published by

fall 2012

Advice & informAtion to help you mAnAge your business

no more excuses

Why business owners need to stop waiting for the economy to improve and act noW

plus: hot global industries ex-employees as assets

Achieving Growth Among UncertaintyEvery day, we hear conflicting reports in the news regarding the condition of the United States’ economy. Some say it’s still distressed; others claim to have evidence of a recovering marketplace. Regardless of which assertion is more accurate, the one thing we do know is that every

aspect of the economic situation is uncertain.

Uncertainty can create a wealth of problems within organizations, making expansion and growth seem impossible. However, surviving these uncertain times and even achieving a competitive advantage is feasible by taking action.

Take a look at your organization’s productivity levels. If you’re not producing an optimal amount, determine what is causing those low levels. Your employees are critical to high productivity—do you need to review your current performance-management policy and procedures, develop a stricter training program or solicit employee feedback on a more regular basis? Perhaps your organization’s low productivity levels are due to operations. In this case, consider investing in a business management solution that can give you daily insight into everything from your financials and sales to manufacturing and supply chain management.

Also, talk to a professional about how you can save your organization money. Taxes, for instance, can be complex, especially if your organization is multi-faceted or operates internationally. An expert can uncover tax credits that your organization might be missing, saving you tremendous amounts of money now and for years to come. Give Sikich a call today to set your organization up for growth today and into the future.

Respectfully,

James A. Sikich, CPA CEO & Managing Partner

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2 fAll 2012

Advice & informAtion to help you mAnAge your business

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Leading Edge Advisory Committee

tricia egry / Alpern rosenthal

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Jen lemanski / pKf texas

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Karen Kehl-rose / the leading edge Alliance

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www.sbnonline.comAnn m. gynn / editor

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graphic designers

VOluMe 13 • ISSue 1 • FAll 2012

leading edge is published four times per year by smart business content marketing, 835 sharon drive, suite 200, cleveland, oh 44145. (440) 250-7000, (800) 988-4726, fAx (440) 250-7001, www.sbnonline.com. periodicals postage paid at cleveland, ohio.

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features

departments

4 No more excuses

Why business owners need to stop waiting for the economy to improve and act now

14 The ‘ex’ factor

how companies can utilize former employees and other connections to drive growth

16 What’s hot despite global pessimism, some global industries are sizzling with opportunity

9 Technology outages: how to create an effective disaster recovery plan

10 Identifying waste: 7 improvement opportunities for your business

11 Higher education: how to manage student accounts receivables

12 Client Spotlight: earth friendly products

12 Industry Updates

13 Bits & Pieces

18 On the Bookshelf

leAding edge 3

contents

4 fAll 2012

no more

leAding edge 5

cover feature

A recession can be a great excuse to do nothing with your business. Just don’t try telling that to Bob Mitchell.

More than a year after the economy crashed and banks started closing their doors en masse, Mitchells Family of Stores looked to add to its portfolio.

The Westport, Conn.-based upscale clothing retailer bought the Wilkes Bashford stores in San Francisco and Palo Alto, Calif., in December 2009, at a time when the troubled line of stores had just filed for bankruptcy.

For Mitchell and his team, it was an opportunity that couldn’t be passed up.

“These may have been things we wouldn’t have done in good times, because things were good and we didn’t have to worry about it,” says Mitchell, co-president of the family-owned business. “But by doing these things, it’s energized our team. We’re looking for opportunities when maybe other people are being complacent.”

As the economy enters its fifth year of uncertainty since the 2008 crash, owners of mid-sized businesses face tough decisions. continued on page 6

no more Why business owners need to stop waiting for the economy to improve and act noW By mArk sCOTT

Most are not big enough to take on significant risk and recover if it doesn’t turn out well. But many do have some capital to work with and the wherewithal to make things happen — if they are willing to be bold and take a chance.

“There are plenty of people who are too cautious and too comfortable,” Mitchell says. “They have the means to do it, but they are still not willing to take the risk. It’s like investing in the stock market. The best time to invest is when everything is low. Not that everything is as low as it was three years ago, but there is still a lot of uncertainty out there. From an acquisition standpoint, things are still at a different level today than they will be when the economy takes off again.”

As a result, if you’re looking for a bargain and have the means to buy, the time to act may be now. If you’re waiting for the economy to start growing again in a big way, you may be waiting for a long time.

“The recession was declared over in June 2009,” says Al Lewis, a columnist for Dow Jones Newswires and The Wall Street Journal. “We’ve had three years of recovery since then

eXcuses

6 fAll 2012

opportunities and forget about the economy,” Lewis says. “There were people who got very rich during the Great Depression and there were people waiting in bread lines. You just try not to be the person waiting in the bread line.”

It’s too stressful and too frustrating, and at the end of the day, just downright futile to look for signs from the economy that are going to magically help your business.

“The only economic indicators I would watch, if I watched them at all, would be housing and unemployment,” Lewis says. “Those are the things that are hurting the economy the most. When we really see improvement in those areas, then we’ll know the economy is indeed turning around.”

and we still have 8.3 percent unemployment and a mortgage foreclosure crisis that won’t quit. Now we have people warning we might go into another recession next year. So we’re going to have two recessions with a three-year recovery in between? To me, that sounds like a depression.”

With all that in mind, what is the best course of action for an owner of a mid-sized business to take?

Get movingAccording to the latest report from the Congressional Budget Office, fiscal year 2012 is slated to close Sept. 30 with a federal budget deficit totaling $1.1 trillion, the fourth year in a row with a deficit of more than $1 trillion.

GDP is expected to grow at about 2.25 percent in the second half of 2012, compared with 1.75 percent in the first half, and unemployment will likely remain above 8 percent.

Little is expected to change from a numbers perspective, but even if those numbers did change, how does that help you as the owner of a mid-sized business?

Not much, says Lewis.“Companies need to look at their own

Mitchell keeps a watchful eye on the stock market, but it’s not out of a desperate hope for direction. It just happens to serve as a pretty accurate barometer for his business.

“There seems to be a very high correlation that when people feel good about their investments, they are more willing to spend on things that are not necessities, like expensive clothes or expensive jewelry,” Mitchell says. “The market is probably the biggest indicator of how our business is going to do.”

Most of the time, Mitchell is keenly focused on his customers and what he can do to satisfy them, whether the economy is booming or busting.

“We’re just a big believer that, in our business, it’s all about relationships and customers,” Mitchell says. “You have to have the best products, but that’s kind of a given. It’s really the one-to-one personalized service and getting to know your top 100 customers intimately. There is always more business available from your top clients. What things are you not selling them that you could?”

Getting in touch with your customers should not just be your job and it should not just be the job of your low-level staffers on 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.”

continued from page 5

“Companies need to look at their own opportunities and forget about the economy.”

– Al lewis, a columnist for dow Jones newswires and The Wall Street Journal

leAding edge 7

cover feature

continued on page 8

Use your experienceFor business owners who need data or a signal to help guide their decisions, John Graves says there are numbers that can give you some sense of direction, even if they don’t solve all your problems.

“Most companies look at backlog or back order,” says Graves, a chartered financial consultant and author of The 7% Solution, a book geared toward helping people make smarter investments for their futures.

“If orders change or orders are cancelled, that’s a signal,” he says. “If orders are extended, that’s another signal. You can also look at your accounts receivable. If people are 30 days late and they extend it to 60 or 75 days, that’s a signal. If we’re cleaning up ARs and the 90s and 75s are going away and we’re banking capital more quickly, that’s also a signal.”

You can also look at truck utilization figures, wholesale diesel fuel prices, underemployment figures, rental property usage and vacancies and residential data, Graves says.

But once you sort through all that data, it is still ultimately you that has to make the decisions. The numbers can only take you part of the way.

“We cannot create a formula to describe the future,” Graves says. “None of us can. So depending on the company, the industry, the product or the service, there’s a significant amount of guesswork. We have to make decisions. The informed part comes from our experience, our background, our current backlog of business, our inventory, how quick we turn it around and what our clients or prospects are telling us. That’s all data driven. Everything else is a guess.”

Mitchell made the decision back in 2009 to buy Wilkes Bashford and it has worked out well for his company.

“If you have the capital financially and intellectually in your organization to do something, this is the time to do it,” Mitchell says. “It will pay itself back. On the flip side, this is not the time to make an acquisition that would be betting the farm. If it’s something that is make-or-break, it’s probably not the right time to do it in case we get into a small downturn again.”

Just because it worked once, don’t assume it will work again.bob mitchell could not be more pleased with his company’s acquisition of Wilkes bashford. but he didn’t take the move as a strict blueprint for all future decisions.

“the biggest mistake most people make in good times or bad is doing something, having quick success and then trying to duplicate it very quickly and do it again and again,” mitchell says. “We’re much more a believer that 90 percent of all success is execution.”

Don’t worry about the economy.financial columnist Al lewis says it’s really the best thing you can do. make the decisions that you think put you in the best position to grow and don’t worry about what’s happening on the business pages.

“focus on what matters,” lewis says. “find somebody who needs your goods and services, and that’s it. there are still people out there who need things. find them. don’t worry about the economy. if you have to make hiring decisions, don’t just sit there. do it.”

stay out of debt.John graves calls debt an addiction that you should seek to avoid at all costs.

“people think, ‘if i take on more debt and i put more money into my product or service or inventory and i try to sell more stuff, i’ll become a bigger company and i’ll feel better,’” says graves, a chartered financial consultant. “that’s the wrong answer. paying down debt is good. taking on debt is bad.”

three survivAl tips for ceos

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8 fAll 2012

cover feature

Whatever you do, make sure that you’re making decisions as a team and using all of the talent at your disposal to collectively sort through the pros and cons of a decision.

“I find that, especially in times that are more challenging, having everybody on the same page is even more important so that we all win or lose as a team,” Mitchell says. “We’re not just dictating any one thing. We’ve made sure everybody believes in what we’re doing before we jump into it.”

Don’t be paralyzedOne of the biggest unknowns looming is the presidential election. The outcome of the race and the decisions that are made in 2013 could have a big effect on the economy.

But just like all the other financial news out there, Lewis says you can’t put your life or your business on hold.

“It can be quite paralyzing,” the columnist says. “It would be better to just look at what’s going on with your customers and look at how you can be more involved with them during these times.”

The economy is going to do what it’s going to do and you can’t be swayed by one report today and swayed back by a conflicting one tomorrow. If you do, you will drive yourself crazy.

“For instance, we can get really good employees for a fraction of what we would have had to pay them during an economic boom,” Lewis says. “We should be looking at who we can hire. Who is super smart that is available? People are suffering from declining incomes, but what is the value you can deliver to these people so that they can continue to use your product or service?”

Focus on your business and on what you do really well, and you’ll have the best chance to find profitability.

“You can’t just sit there and go, ‘Well, we can’t hire anybody because we’re worried about what Obama is going to do if he’s re-elected, or we’re worried about something else,’” Lewis says. “You hire somebody because you can employ them immediately and you can make a profit from them.” LE

continued from page 7

When Al lewis sees a business owner studying his competition a little too much, he takes it as a lack of confidence.

“you should have intelligence on your competitors and be aware of the tenor in your industry,” says lewis, columnist for dow Jones newswires and The Wall Street Journal.

“but the most successful business owners aren’t sitting around worrying about what their competitors are doing. they’re plowing new fields and they are moving ahead. if you’re focused too much on what they’re doing and not on what you’re doing, that means your vision isn’t very strong.”

bob mitchell doesn’t worry about his competition, but he does keep an eye on it. the co-president of mitchells family of stores is curious about what competitors do that works and what doesn’t work.

“you can learn from everyone,” mitchell says. “but our big differentiating factor is still going to be the environment we create, the relationships we develop and the service we provide for clients.”

don’t obsess over your competition

Technology outages: how to create an effective disaster recovery plan

If you have ever been in the unfortunate position of

experiencing a technology disruption—either due to power outages, loss of Internet connectivity, blown battery backup devices, lightning damage or, the worst case, natural disaster damage—hopefully your disaster recovery plan was in place, tested and working. However, not all leaders prepare for a disruption, which can critically damage your business’s technology or overall operations. An effective disaster recovery plan typically includes five steps:

Prioritize processes. Prioritization of processes is sometimes referred to as a business impact analysis. By segregating each significant process into one of three categories (mission critical—most important; business critical; or organizationally important—least important), you are prioritizing the parts of the organization that should be recovered first in the event of an outage.

Determine recovery objectives.

Decide how long you can live without access to a particular system. Additionally, ask yourself: Should a system fail, how current is the data from which you recover? Define what you consider a disaster and set the maximum amount of time you can go without access to your system, otherwise known as recovery time objective. Then, set the recovery point objective, the acceptable amount of data loss from the most recent complete system backup. Do this for each

system and you will begin to realize what has the highest priority and what may not be equally important to your organization.

Plan for common incidents. Learn from history when creating a disaster recovery plan. What types of outages have you already experienced? Are lightning strikes, tornadoes, flooding or server failures prevalent in your area? To help you begin thinking about this, here are the five main losses in order of most common to least common:• Humanerrorloss:deleting

files, overwriting data and everyday mistakes

• Datacorruption:virusattacksand application errors

• Storageloss:corruptormalfunctioning hardware

• Siteloss:flood,fire,tornadoor hurricane

• Serverloss:CPUfailure,theftor catastrophic virus

Communicate the plan. This step is key because it’s

important for staff at all levels to understand what their roles are in a disaster or disruptive situation. The best way to communicate the plan is to prepare a document, place multiple copies throughout all business locations and ensure everyone knows where it is located. Just as you know where the fire extinguishers are located, you should know where the disaster recovery plan is located. When documenting this plan, keep the following in mind:• Organizational information:

Define who is entitled to

declare a disaster and start the plan in motion, which locations are covered by the plan and the critical applications and facilities. In addition, list the major departments and their process owners.

• Teams and contacts: List the disaster recovery

team and responsibilities; contact information for process owners, IT staff and third-party vendors; off-site storage information; and information about any alternate recovery site.

• Environmental documentation:

Include current network documentation such as ISP contacts and accounts, passwords, physical maps of all locations and recovery site information.

• Disaster implementation tasks:

Detail recovery procedures, alternate site information, what the recovery environment will look like and where to report,

procedures to use an alternate site, the main point-of-contact and a backup.•Plan testing schedule: Describe how you will test the plan, as well as how often. Start small by testing specific areas or departments. Often, it is not possible to pull the plug on the entire organization, so starting small

during slower demand times may be easier. Remember—without testing your plan, it is not complete.

• Recovery plan maintenance: Many changes will impact the plan, including contact information, personnel changes and the computer network environment. Review the plan once or twice a year to keep up with these changes. Also, don’t forget to have paper copies on hand, just in case.

• Appendices: Include copies of important

contracts, agreements and previous plan testing results.

Creating a disaster recovery plan may sound like an overwhelming and time-consuming task. Start with what you already know about your network and processes and then start to fill in the gaps. When it comes to disaster recovery planning, having something in place is always better than having nothing in place. LE

leAding edge 9

INSIDE:• Identifying waste: 7 improvement opportunities for your business

• Higher education: how to manage student accounts receivables

• Client Spotlight: earth friendly products

• Industry Updates

Identifying waste: 7 improvement opportunities for your business

10 fAll 2012

The current economic situation is forcing business owners to

take a good look at their companies to identify waste and key improvement opportunities. Whether cutting costs is a necessity or you just want to run a leaner business, it’s beneficial to constantly seek ways to reduce waste. There are seven areas where waste typically accumulates. Explore these and help your management team develop and implement an effective waste-reduction plan.1. Overproduction occurs when

a company produces more of an order in anticipation of waste or damage. For example, imagine you need to assemble a product that requires eight component parts. Your purchasing department may actually buy 10 component parts just in case any parts are spoiled or damaged. In a service setting, this happens when staff spends too much time on a project that can only be billed at a certain price.

2. Waiting is the time your product or service spends in the system. It waits for someone to add value before it goes to the customer. If you can eliminate the waiting time by 50 percent (which is ambitious), you can reduce your cost and improve your cash flow tremendously.

3. Transport is the critical path your product or service takes through the plant, so consider the inefficiencies in its way and what kinds of time or

waste can be eliminated from that path. Think about the flow of work in your organization and ask yourself if it makes sense for your business.

4. Inappropriate processing occurs when you are using the incorrect tools and processes for a job. For example, do you use a 20-ton press when a 10-ton press can do the job? Is an experienced senior executive doing a job a lower-ranking person should be doing?

5. Inventory is a huge waste culprit within organizations. How often do you “turn” your inventory each year, and how much outdated inventory are you keeping, storing and counting each year that is not going to sell? If there’s too much, consider finding a new place for it.

6. Motion and process improvement has to do with

the resources you have available in the organization. Can you make the workplace more ergonomic for your employees? When they sit down to perform a service or work on a project, do they have all the parts, tools, plans and schematics to complete the job, or do they have to get up and waste time looking for something to complete the task?

7. Defects are likely the biggest waste to your organization. Where do defects occur in your business? The answer is everywhere. Most defects and mistakes occur due to poor processes, lack of training or lack of proper equipment. Defects and mistakes cost money and customers.

After you’ve identified where waste accumulates in your organization, it’s time to start developing a plan to eliminate, or at least reduce, this waste. To do so, follow these six steps:

• Gatheryourmanagementteam and conduct a “whiteboard” session with a waste auditor.

• Writedownthesevenareasof waste and discuss where the company is experiencing waste in each critical area.

• Brainstormatleastthreeideas per area about how to eliminate some waste. At this point, do not think about time or cost considerations.

• Estimatehowmuchmoneythe company is spending or losing because of each area of waste.

• Rankeachideaonascaleof one to five, with one being the easiest to implement and five being the most difficult. At the end of this process, it will be easy to identify the ideas that have the highest value with the easiest implementation.

• Documentyourwork.Complete a one-page plan and give a deadline to complete the project. Also, have all members of the management team complete their plans identifying individual strategies and objectives.

It is essential that you set the stage with your employees. This last step is critical for any improvement objective in your organization because these plans provide a road map to ensure that the improvement plan is complete. LE

leAding edge 11

sikich llp

Each 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 managementWhen 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:• Revenueloss• Slowercashflow• Improperwrite-offsofbaddebt• Opportunitycostofnotpursuingoutstandingbalances• Studentsregisteringforfuturetermswithoutsatisfying

prior debt

Develop benchmarks for comparisonIn order to start improving the way your higher education institution manages accounts receivables, you should first outline some benchmarks. These will allow you to compare this year’s numbers to last year’s, which will give you an idea of where not only your accounts receivable stand but the institution’s overall finances. Some benchmarks to consider include but are not limited to: • Totalannualtuition• Totalannualamountbilled(otherthantuition)• Averagereceivablesbalanceperstudent• Percentageofstudentswithreceivablesbalances• Latefeeschargedandcollected• Totalannualwrite-offs• Percentageofstudentsplacedincollectionduring

the fiscal year• Receivablescollectedbyathirdparty

Improve the collection of accounts receivablesNow that you have a better idea of where you stand compared to last year, you can determine how to make collection easier on both the student and institution.

Higher education: how to manage student accounts receivables

• Billthetuitionandfeesinatimely manner. The earlier you send students their bills, the better chance they will pay in a timely manner.

• Includeasignedpromissorynote.Thiswillensurealegalagreement has been made for all multi-payment plans.

• Shortentheterm.Yes,thisincreasestheamountstudentsmustpayduring each installment, but it also wipes the debt from their account more quickly.

• Setamaximumreceivablebalance.Ifstudentscannotcarrymorethan a specified balance, it prevents them from registering for future terms.

• Imposelatefees.Ifyourinstitutionalreadyhaslatefeesfornon-paying students, increasing these fees may help.

• Placeholdsonrecordsortranscripts.Thisisimportantforstudents seeking full-time jobs or internships, as they may be required to provide these to prospective employers.

• Blockcollegeoruniversityservices.Thismaybesomethingsmall,such as library access, or something significant, such as graduation ceremonies.

• Reportdelinquentstudentstocreditors.Federallawrequiresthathigher education institutions regularly update credit statuses, and credit scores are important to students entering the workforce.

Different ways of improving collections work for each unique college and university, but the underlying message is the same for all—student accounts receivables affect all institutions’ operations in one way or another. Regardless of how you collect the fees, it’s imperative you do for your institution’s future. LE

the eArlier you send students their bills, the better chAnce they Will pAy in A timely mAnner.

12 fAll 2012

sikich llp

MANUFACTURINGConsumer confidence drops – u.s. consumer confidence, a key demand indicator for manufactured goods, fell in July 2012 to its lowest point in the year,

according to the thomson reuters/university of michigan index of consumer sentiment. the index reading fell to 72 from June’s 73.2; a bloomberg news survey of 69 economists had forecast a July 2012 index reading of 73.5. the drop in consumer confidence is likely due to persistently high unemployment, the european debt crisis and its contribution to stock market volatility and low home prices. household spending accounts for about 70 percent of the u.s. economy, so a sustained decline in consumer confidence could reduce demand for many types of manufactured goods.

industry updates

founded in 1967, earth friendly products manufactures more than 150 all-natural household and commercial cleaning products that are made from pure plant-based ingredients. With more than 300 employees and five manufacturing facilities across the country, earth friendly products creates green products in a sustainable fashion by reducing its carbon footprint and lowering costs. for example, the company’s corporate headquarters is home to the largest commercial solar array in illinois.

since earth friendly products’ partnership with sikich began, the green company has experienced many

PROFESSIONAL ASSOCIATIONSBusiness travel forecast dims – business travel is expected to slow down for the remainder of 2012 in light of continued economic concerns in the united

states and europe, a signal that attendance at business and professional association meetings could suffer. the global business travel Association downgraded its outlook for u.s. business travel from 3.6-percent growth to a more modest 1.8 percent. businesses will also rein in international business travel expenses as economic uncertainty continues to plague europe. the forecast is a stark contrast to the relative strength of the business travel market in recent years and underscores the concern businesses place on overall economic conditions.

*industry intelligence from first research, a division of hoover’s (a d&b company). data published Aug. 13, 2012

Keeping 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. our quarterly industry updates offer intelligence from first research* and focus on the critical facts that affect your day-to-day business.

Client Spotlight: earth friendly productsnew ways to save money through its taxes. Whether for domestic production or research and development, sikich has provided support and value to earth friendly products’ business by catching missing tax credits and going back several years to ensure the returns were amended. through these savings, as well as the company’s long-term vision, earth friendly products has grown by 20 percent annually for the last few years.

Want to get an inside look at earth

friendly products and learn more about how sikich added value to the company? Watch the client spotlight video at http://youtu.be/JzvxQ0oqxbm

regional

leAding edge 13

DOEs yOUr sOCiAL mEDiA POLiCy viOLATE fEDErAL LAW?Many organizations have been grappling with writing social media policies for their employees, but recent guidance from the general counsel of the National Labor Relations Board has shed light on the matter.

NLRB’s Lafe Solomon stresses that all employees have certain rights under federal law that can’t be infringed upon in social media policies, and there are questions you should ask when defining your policy. • Does your policy prohibit or restrict “friending” other employees? Workers have

the right to do so. A statement encouraging employees to “think carefully about ‘friending’ co-workers” was considered illegal.

• Doesyourpolicyprohibityouremployeesfrompostingaboutthecompany?Under federal law, employees may criticize their company and how it treats its employees.

• Doesyourpolicyprohibittalkingaboutco-workers?The workforce has the right to discuss wages and conditions of employment with employees and others.

• Doesyourpolicybanpostingthetrademarks,videosandpicturesofthecompany, or of others, without permission? If a policy merely urges people to “respect third-party intellectual property,” it is likely lawful.

• Doesyourpolicyprohibittalkingtothepress?Workers have the right to talk to the news media in certain labor disputes.

• Doesyourpolicyprohibittalkinginanindecentmanner?A provision warning employees to “avoid harming the image and integrity of the company” was not lawful.

• Doesyourpolicyprohibitdiscussinginflammatorytopics?Employees have the right to talk in a spirited manner about working conditions.

• Doesyourpolicybantheuseofsocialmediawhileatwork?A complete prohibition of employees using social media with an employer’s resources or on an employer’s time was unlawful.

&piecesbits HOW TO kEEP yOUr sTAr PLAyErsIf 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.

These observations are the key findings of an informal survey of 91 human resources professionals conducted in July by Sibson Consulting. Almost all of those surveyed indicated they were concerned about losing their star employees. At the same time, companies appear to be more selective in their retention practices; just 58 percent said they were interested in retaining their entire workforce.

Companies may be waking up to the importance of providing career growth to their best people.

“In general, one of the things that keep high performers around is giving them a sense that they have a future with your company,” says Jim Kochanski, a senior vice president at Sibson.

Executives can take some basic steps to build trust among employees and improve business results, says Andy Atkins, chief innovation officer of Interaction Associates, a global leadership development firm.1. Involve people in decisions that directly

affect them. Bring people in before the call is made. Even if they oppose the decision, they are more likely to support it if they were involved in the discussion.

2. Be transparent and consistent in your actions. While businesses often focus on results and ignore the process, if you are transparent and consistent, your employees will learn to rely on you.

3. Pay attention to relationships. If you understand what matters to employees, they’ll trust you to act in behaviors that align with their interests. LE

THrEE sTEPs TO BUiLD TrUsT AmONG EmPLOyEEs

14 fAll 2012

The ‘ex’ factorhow companies can utilize former employees and other connections to drive growth

When 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 we

strategic

can spread that need very, very broadly in an effort to identify potential solutions.”

Alumni are often eager to respond to a need because they have previously worked in a specific area, or they have a connection in a specific area that can help get potential solutions back to the company.

“The other broad bucket of how we interact with them would be helping them understand that P&G is open for business and wants to do business with alumni,” Baggot says. “Our group provides a portal for alumni to reach back into the company to say, ‘I’ve got a particular business proposition, technology, a new brand, a new capability.’ Our charter is to help them and get that navigated to the right place within the company.”

support is vital to successP&G’s level of commitment and support to the alumni group helped it succeed.

“Two things are critical — one is support from the parent company, and the second is that the governance and the organization come from the members themselves,” Baggot says. “It has to be something that comes from the population, and they have to want to do this. Equally, the company has to say, ‘This is a good thing, and we are very supportive of that.’”

Approach your former employees with support and view them as potential assets or even business partners to maximize their value.

“In a lot of companies, when somebody leaves their employment, they become persona non grata,” says Lisa Popyk, communications and external relations for global business development at P&G. “They’re just not seen as part of the family. P&G made a concerted effort to make sure

that former employees still feel like they are part of the P&G network, that they feel like they’re connected, they feel like they’re still valued and they feel like their contributions are still important.”

To build that kind of network, you need to establish that effort from top leadership. Executives have to be visible to the alumni and assist them with programming and financial support. The advantage to working with alumni is they already know the business, speak the same corporate language and have the same shared values.

“You start a few steps down the road versus somebody who hasn’t had a history of working with your company,” Baggot says. “It makes it easier for both parties. They should have better-than-average insight into the types of things that would be appropriate for your business, so it’s a good use of your time to be sure that you engage with them.”

As much as company support can help, it is still dependent on the alumni to make the group successful.

“The first thing you need is a strong group of volunteers to make this work,” Halloran says. “Too often, some organizations try to get going with two or three people, and it really takes 10 or 12 to make it happen. Second, you have to have a very clear short-term vision and clear long-term vision. Keep it simple, but have a very strong focus.”

Alumni groups are not just about going to cocktail parties and seeing somebody from the past, and they’re not just about having guest speakers and talking business.

“You have to figure out what is that right mix of personal connection events with business events and build that into your

leAding edge 15

programming,” Halloran says. “The last thing is to develop ways to generate funding. We’ve really thought through how to develop sponsors for individual events and how to generate enough cash to make those events self-supporting.”

Other optionsWhile alumni groups are a great resource to a parent company, not everyone has enough former employees to make the idea work. And sometimes you really need a fresh perspective.

That’s where a network of industry experts can help.

“The benefit that these experts bring is that they are on demand,” says Michael Rubin, vice president of marketing for Your Encore, an organization that connects businesses with a network of 7,500 industry experts. “It’s a great way for these companies to tap into advanced expertise that may be difficult to find elsewhere on the open market.”

Many companies are now looking for on-demand talent. Networks like Your Encore give those companies an outside perspective that alumni sometimes can’t provide.

“A lot of companies like someone from the outside, either from their general industry or from a totally different industry, to come in with fresh eyes,” Rubin says.

The key is to look for relationships that can benefit your business. Regardless of whether it is through ex-employees or outside experts, viewing everyone as a potential business partner can help move your business forward. LE

“The f irst 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 network

16 fAll 2012

With a sluggish global recovery and bleak news about the recession in Europe, many are pessimistic about the world’s economy.

However, there are some bright spots, particularly in the energy, health care, translation and localization and IT industries, and experts forecast all of these will stay hot in the short term.

EnergyThe energy industry is of particular interest in the United Arab Emirates, Pakistan, Bangladesh and Indonesia, says Ovidiu Bujorean, program manager of the Global Innovation through Science and Technology Initiative, which builds entrepreneurship in countries across the Middle East, Central and Southeast Asia and Africa by identifying, coaching and funding entrepreneurs. The initiative is part of CRDF Global, an independent nonprofit organization that promotes international scientific and technical collaboration.

“The UAE is looking to diversify its energy resources, so it has put a lot of effort into renewable sources of energy. It wants to reduce its dependency on oil and lead the way for other more renewable energies,” Bujorean says. “On the other hand, countries like Pakistan and Indonesia have limited access to traditional energy sources like oil, so they are looking to build alternative sources of energy.”

For example, the GIST Initiative recently recognized an entrepreneur from Indonesia who created a company named T-Files. The company develops marine turbines that turn ocean currents into electricity, a valuable resource for the country.

These countries are also focused on creating sustainable energy. A GIST Initiative funding winner from Pakistan, for example, created a machine that turns farm waste into natural gas that can then be used as electricity. And in Bangladesh, a man

invented a way to bring sustainable local housing to people by developing an affordable, sustainable building material that is biodegradable and 30-percent less expensive than other housing materials.

“Sustainable resources are very connected to affordability,” Bujorean says. “People can’t afford to pay a lot for energy, so new technology that can be identified to provide energy at a low cost that is more attainable is a big focus. In Bangladesh, in particular, it is important given the flooding and disasters that have happened there. These technologies give them the possibility of rebuilding and are also applicable in other countries that can’t afford housing.”

information technologyAs technology continues to advance and grow, more opportunities are opening up across the globe.

Spain, for example, has a well-educated population with a strong emphasis on advanced scientific and technological degrees, says Mary Anne Thompson, founder and president of Going Global Inc., which provides country-specific career and employment information for 30 countries. Potential areas of growth in Spain include open-source software, which has strong public support and a growing market, and e-health, e-commerce and mobile phone auxiliary services. Spain has one of Europe’s highest mobile phone penetration rates.

In addition, IT professionals are strongly in demand in Ireland. Two years ago, the country issued almost 500 work permits to non-European Economic Area software engineers and computer programmers to bring these much-needed professionals to the country.

“The Irish government will also be implementing two immigration programs to encourage foreign investment and entrepreneurship: the Immigrant Investor Programme for non-EEA investors and the

What’s hotdespite global pessimism, some global industries are sizzling with opportunity

leAding edge 17

Start-up Entrepreneur Programme for entrepreneurs with proposals in innovation sectors,” Thompson says. “Successful applicants will be granted two-year residence permits for themselves and family, renewable up to five years.”

India is also expected to see strong growth in the IT industry. In the second half of 2011, the sector generated 81,300 jobs, and about 130,000 new positions are expected this year. The sector is particularly thriving because of strong revenue from the country’s top four IT firms: Tata Consultancy Services Ltd., Infosys Ltd.’s IT division, Wipro Ltd. and HCL Technologies Ltd.

Pharmaceuticals and health carePeople will always need medication, so the pharmaceutical industry is continually growing.

The industry is hot in Spain right now, which has about 440 pharmaceutical companies operating in the country and accounts for 18.5 percent of the country’s private research and development spending, according to Thompson.

In 2011, for example, Celgene, a multinational biopharmaceutical company, opened its first research center outside of the United States in Spain as part of the Celgene Institute of Transnational Research Europe, which intends to invest 60 million euros, or approximately $75 million, in advanced therapies and regenerative medicine.

The industry is also big in Japan because governmental policies offering incentives for generic medicine have driven demand. Japan

has also been entering emerging markets, particularly those in Brazil, Russia, India and China, which will help the industry expand and grow.

The United States is also focusing on these emerging markets and expects to see strong growth in this industry. In addition, generic pharmaceuticals are expected to grow in the United States because many drug patents expire and the Patient Protection and Affordable Care Act becomes effective, requiring all individuals to have health insurance.

Bujorean says the GIST Initiative worked with many entrepreneurs in health care, particularly in Mediterranean countries. The initiative recently saw two health care entrepreneurs from Lebanon, one who developed a waterproof heart rate monitor that attaches to swim goggles and another who created a portable health monitor with GPS that can predict heart attacks and transmits data that can detect anomalies.

“With the availability of Wi-Fi technologies, there are a lot of opportunities for new, technological health care products,” Bujorean says

Translation and localizationWhile translation deals with language only, localization takes into account everything else that is part of converting business from one country to another, including in which currency a price should be quoted or whether a website should be designed for viewing right to left or left to right.

This industry has steadily increased revenue and created jobs during the recession, says Terena Bell, CEO of In Every Language, a provider of translating, interpreting and localization solutions in the United States and abroad.

This industry is hot in the United States because, according to Title VI federal law, which prohibits discrimination based on race, color and national origin, any organization receiving federal funds is required to provide translation and interpretation to people with limited English skills, Bell says. In addition, the Small Business Administration recently issued State Trade and Export Promotion grants that help small exporters in the United States pay for the translation of their websites and marketing material.

Translation and localization is also a big trend in Ireland, which has a large concentration of localization and translation industry professionals and is a hub for multinational companies including Microsoft, Cisco, Facebook, Google and LinkedIn.

In addition, the industry is gaining traction in China because, with a population of more than 1.3 billion, many businesses are looking to target the country’s vast number of consumers.

“Businesses are looking toward foreign markets as an additional source of revenue,” Bell says. “Selling to these markets means communicating with them, so savvy businesses understand that translation is not a cost center — it’s a profit driver. This makes it a smart investment in a company’s financial future.” LE

18 fAll 2012

Inside CEO Succession: The Essential Guide to Leadership TransitionThomas saporito, Paul WinumJossey-Bass256 pagesInside CEO Succession gives business leaders the tools to execute their succession responsibilities with a high level of professionalism to ensure their companies’ sustained success. The authors explain how human dynamics such as power, ego and role relationships can affect the processes of relinquishing leadership, preparing successors and ceding authority to other people, and they suggest strategies to prevent these and other dynamics from creating problems during the leadership transition process that can cause new business executives to fail early in their tenures.

The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for SuccessWilliam ThorndikeHarvard Business Review Press272 pagesIn The Outsiders, Thorndike profiles eight

idiosyncratic business leaders whose companies’ returns greatly outperformed those of the S&P 500. The subjects themselves are not household names, although some of their companies are: General Cinema, Ralston Purina, The Washington Post Co. and Berkshire Hathaway. The book enumerates the consistent traits that helped these leaders push their companies to exceptional performance, such as focusing on share value instead of sales, an aptitude for allocating capital and human resources, the conviction that cash flow is more important than earnings in determining a company’s long-term value, and a talent for giving managers autonomy to foster entrepreneurial thought and action.

World Class Communication: How Great CEOs Win with the Public, Shareholders, Employees, and the Mediavirgil scudder, ken scudderWiley240 pagesWorld Class Communication is a tonic for business executives whose narrow focus on the financial aspects of their business can at times be detrimental to their ability to communicate well with the public, the media and their employees. The book furnishes business leaders with procedures and crisis lessons and provides numerous case studies of situations in which CEOs’ communications were handled well and poorly. The authors provide tips on communication techniques to rally employee support, speak persuasively in public, win over the media and deliver effective messages to shareholders.

Julius Caesar, CEO: Six Principles to Guide & Inspire Modern LeadersAlan AxelrodSterling248 pagesIn this most recent installment in his CEO series, Axelrod analyzes Julius Caesar, the general, statesman and leader of the Roman Empire, in business-executive terms. He uses a straightforward, informal style to explore six motivational standards that constitute the core of Caesar’s leadership philosophy. Within each of the six core principles are several practical lessons CEOs can use in their daily work lives. Axelrod also provides an interesting analysis of Caesar’s life and applies the lessons learned by the subject to modern day events and how they can be similarly handled by today’s business leaders.

Leading With Honor: Leadership Lessons from the Hanoi HiltonLee EllisFreedom Star Media256 pagesFormer U.S. Air Force pilot Lee Ellis talks candidly about the five and a half years he spent imprisoned in a brutal POW camp in North Vietnam and offers 14 leadership principles he formulated during that period that helped him persevere through his captivity. Ellis, a corporate consultant and business leadership coach, helps Fortune 500 executives, small business owners and entrepreneurs implement these leadership principles to increase their organization’s prospects for success via coaching sessions provided within each chapter of Leading With Honor. LE

PrOfiLEs iN LEADErsHiP

on the bookshelf

the fall edition of bookshelf includes volumes on leadership under duress, communication, ceo transitions, unconventional (but effective) approaches to business leadership and a look at how one of the world’s earliest ceos, Julius caesar, led his organization, the roman empire, through its most successful years.

the leading edge offers:• Access to extensive teams of accounting professionals and business

advisors—a peer-to-peer connection that provides the right solutions for clients.

• innovative, practice-proven strategies for improving performance in management, business processes, finance, operations, information technology and marketing.

• A leading knowledge resource for multi-disciplinary information and industry-specific expertise responsive to clients’ unique needs.

• the Alliance offers accounting, consulting and tax services through a global alliance of firms with over 18,323 professional staff, more than 1,600 partners and over 23,518 staff in 455 offices.

• the leading edge Alliance offers global business advisory expertise and experience with innovation, progressiveness and quality.

To find out more about The Leading Edge Alliance, visit www.LeadingEdgeAlliance.com or contact Karen Kehl-Rose, president, at +1 630.513.9814 or kkr@The-LEA.com.

the leading edge Alliance is an international professional association of independently owned accounting and consulting firms. the Alliance enables member firms to access the resources of a multibillion dollar global professional services organization, providing business development, professional training and education, and peer-to-peer networking opportunities nationally and globally, around the corner and around the world.

members are quality firms who are very successful, have deep client relationships, and strong ties to the community. the Alliance provides members with an impressive combination: the comprehensive size and scope of a large multinational company while offering their clients the continuity, consistency and quality service of a local firm. member firms have access to extensive teams of business advisors – a peer-to-peer connection that provides the right business solutions for clients.

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indiaindianaindonesiaiowairelandisraelitalyJordanKansasKazakhstanKenyaKnoxvilleKoreaKuwaitlas vegaslatvialebanonlexingtonlondonlos Angelesluxembourgmacedoniamadison, Wimalaysiamaltamauritiusmemphismexicomiamimichiganminneapolis/st. paulmissourimoldovamontenegromontrealmorocconashvillenebraskanetherlandsnew orleansnew Jerseynew yorknew Zealandnorth carolinanorwayorange county, cAoregonpakistan

palestinepanamaparaguayparisperuphiladelphiaphoenixphilippinespittsburghpolandprovidencepuerto ricorichmondrenoromaniarussian federationsan franciscosaudi Arabiascotlandseattlesenegalserbiasingaporeslovakiasloveniasouth carolinaspainswedenswitzerlandtaiwanthailandtokyotorontotucsontunisiaturkeyukraineunited Arabemiratesugandauruguayu.s. virgin islandsvenezuelaWashington, d.c.vietnamvirginia/West virginia

Sikich and other members of the Leading Edge Alliance are leaders in many key markets, including:

visit leadingedgeAlliance.com for a detailed listing of member firms.

leAding edge 19

sikich llp corporate office1415 W. diehl road, suite 400naperville, il 60563(877) 279-1900 www.sikich.com

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