toward foreignInstitute of Transnational Research Europe, While translation deals with language only, markets as an additional source of revenue,”which intends to invest 60 million euros, or localization takes into account everything else Bell says. “Selling to these markets meansapproximately $75 million, in advanced that is part of converting business from one communicating with them, so savvytherapies and regenerative medicine. country to another, including in which businesses understand that translation is not The industry is also big in Japan because currency a price should be quoted or whether a cost center — it’s a profit driver. Thisgovernmental policies offering incentives for a website should be designed for viewing makes it a smart investment in a company’sgeneric medicine have driven demand. Japan right to left or left to right. financial future.” LELeading Edge 17
  • 18. on the bookshelfProfiles in LeadershipThe fall edition of Bookshelf idiosyncratic business leaders whose Julius Caesar, CEO:includes volumes on leadership companies’ returns greatly outperformed those Six Principles to of the S&P 500. The subjects themselves are Guide & Inspireunder duress, communication, CEO not household names, although some of their Modern Leaderstransitions, unconventional (but Alan Axelrod companies are: General Cinema, Ralstoneffective) approaches to business Purina, The Washington Post Co. and Sterlingleadership and a look at how one Berkshire Hathaway. The book enumerates 248 pagesof the world’s earliest CEOs, Julius the consistent traits that helped these leaders In this most recentCaesar, led his organization, the push their companies to exceptional installment in his CEORoman Empire, through its most performance, such as focusing on share value series, Axelrod analyzessuccessful years. instead of sales, an aptitude for allocating Julius Caesar, the general, statesman and leader capital and human resources, the conviction of the Roman Empire, in business-executive that cash flow is more important than terms. He uses a straightforward, informalInside CEO earnings in determining a company’s long- style to explore six motivational standards thatSuccession: The term value, and a talent for giving managers constitute the core of Caesar’s leadershipEssential Guide to autonomy to foster entrepreneurial thought philosophy. Within each of the six coreLeadership Transition and action. principles are several practical lessons CEOsThomas Saporito, can use in their daily work lives. Axelrod alsoPaul Winum World Class provides an interesting analysis of Caesar’s lifeJossey-Bass Communication: and applies the lessons learned by the subject256 pages How Great to modern day events and how they can beInside CEO Succession CEOs Win with similarly handled by today’s business leaders.gives business leaders the tools to execute the Public,their succession responsibilities with a high Shareholders, Leading With Honor:level of professionalism to ensure their Employees, Leadership Lessonscompanies’ sustained success. The authors from the Hanoi Hilton and the Mediaexplain how human dynamics such as power, Lee Ellis Virgil Scudder,ego and role relationships can affect the Freedom Star Media Ken Scudderprocesses of relinquishing leadership, preparing 256 pages Wileysuccessors and ceding authority to other Former U.S. Air Force 240 pagespeople, and they suggest strategies to prevent pilot Lee Ellis talks World Class Communication is a tonic forthese and other dynamics from creating candidly about the five business executives whose narrow focus on theproblems during the leadership transition and a half years he spent financial aspects of their business can at timesprocess that can cause new business executives imprisoned in a brutal POW camp in North be detrimental to their ability to communicateto fail early in their tenures. Vietnam and offers 14 leadership principles he well with the public, the media and their employees. The book furnishes business formulated during that period that helped himThe Outsiders: persevere through his captivity. Ellis, a leaders with procedures and crisis lessons andEight Unconventional corporate consultant and business leadership provides numerous case studies of situationsCEOs and Their in which CEOs’ communications were coach, helps Fortune 500 executives, smallRadically Rational handled well and poorly. The authors provide business owners and entrepreneurs implementBlueprint for Success tips on communication techniques to rally these leadership principles to increase theirWilliam Thorndike employee support, speak persuasively in organization’s prospects for success viaHarvard Business Review public, win over the media and deliver coaching sessions provided within each chapterPress effective messages to shareholders. of Leading With Honor. LE272 pagesIn The Outsiders, Thorndike profiles eight18 fall 2012
  • 19. Sikich and other members of theLeading Edge Alliance are leaders inmany key markets, including: The Leading Edge Alliance is an international professionalAlabama India Palestine association of independently owned accounting and consulting firms.Albania Indiana PanamaAfghanistan Indonesia Paraguay The Alliance enables member firms to access the resources of aArgentina Iowa Paris multibillion dollar global professional services organization, providingAtlanta Ireland PeruAustralia Israel Philadelphia business development, professional training and education, and peer-to-Austria Italy Phoenix peer networking opportunities nationally and globally, around the cornerAzerbaijan Jordan Philippines and around the world.Bahrain Kansas PittsburghBaltimore Kazakhstan PolandBangladesh Kenya Providence Members are quality firms who are very successful, have deep clientBelgium Knoxville Puerto RicoBolivia Korea Richmond relationships, and strong ties to the community. The Alliance providesBoston Kuwait Reno members with an impressive combination: the comprehensive size andBrazil Las Vegas Romania Russian Federation scope of a large multinational company while offering their clients theBritish Virgin Islands LatviaBuffalo Lebanon San Francisco continuity, consistency and quality service of a local firm. Member firmsBulgaria Lexington Saudi Arabia have access to extensive teams of business advisors – a peer-to-peerCayman Islands London ScotlandChattanooga Los Angeles Seattle connection that provides the right business solutions for clients.Chicago Luxembourg SenegalChile Macedonia SerbiaChina Madison, WI SingaporeCincinnati Malaysia SlovakiaCleveland Malta Slovenia The Leading Edge offers:Colombia Mauritius South CarolinaCroatia Memphis Spain • Access to extensive teams of accounting professionals and businessCyprus Mexico Sweden advisors—a peer-to-peer connection that provides the right solutionsCzech Republic Miami Switzerland for clients.Dallas Michigan TaiwanDayton Minneapolis/St. Paul Thailand • Innovative, practice-proven strategies for improving performance inDenver Missouri Tokyo management, business processes, finance, operations, informationDominican Republic Moldova TorontoEcuador Montenegro Tucson technology and marketing.Egypt Montreal Tunisia • A leading knowledge resource for multi-disciplinary information andEl Salvador Morocco Turkey industry-specific expertise responsive to clients’ unique needs.Finland Nashville UkraineFort Lauderdale Nebraska United Arab • The Alliance offers accounting, consulting and tax services through aGhana Netherlands Emirates global alliance of firms with over 18,323 professional staff, more thanGermany New Orleans UgandaGreece New Jersey Uruguay 1,600 partners and over 23,518 staff in 455 offices.Guatemala New York U.S. Virgin Islands • The Leading Edge Alliance offers global business advisory expertiseHarrisburg, PA New Zealand Venezuela and experience with innovation, progressiveness and quality.Hartford North Carolina Washington, D.C.Hong Kong Norway VietnamHonolulu Orange County, CA Virginia/West VirginiaHouston OregonHungary Pakistan To find out more about The Leading Edge Alliance, visit www.LeadingEdgeAlliance.com or contact Karen Kehl-Rose, Visit LeadingEdgeAlliance.com for a detailed listing of member firms. president, at +1 630.513.9814 or kkr@The-LEA.com.Leading Edge 19
  • 20. Sikich LLP Corporate Office1415 W. Diehl Road, Suite 400Naperville, IL 60563(877) 279-1900www.sikich.comreturn service requested