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Advice and information to help you manage your business

volume 10 • issue 4summer 2010 employees opt not to retire • Top 10 misconceptions of doing business in BulgariaPlus:

reinvenTingyour comPanyScrutinize new opportunities, think for future success

PubliShed bY Kreischer Miller

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dear clients and Friends:it’s summer again! As our thoughts turn to vacations with family and friends, the roller coaster ride the financial markets have been experiencing still has many of us on edge. As always, in this edition of The leading edge, we offer some guidance that we hope will help you with the myriad of challenges you face in leading your business.

The old adage still holds true that death and taxes are the only certainties in life. however, two of our Tax Strategists, harry Murphy and Kim McKenna, point out in their article on estate planning, that even “certain” taxes may be in question this year.

in his article on retaining and incentivizing top talent, Tyler ridgeway, leader of our human Capital resources practice, advises employers to re-evaluate hiring processes and the components of total compensation packages. he also highlights key ways to increase productivity and morale, and reward top-performing executives.

Staying current with the latest technology always seems a daunting task, but J.T. hardy of our Technology Solutions Group, illustrates how outsourcing as part of a company’s overall iT strategy can help with the challenges of supporting your business’ needs.

lastly, John landon, of our Audit and Accounting Group, explains the effort underway to develop a single set of high-quality globally accepted accounting standards.

As always, we value our relationship with you and look forward to your feedback on how we can better meet your needs. Please share suggestions, comments and ideas for future articles with us.

Sincerely,

Stephen W. ChristianManaging director

Km cares!cradles to crayons One of our annual summer KM Cares programs is participating in Cradles to Crayons’ “ready-for-School” campaign.

We purchase new backpacks and a variety of school supplies which are given to local children who otherwise would not have the most basic tools for school.

This campaign is designed to prepare the children, and help them feel proud and enthusiastic about starting the new school year.

June FeTe village Fairin early June, KM team members worked as volunteers at the 97th annual Abington Memorial hospital June Fete Village Fair. The Fete, which runs three days, is a major fund-raising event for the hospital and fun for all ages.

Adults and children enjoyed watching equestrian competitions, listening to musical entertainment provided by local school bands, face painting, carnival rides, bingo, a spectacular fireworks display, and of course—lots of food!

CHARITY ART AUCTIONSeveral pieces of artwork were not selected for display in our new location. Therefore, we decided to host an in-house art auction and gift the proceeds to three of our walk-a-thon events. The artwork was sold via silent auction, and participants included former colleagues as well as current team members. The three beneficiaries were the Greater Philadelphia chapters of Multiple Sclerosis, easter Seals and lupus.

SUMMERvOlUME 10

ISSUE 42010

Advice and information to help you manage your business

The Leading edge 3

conTenTs

features

departments

The Leading edge www.Leadingedgealliance.com

The Leading edge alliance is an international professional association of independently owned accounting and consulting firms. The Leading edge alliance enables member firms to access the resources of a multibillion-dol-lar global professional services organization, providing business development, professional training and education, and peer-to-peer net-working opportunities nationally and globally, around the corner and around the world.

Members are top quality firms who are very successful, have deep client relationships, and strong ties to the community. The alliance pro-vides members with an unbeatable combina-tion: 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 the best and brightest teams of business advisors—a peer-to-peer connection that provides the right busi-ness solutions for clients.

To find out more about the alliance, contact Karen Kehl-Rose, president, at (630) 513-9814 or kkr@The-Lea.com.

Leading edge advisory Committee

Marshall Lehman Lurie Besikof Lapidus & Co., LLP

Jen Lemanski Pannell Kerr Forster of Texas, P.C.

gary Voth Pannell Kerr Forster of Texas, P.C.

Karen Kehl-Rose The Leading edge alliance

in affiliation with Wise groupwww.wisegroup.com

ann M. gynn editor

dennis Seeds associate editor

amanda horvath, Crystal Madrilejos,

Stacy Vickroy art directors

andrea Jager graphic designer

VoLuMe 10 • iSSue 4 • SuMMeR 2010

The Leading Edge is published four times per year by Wise group, 812 huron Road, Suite 201, Cleveland, ohio, 44115, (216) 523-1212, FaX (216) 241-5458. Periodicals postage paid at Cleveland, ohio.

iRS Treasury Regulations require us to inform you that any tax advice contained in the body of this com-munication was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the internal Revenue Code or applicable state or local tax law provisions.

4 reinventing your company

8 uK business: a matter of survival

13 What’s next? When soon-to-be retirees decide to keep working

9 news and information from our firm

14 Bits & Pieces

16 Top 10 misconceptions about doing business in … Bulgaria

18 in a nutshell: Q&a ChrisDeSantisrespondstoyour workplacedilemmas

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ccinnamonbunsandhardhats.

ThoseingredientshelpedcookupthecurrentreinventionsuccessatSchlotzsky’s,aninternationalfast-casualdiningfranchisethatfiledforbankruptcyjustsixyearsago.

Itwasn’tjustanycinnamonbuns—itwasCinnabon,themarketleaderincinnamonrollbakeriesthatalready

had750franchisesandgreatbrandappreciation.Anditwasn’tjusthardhats—itwasanentireteamthatrebrandedSchlotzsky’s,includingthephysicaltransformationofthestoresfromlocaldelistocontemporaryhangouts.

Justafewyearsintothe“reinvention”process,theresultsspeakforthemselves.Onaverage,theSchlotzsky’s/Cinnabon-brandedstoresareseeing9percentsalesgrowthandtheremodeledstoresareseeinganaverage40percentsalesincreaseoverthepreviousyear.

Theeconomicdownturnhasforcedmanycompaniestolookat“reinvention”asamatterofsurvival.Othershavebeenworkingproactivelyforawhiletoidentifyopportunitiestoadapttochangingmarketplacesanddifferentcustomers’needsorexpectations.Oneofthemosttalked-about“reinvention”companiesisApple,whoseintroductionoftheiPodin2001transformedtheformerpersonalcomputercompanyintoaconsumerelectronicsmanufacturerandretailer.Yet,Apple’sreinventionstoryisfarfromunique.

The Leading edge 5

By ann M. Gynn

Scrutinize new opportunities, think for future success

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more sophisticated customersSchlotzsky’sPresidentKellyRoddysaystherestaurantchainwantedtostayonitscustomers’dininglist.Peopletypicallyhavefiveorsixstaplerestaurantstheygoto,heexplains.Whenanewrestaurantopens,theytryit.Iftheylikeit,itgoesonthelist.Thatmeanssomethingcomesofftheirlist,too.

Schlotzsky’swasa40-year-oldrestaurantbrandthatreallyhadn’tdoneanythingtokeepitselfrelevanttodiners.“Weknewweneededtoreinventthebrand,”Roddysays.

Consumersnowexpectmorefromtheirdiningexperience.“Everybodythinksthey’reachefbecausetheycanwatchtheFoodNetwork24/7,”Roddyexplains.“They’rebecomingmoresophisticatedwhenitcomestofoodandwhattheywant.”

GivingdinersmorecametoSchlotzsky’sintwoforms:rebrandingSchlotzsky’sfromtoptobottomandco-brandingSchlotzsky’srestaurantswithCinnabon,asistercompanyintheFOCUSBrandsfamily.

“Ifwecoulddosomethingtomaketherestaurantmorerelevantcombinedwithgoodfood,itwouldbeahomerun.Itwouldmaketheunitsmoreprofitable,”Roddysays.

Schlotzskysoughtabrandingpartnerthatwasprofitable.Cinnabonworkedwell,notjustbecauseitwasintheFOCUSBrandsfamily,butbecauseit,too,marketedthefreshnessofitsbunsthatwerebakeddailyjustliketheSchlotzsky’sbreadwas.SonowSchlotzsky’sdinerscanoptforSchlotzsky’ssandwiches,Cinnabonrollsorbothwhentheyvisitaco-brandedrestaurant.

Franchiseownersnowhavetwocompanies’productstosellbuttheexpenseofonlyonemanager,oneelectricitybill,onestaff,etc.Theresultshaveprovenco-brandingsuccess.

“Nowwe’reputtingCinnaboninallnewSchlotzsky’srestaurantsandretrofittingtheexistingones,”Roddysays.“Itmakesitalotmoreprofitable.”

What’s in a nameSchlotzsky’sworkedwithBackLot,abranddevelopmentanddesignfirm,tocomeupwithanewimage,anditdidn’tevenneedto“invent”anewfoodorcomeupwithanewname.

Therestaurantchainwiththe“funnyname”and“serioussandwich”wasknownforitsroundbread.Thatsignatureelementledtoanewdesign—everythingatSchlotzsky’scentersaroundthat“circle.”Thecompanyalsogaveupitstraditionalredandgreenformoretrendyandrelevantcolorstoillustrateitsdininghangoutcoolness.

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Tips for reinvention successKelly roddy, president of Schlotzsky’s, offers these five steps:

1make reinvention a part of your culture. Everybody at Schlotzsky’s thinks about how we’re here to make our franchisees successful. If we make other people successful, regardless of what position they’re in, and if you don’t worry about yourself, success will happen.

2Be ready for change. prior to the explosion of food media, trends developed more slowly and took five to six years before they crossed the country. now, trends go coast-to-coast in a matter of months. you don’t have to make major changes. you just have to stay relevant with your associates, franchisees, vendors and consumers.

3 don’t forget solid economics. reinvention still needs to make strong financial sense.

4don’t grow. Schlotzsky’s put growth on hold for a couple years. It didn’t pursue deals, though it still sold a select few franchises. We’ve said “no” more than we’ve said “yes.” Beginning last august, Schlotzsky’s went into growth mode and expects to add 100 stores in the first calendar year.

5Have a strategy. Be patient and work the strategy. Make sure every piece is fleshed out and works properly before you move to the next step. If our culture wasn’t right, we wouldn’t have the mindset on how to make other stores more profitable. Everything had to happen in order. e

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Theredesigndidn’tstopwiththeroundbread.ItwenttotheheartoftheSchlotzsky’sname,morespecificallythe“lotz,”tolaunchanewcorporatephilosophyandculturetosupporttothenewidentity.

“Isit‘lotz’better?”isthequestionaskedforeverythingnow,Roddysays.“Weuseitasafilterandputeverythingthroughitthatwedo.

“Ifit’snot‘lotzbetter’thanwhatwecurrentlyhave,thenwedon’tputitonthemenu,”hesays.The“lotzbetter”questionextendsbeyondthemenutodecisionsinvolvingfranchiselocations,newhires,service,cleanlinessandmore.Forexample,Schlotzsky’saskeditselfhowitcouldmakethediner’sexperiencebetterandfoundtheanswerwasbringingthefoodtothetableratherthanaskingcustomerstowaitatthecounter.

“‘Lotzbetter’iswhatwedo—it’smadeusacompletelydifferentbrand,”Roddysays.“It’satruebrandposition.Wecanholdthispositioninthemindofthecustomer.”

generational transformationGlideawaygrewoutofafamily’sretailfurniturebusinessthatbeganinthe1920s.Initsheydaythefamilyoperated40furniturestoresinsouthernIllinois.

Small-townlifeandtoughcompetitionledthefamilytoyearnforbiggercitylifeandanewbusinessmodel.SothefurniturestoresbegantocloseandthefamilymovedtoSt.Louisinthe1960storeinventthebusinessbasedonanewinventionofGrandpaFredman—asteel,slatlessbedrailthatrevolutionizedtheindustrybybringinguniformitywhereonceeveryframewasbuiltdifferently.

Thatreinventionworkedwelluntilaboutfiveyearsago.Theframebusinesswasn’tasstrongasCEOCarmiFredmanandhisfamilywanted.SotheytookachanceontherecommendationofFredman’scousin,RonRedman,whojoinedthecompanyabout12yearsago.Alifelongsalesmanandawell-readperson,RedmanpushedforGlideawaytogetintothemattressbusiness,specificallythememoryfoammattressbusinessthathesawbecomingalargerpercentageoftheindustry.

“Becausehewasoutinthefieldandsawthepopularity,itwasanobrainertohim,”Fredman Continued on page 8

says.“Togetourboard,ourfamilymembers,todothiswasharderthanhethoughtitwouldbe.”

Fredmanhadtobecomeconvincedfirst;thenheworkedwithRedmantoconvincetheboardaftermanyhoursofdiscussion.TheboardapproveddippingGlideaway’stoesinthememoryfoammattressbusiness.Theyagreedtospend$60,000forinventory.Today,successmeansthecompanyhasinvestedmillionsinthememoryfoammattressindustry.

Althoughmattressesandbedrailsfallinthesameindustry,sellingmattressesrequiresadifferentmodelthansellingbedframes.Mostretailerstypicallysellonelineofrolledsteelbedframesbutdozens,ifnothundreds,ofmattresstypes.Glideaway’ssalesrepresentativeshadworkedfor10,20and30yearssellingframesandrails,sotheywerehesitanttoaddmattressestothemix.

Glideawayrecognizedsynergiestoobecausethecompanycouldselltothesameclients.Itknewthatthesalesexperiencetookmoretimeanddoubleditssalesforce,hiringnewrepresentativeswithmattress-sellingexperience.

“Ifyoucansellmattresses,youcansellbedframes,buttheoppositeisn’talwaystrue,”Fredmansays.

Mattressesnowmakeup20percentofGlideaway’sbusiness,hesays.Thecompanyseesitsfutureinmattresses,eveninnerspringmattressesthatmakeup90percentofthemattressindustry.However,expandingtoinnerspringmattresseswillrequireachangetotheexistingmodelthatimportsallthemattressesforGlideaway.Unlikefoammattresses,innerspringmattressescannotberolledandcompressedtoshipcost-effectivelyacrosstheocean.TheyneedtobemanufacturedclosertothecustomerssoGlideawaywouldneedtomanufacturethemintheUnitedStates.

differing stylesGlideawayremainsafamilyownedbusinesswithmultiplegenerationsinvolvedandthatcanbeachallengetoreinventionbecauseevery

generationoperatesdifferentlybutmustworktogetherforthefuture,Fredmansays.

Inhisgrandfather’sgeneration,hisgrandfatherwasthetopexecutiveandmadethedecisions.Thatimmigrantgenerationalsoworkedhardandbelievedtheyneededtodoeverything.Fredman’sgenerationunderstandsthevalueofhiringwellsotheycandelegatesomeresponsibilities.

Oldergenerationsalsohesitatetoreinvent,whiletheyoungergenerationtendstohaveamillionideasandsometimeswantstoshootfromthehip.“I’mtryingtobridgethatgapandfindthebestwaytooperate,”Fredmansays.“Nowadays(decisionsare)alotmorebyconsensus.Wetalkeachotherintoit.Itusuallyworks.”

Problem = new businessYearsago,TaraAbrahamfoundher“invention”whenshewasamerchantforBath&BodyWorks.“Istruggledtofindacompanythatcouldsuccessfullydeliverthequalityandconsistencyweneededintheproductionofourgiftsets,”shesays.“ItwasthenIhadan‘aha’moment.IfeltthatifBath&BodyWorksneededaqualitycontractpackagertoassemblegiftsets,Iwasthebestpersontostartthatbusiness.”

So,15yearsago,AbrahamcreatedAccelInc.andservesasitschairmanandco-CEOtoday.Sincethen,theglobalcompanyhasgrownmostyears,packaginganddeliveringconsumerproductsbasedlargelyonitsexpertiseandflairinbeautyandbathsupplies.It’sexpandedfrom1,200squarefeetto580,000squarefeet.

Accel’scompetitivevalue,Abrahamsays,liesinitsabilitytoproduceanendproductthatexceedsclients’expectations.Itsengineersdesignprocessesthatmaximizecostefficienciesinpackagingmaterials,laborandequipmentuse.“Mostcontractpackagersrelyontheirclients’‘spec’sheetstodesigntheproductionflow.Wehousethatinternallyasnooneknows

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Continued from page 7

ourlinesbetterthanwedoandwecanpassalongthatsavingstoourclients.”

‘viral’ businessInrecentyears,thetougheconomymeantconsumerscutbackondiscretionaryspendingandpurchasedfewerhigh-endretailanddispensableproducts.Accelsawdemanddropandtookahardlookatitsbusinessmodeltodevelopideastoexpandthecompany’scapabilitiestomeetthechangingeconomy.Itfoundanswersbecauseitknewwhatitsclientsweredoingandwhattheirconsumerswerebuying.

WhenAccelworkedwithanapparelretailertoassembleitsgiftcardsinboxes,itlearnedabout“out-of-stock”apparel.Theclienthadtoreceiveandinventoryitsreturnedapparel,andthensorttheclothingtobesoldtosell-offmerchandiserssuchasMarshall’sandTJMaxx.Abrahamhadanother“aha”momentandthought,“Accelcandothat.”

“Wedevelopedasysteminrecordspeedandthefirstsortwedidforthemendedupbeing25percentfasterthantheyhadbeenabletoachieveinthepast,”Abrahamsays.“Thisnotonlyallowedustocreateadditionalbusinessthroughouttheyear,butitprovideduswithnewprospectiveclientfunctionalities.”

Thecompanydidn’tstopwiththeonenewservice.Itcontinuedtoevaluatewhatitscustomersweredoingandfounditsretailclientscreatingmoregiftsetswithscentedantibacterialsoapandhandgels.ThatexplorationledtoAccel’srealizationthatJDNelson,aproducerofantibacterialproducts,wasjustmilesaway.ThetwopartneredtogethersoAccelwouldbetheone-stopsourceforJ.D.Nelson’spoint-of-purchasestoredisplaysourcing,creationandassembly—allstepsthatJ.D.Nelsondidin-housebeforeworkingwithAccel.

Abrahamsayssheexpectsthatcustomer-ledevolutiontocontinuetocreateapositivefutureforAccel.“Weworkhardatmaintainingcommunicationlevelssowehaveasolidunderstandingofwhereourclientsareheadedandhowwecansupporttheminachievingourgoals.Weareconstantlychangingandbeinginnovativetoensureourclientsaresuccessful.”

Accel,though,alwayswilloperatebasedonitscoreoffering—semi-automatedandhandassembly.“It’simportanttousthatwedonotchangethatfocusbecauseitiswhoweare.”e

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reinvention in the united Kingdom: a matter of survivalBy David clift, cLB cooper chartered accountants

In a period when the economic downturn is dictating the future of many businesses, the thought of expanding in your home market or investing in new, international markets may be far from the minds of many companies.

The main focus and aspirations of a company may in fact be the reinvention of a brand or business offering. To ensure that an existing business model is successful, it needs to adapt to the competitive nature of the global marketplace and the changing needs of consumers.

In a recent survey of 14,000 shoppers by Which, a leading consumer magazine, a kitchen and homeware company renowned for its range of improbably gadgets, was voted the UK’s best shop. In winning the accolade, the company beat competition from such well-known and leading names as Marks and Spencer and John Lewis group, companies that are significantly larger.

This company though,did not start out as a kitchen and homeware company. The business was founded as an animal food packing business more than 30 years ago. Further reinvention and diversification followed, to transform it into the UK company it is today, with a catalog containing products aimed at making life both easier and enjoyable for its customers.

customer service is at the heart of the company’s philosophy. products come with a lifetime guarantee so if customers are not happy at any time with the product they can get their money back. Sales of £135 million from its latest published accounts indicate that this approach is paying dividends.

In particularly tough market conditions, the risk associated with entering new markets can sometimes dissuade companies from taking that next step. as such, a cautious approach to expanding may unfortunately mean that excellent opportunities are missed.

In the fast changing times we find ourselves in it is critical for businesses to challenge what they do, understand how their customer base is changing and whether the service it is offering is what its customers want. This is true of whichever worldwide market you are serving.

The UK market offers similar economic uncertainties as the United States does for the next year or so. That said, the United Kingdom is still an extremely attractive location for inward investment and there is always a niche for the customer-focused business to flourish. e

Author David Clift is a partner at UK-based Leading Edge Alliance firm CLB Coopers Chartered Accountants. He can be reached at dclift@clbcoopers.co.uk.

ThE LEADiNg EDgE 9

certainties and uncertainties of estate planningdeath and taxes are still certainties…by Kimberly A. McKenna and harry F. Murphy, Kreischer Miller Tax Strategists

most tax advisors believed Congress would extend the

estate tax prior to Dec. 31, 2009. The House took action, but the Senate did not. Therefore, pursuant to the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), the federal estate tax and generation skipping transfer (GST) taxes were repealed as of Jan. 1, 2010.

Unless Congress acts under the 2001 law, the federal estate tax and the GST taxes will return on Jan. 1, 2011, with a top rate of 55 percent and an exemption equiva-lent of $1 million, compared to a 45 percent top rate and a $3.5 million exemption equivalent as of Dec. 31, 2009.

The repeal effective January 1, 2010 has the following impact.• In 2010, the tax bases of assets

acquired will have the same income bases as the decedent.

There is an exception whereby an executor may allocate up to $1.3 million to adjust asset bases, but not above the fair market value at the date of death. Also, the executor may adjust assets received by the spouse up to $3 mil-lion. Heirs are required to pay capital gains taxes in excess of the first $1.3 million on any appreciated property when it is sold. Therefore, heirs must be prepared to locate invest-ment account statements pos-sibly decades old to calculate gain on today’s value from the original price. Unless the dece-dent has excellent records, this could require a lot of work for their heirs.

• The gift tax rate is 35 percent for taxable gifts. Also, no GST tax is assessed during 2010. This may lead to some plan-

ning alternatives, including the use of family limited partner-ships, and using discounting for lack of marketability and lack of control or minority interest to reduce value. The funding of dynasty trusts and the use of personal residence trusts should also be consid-ered. These certain types of transfers must be carefully planned or structured, espe-cially in this tax environment.

It is not clear whether or not Congress will change the law in 2010. Many advisors still expect Congress to change the law some time. This year, bringing back the 45 percent rate, and at least a $3.5 million exemption equivalent. It is also unclear if the law would be retroactive to apply back to Jan. 1, 2010. Some advisors believe a retroactive change back to Jan. 1, 2010, will result in a Supreme

Court challenge because Congress would be retroactively imposing a tax that no longer exists. These uncertainties add a measure of challenge to tax planning this year.

Because no federal estate law exists, there is a major concern or issue with clients whose wills, trusts or documents make refer-ence to possibly now obsolete Internal Revenue Code sections. The so-called “Formula Estate Plan,” which allocates minimum or maximum amounts to surviving spouses, various trusts or other heirs for their benefit may result in an estate being distorted. Clients would be well advised to review their estate plans to determine if any potential difficulties exist and if their plans accurately reflect the respective spouse’s intentions.

Unless Congress takes action prior to Jan. 1, 2011, the Internal Revenue Code provisions prior to EGTRRA will again be in effect for 2011 and subsequent years. As a result, the estate tax, GST tax and gift tax rates will have a graduated rate as high as 55 percent and an applicable exemption equivalent of only $1 million. Also, an addition-al 5 percent tax on estates more than $10 million will be appli-cable. However, the offsetting state inheritance or death tax credit will again be part of the IRC.

In summary, the old adage still holds true that death and taxes are the only certainties in life. However, for 2010, even the estate, GST and gift taxes hold an element of uncertainty. e

KREISCHER MIllERvolume 10 • issue 4

summer 2010

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companies that survived last year aren’t just looking to

weather another year, they are focusing on taking action to thrive in the rest of 2010 and beyond. To implement this strategy change, companies must take steps to not only retain their top executives, but make the decision to recruit and upgrade their existing talent.

When owners think of a total compensation package, they shouldn’t just think of base and bonus. They should re-evaluate whether the structures and pro-cesses are in place to take full advantage of the talents and

creative compensation: How to retain and incentivize top talent by Tyler A. ridgeway, director, Kreischer Miller’s human Capital resources

capabilities of their top perform-ers. They should also contemplate which intangibles they can offer to make employees happy and provide them with the peace of mind that they are advancing their careers.

Over the past 12 months, a trend has developed toward increasing communication between executive teams and employees, and getting everyone involved in the business so they feel that they have an impact on what is going on in their company. For example, many companies assigned high-potential employees

to participate in cross-functional projects that contained executive-level visibility. Other companies randomly invited certain employ-ees to join C-suite private com-pany meetings. Another tactic involved developing more depart-mental and one-on-one meetings. These examples help to increase employee morale and enable employees to feel more involved in decision-making. From a pro-fessional standpoint, even though these ideas do not tie directly to compensation, they go a long way toward retention.

Hiring processes continue to be re-evaluated. Companies are cautious about not exceeding their financial budget for new hires. How do they plan to stay within budget? More compensa-tion plans include incentives tied to both individual and company performance, giving employees the opportunity to make more money and share in the growth of the company.

Last year, many executives worked harder for less money and feel they now deserve to be repo-sitioned financially to be compen-sated for their sacrifices.

This year, owners must prepare for the fact that some of their executives may explore job oppor-tunities outside of their company. Statistics indicate that 50 to 60 percent of executives are deter-mined to make a move when they feel the economy has rebounded.

Key steps to take to retain and incentivize top talent: First and foremost, companies should iden-tify their top performers. Then, determine what the marketplace is paying for those same posi-

tions in other companies. Identify companies of similar revenue and employee count and determine where you stand as it relates to that benchmark.

If your company is paying below the mean, you should seri-ously consider increasing cash compensation to those identified as top performers. If you are pay-ing what the market dictates, your business leaders need to commu-nicate this fact with your employ-ee base to ensure retention.

Total cash compensation either remained status quo or decreased for many employees last year. As a result, to retain executives, com-panies should consider other ways of compensating them. Three such ways are offering an extra week of vacation, paying more of the executives’ health benefits or pro-viding spontaneous spot bonuses to reward solid performance and production.

Companies should consider offering professional develop-ment perks that will demonstrate commitment to their workforce. Offering in-house classes and training, or tuition reimbursement are very effective ways to reward and benefit top-performing execu-tives.

Successful companies in 2010 and beyond will be those that con-tinue to be proactive in involving their workforce, creating strong teams and leadership. e

Tyler Ridgeway is a director at Kreischer Miller and practice leader of its Human Capital Resources Practice. Reach him at (215) 441-4600 X 175 or tridgeway@kmco.com.

KREISCHER MIllER

ThE LEADiNg EDgE 11

KREISCHER MIllER

The technology landscape is evolving rapidly. A few decades

ago organizations required information technology competencies that are much different from what we face today. For most organizations this entailed procurement and maintenance of personal computers running standalone applications. Today’s organization exists in a far more complex information technology environment as illustrated by challenges that arise from a mobile workforce, business processes that span functional lines and changes in how employees interact with each other and customers (social networking, instant messaging, texting). The result can be summed up in a single word: complexity.

The traditional organization has responded by incremen-tally investing in its IT workforce through additional staff and train-ing. This approach is rational in the short term but places today’s organization at risk. How quickly can the organization respond to competitive challenges? How to retain highly trained and valuable IT staff? How to recruit for these positions? In addition to the risks, the sheer cost of keeping up with new technology can be staggering. It has become increasingly dif-ficult for IT professionals in small departments to keep up with all the latest technological changes.

The answer to these questions is to include outsourcing as part of an overall IT strategy. Recent develop-ments in business applications have enabled organizations to mix and match their deployment methods. Many applications can now be deployed in both traditional and hosted models, affording organiza-tions the flexibility to select the right systems and select how to deploy them on a piece-by-piece

Technology outsourcing for today’s organizationby J. T. hardy, Manager, Kreischer Miller Technology Solutions

basis. This is in profound contrast to the technology available just a few years ago where some systems worked best deployed in-house and others were suited for hosted environments.

Web-based platforms have been the key enabler for this phenom-enon. The Internet has created a standardized operating platform that enjoys a high degree of user familiarity. Most users are not concerned where an application resides when typing the applica-tion address on their browser. What they are concerned about is that the application performs in a robust and reliable manner. Software applications firms such as Salesforce.com have grown substantially in the past few years because they have developed their application from a Web-centric perspective resulting in ease of deployment and rapid market share growth. Google has invested heavi-ly in business-oriented productivity applications that will challenge tra-ditional players such as Microsoft with its Office product line.

This change allows today’s orga-nization to use outside resources for common business applications such as server applications, data-bases, productivity applications (word processing, spreadsheet, e-mail), website hosting. Internal

IT resources can be refocused on two value-added activities: busi-ness applications that support operating activities specific to the organization or its industry and management of relationships with outside service providers.

Several items related to the desired level of service must be considered when an organization designs a technology strategy. Primary items include response times, guarantees on system avail-ability, hosting test environments, site mirroring, backup/restore, server virtualization, upgrade management, remote access and disaster recovery. Hosted solutions are especially of value in support of an organization’s disaster recov-ery and business continuity con-cerns. A well-run hosting solution provider operates with SAS-70-certified operating guidelines and has been audited for adequacy of its disaster recovery and business continuity capabilities. As a result, end-user organizations will be able

to transfer some of their business risks to such outside solution pro-viders.

Selecting an outside solu-tion provider also poses several uncontrollable business risks to the end-user organization. As with any business entity, such solution providers can experience finan-cial difficulties and as a result fail to deliver services as promised. Selecting a stable outsource ser-vice provider based on sound business principles can minimize such risks.

In summary, recent develop-ments in technology are challeng-ing the traditional IT model while at the same time creating oppor-tunities for today’s organization to effectively use outside resources to support many business systems and applications. The key is to identify whether to use internal or external resources on a case-by -case basis, taking into consider-ation all available resources, level of service, costs and risks. e

The Sheer COST OF

KeePinG uP WiTh neW

TeChnOlOGY CAn be

STAGGerinG.

12� VOluMe 10 • iSSue 4 • SuMMer 2010

The U.S. Securities and Exchange Commission (SEC) is expected

to determine in 2011 whether to incorporate International Financial Reporting Standards (IFRS) into the U.S. public markets, with required implementation dates beginning in 2015, a year later than originally planned. This was reaffirmed by the SEC during its open meeting in February 2010, in which SEC Chairman Mary L. Schapiro was quoted as follows:

“For nearly 30 years, the com-mission has consistently promoted the development of a single set of high-quality globally accepted accounting standards. I, too, sup-port this goal, which I believe will inevitably lead the account-ing standard-setters across the globe to work together to improve financial reporting in all markets, including in this country. U.S. Generally Accepted Accounting Principles (GAAP) can and should be improved by this process. So, too, should IFRS. As both of these bodies of standards improve—and hopefully do so in a manner that brings them closer to each other—investors will be better served.”

Since the Norwalk Agreement in 2002, U.S. GAAP and IFRS stan-dard setters have worked together in their efforts of convergence. The joint convergence projects underway must be successfully completed for the SEC to deter-mine whether to incorporate IFRS into the financial reporting system for U.S. public companies. The expected results of the projects, which have the potential to con-tinue to significantly affect U.S. GAAP, may make the adoption of IFRS virtually seamless when final-ly implemented by U.S. issuers.

New accounting standards

international convergence of accounting standardsWhy the worldwide effort to provide global standards?by John P. landon, Manager, Kreischer Miller

already issued as a result of the convergence efforts include the following: In 2004 and 2005, Statement of Financial Accounting Standard (SFAS) 123(R) Share-Based Payment, SFAS 151 Inventory Costs, SFAS 153 Exchanges of Nonmonetary Asset and SFAS 154 Accounting Changes and Error Corrections were issued by the Financial Accounting Standards Board (FASB) to eliminate differences with IFRS. SFAS No. 157 Fair Value Measurements has been in effect since 2007; an IFRS exposure draft was subsequently issued which was consistent with this SFAS. The FASB also issued Statements No. 141(R) Business Combinations and No. 160 Non-controlling Interests in Consolidated Financial Statements, which became effec-tive for fiscal years beginning after Dec. 15, 2008; similar stan-dards were concurrently issued by the International Accounting

Standards Board (IASB). Ongoing efforts continue to

be made in the areas of financial instruments, financial statement presentation, intangible assets, leases, liabilities and equity dis-tinctions, revenue recognition, and post-employment benefits. These projects are targeted for comple-tion by June 2011, with possible effective dates of converged stan-dards of 2012 to 2014.

Two examples of specific stan-dard changes being discussed by the boards include:

Linking the information included in each individual financial statement so each state-ment complements the other. For example, the statement of cash flows separates operating activi-ties from financing activities, but that distinction is not made on the statement of financial position or statement of operations.

Developing a single, contract-based revenue recognition model regardless of the industry in which

KREISCHER MIllER

the entity operates to reduce the numerous existing standards on revenue recognition and improve comparability of revenue across industries and geographic borders.

Recently, leaders at a G-20 summit called on international accounting bodies to redouble their efforts to achieve a single set of high quality, global accounting standards within the context of their independent standard set-ting process and complete their convergence project by June 2011. Why the worldwide effort to provide global standards? As the interconnectedness of the world economies grows, it becomes increasingly costly for investors and creditors to adjust for national accounting differences. The FASB and IASB hope to reduce the cost of capital and therefore encourage global economic growth, which, in turn, may lead to a more stable worldwide economy.

In summary, accounting stan-dards over the next couple of years will continue to evolve, and accountants, financial analysts, investors, bankers and other advi-sors must stay informed. Keep up to date with recent developments by referring to the FASB website at www.fasb.org and the IASB web-site at www.iasb.org. e

In January 2011, the U.S. CPA exam will begin to incorporate IFRS into three out of its four parts. This change was made based on research that indicated more and more accountants in the United States are working for foreign-owned companies, companies with foreign subsidiaries or audit companies or subsidiaries that report in IFRS.

The Leading edge 13

Hr

one more thoughtTheGenerations Inc.authorssuggest

anotherpossibility:a“senior

volunteers”program.Drawupajob

descriptionthatencouragessenior

volunteerstobemorethan

figureheads.Recognizeandapplaud

theircontributions.That’sthemain

reasontheyvolunteer.

What’s next? When soon-to-be retirees decide to keep working

Thescenarioisplayingacrossthecountry.Forward-thinkingorganizationsplannedfor

thebigimpactasthebabyboomgenerationretired.Yet,asretirementportfoliostooksignificanthitstheselastfewyears,morebabyboomersareoptingtostayemployed—causingtheiremployersanewdilemma.It’stimeforPlanB.

Doacost/benefitanalysistoevaluatethevaluetotheorganizationoftheexpected-to-retire,now-planning-to-stayemployees.Theultimateoptions:

retain the employee. Giventheemployeepositionalreadywasinyourcrosshairs,you’llneedtodosomerethinking.Doyouwanttoretainthepersoninthepositiondoingthesamework?Doyouwanttoprovidetrainingtohelpthepersondothepositionwithupgradedskills?Doyoureducetheworkload/schedule?Doyouwanttoreassignthepersontoanotherjobordepartment?

Propose a severance package. “Ifyoujudgethattheorganizationwouldbebetteroffwithouttheseniorperson,thenit’sprobablybesttoofferitandmoveon,”sayLarryandMeaganJohnson,authorsofGenerations Inc., From Boomers to Linksters: Managing Friction Between Generations at Work.

“It’swisetoconsideralltheseniorpersonhastoofferbeforereleasinghimorher,”theauthorsobserve.“Ifyou’regoingtokickthisseniorpersonoutthedoorwithaseverancepackage,areyousureyouwon’tbelosingmorethanyoustandtogainfromthedeparture?”

ToddOrdal,aformerCEOwhoisnowastrategyconsultantandcoachtoCEOs,stressesthatthebusinessleaderhastodowhatisrightforthecompany.“Ifsomeonecanperformwellinareducedcapacityandtheirtotalcompensationisareasonableinvestmentfortheworktheydo,youmightconsiderthatoption,”headds.“Myexperience,however,isthatmostoften,‘reducedresponsibilities’meansthattheywillretire,butnotleavethebuilding.”

Ifthepersonreallywantedtoretirebutwasforcedtostaybecauseheorsheneededthemoney,haveaseriousconversationabouthowthepersonwillcontinuetobemotivatedatwork(thisneedstocomefromwithin)andhisorherneedtoaddvalue,Ordalsays.

“Ifa30-year-oldemployeehadthesameknowledgeandperformance,wouldtheybevaluable?”heasks.

TheGenerations Inc.authorssuggestthatturningtheolderemployeeintoamentorforyoungeroneshasagreatbenefitforeveryoneinvolved.TheygivetheexampleoftheapproachtakenbymanyJapanesecompanies.Amentorisassignedtoamentee,usuallyapromisingyoungmanager.Thementorisoutsidethechainofcommandandfunctionslikea“godparent”or“guru”whoalsohelpswithorganizationissuesandofficepolitics.Thementeeismoreopenwiththementor,andthementorcangettotherootoftheproblemiftheemployeeisflailing.

“Wouldn’tyouhavelovedtohavehadamentorwiththatlevelofinterestinyoursuccessearlyinyourcareer?”theyask.

ExecutiverecruiterKarenFenaroliofEFLAssociatessaystomakesuretheprospectivementorhasexperiencerelevanttothecurrentbusiness.

“WhatIliketoseeis‘benchstrength,’”sheexplains.“‘Benchstrength’isexperience—

whetherornotit’samoreexperiencedemployeeorlessexperiencedemployee—ifyoudon’thaveanyexperiencetoshareofsuccesses,thementorrelationshipisnotgoingtobegood.”

Amentorprogram,eitherformalorinformal,isvaluableinbusinesses.“It‘wisesup’somejuniorstaff,”Fenarolisays.

“Valuabletalentinanagingworkforceneedstobedeployed,”shecontinues.“Ifit’sanagingworkforceandthetalentisvaluable,it’skeptonthebench.Butifit’snotvaluable,it’snotkept.Youreallymayhavetobecreative.Youmayhavetocross-germinateintodifferentbusinessunits.”e

By Dennis Seeds

IF yOU’rE GOInG TO KIcK ThIS SEnIOr pErSOn OUT ThE DOOr WITh a SEVErancE pacKaGE, arE yOU SUrE yOU WOn’T BE LOSInG MOrE Than yOU STanD TO GaIn FrOM ThE DEparTUrE?

briefs

14� VOLUME 10 • ISSUE 4 • SUMMEr 2010

Arizona-basedGeoAdvertisingandMarketingrevealsitstoppublicrelationstipsasidentifiedbyitspresident,GeorgiaR.Lacy,basedonher30-plusyearsofexperience.Amongthetips:• Createapublicrelationsplanannuallyfor

theorganizationandfollowit.• Createtemplatesforfrequent

announcements/news,suchasnewhires,

MoRe hiRing, FeWeR neW gRadSAlmost9in10companiessaytheyhiredsomeonewithinthelastthreemonths,accordingtoarecentsurveybytheSocietyforHumanResourceManagement.

AccordingtoSHRM,95percentofpublicfor-profitcompaniesand81percentofprivatefor-profitcompanieshavehired.Whenbrokendownbysize,68percentofsmallerbusinesses(1to99employees)hiredsomeone,while90-pluspercentofmedium(100to499employees)andlarger(500-plusemployees)businesseshiredatleastoneperson.

Althoughmostcompanieshiredsomeone,thebusinessessaytheyplantohirefewernewcollegegraduatesthantheydidlastyear.In2010,30percentofthosesurveyedplannedtohireanewbachelor’sdegreegraduateascomparedto2009when39percentplannedtodoso.

gLoBaL aSSiSTanCe FRoM SBaSmallbusinessesdon’tneedtoshyawayfromaglobalpresencebecauseoftheirsize,accordingtotheU.S.SmallBusinessAdministration.Almost97percentofexportersaresmallbusinessescompetingoutsidetheUnitedStates,where96percentofthepopulationlives.

TheU.S.SBAoffersacentralresourceatwww.sba.gov/internationalwithlinkstoitsonlinecourse,“TakingaBusinessGlobal,”itsU.S.ExportAssistanceCentersaswellasinformationonitstradefinancingprograms,includingtheInternationalTradeLoanProgram,ExportExpressandExportWorkingCapitalProgram.

TheSBAoffersthefollowingreasonstogoglobal:• Declineinexchangeratesincreases

purchasingpowerinexportmarkets,• Productioncapacityavailable,• Lowertransportationand

communicationcosts,• Reductionsintradebarriers,• Increasesalesandprofits,• ReducedependenceonU.S.marketplace,• Extendsalespotentialandlifeofexisting

productsand• Stabilizeseasonal/marketsales

fluctuations.

accolades,accomplishmentsandcharitablecontributions.

• Implementapublicrelationsdatabasewithcontactnames,phonenumbersande-mailaddresses.Establishrelationshipswithpeoplewhowriteaboutyourindustry,fieldorgeographicarea.

• Submitnewsreleasesthathavevalue—think

aboutwhothereaderswouldbewhenyouwritethereleases.

• Postallnewsreleasestoyourwebsite.Giveeachaseparatepageandtitle.

• Monitoryourpublicrelations.Googlealertsarefreeandhelpful—registerandsubmitkeywordsandGooglee-mailsyouanytimeanarticlewiththosekeywordsappears.

iS ThaT neWS ReLeaSe VaLuaBLe?

The Leading edge 15

briefs

OrganizationsusingonlinesocialmediasuchasTwitter,FacebookandYouTubecanbenefitfromthepowerful,low-costmarketingtools.Theyalsocanencounterinformationsecuritychallengesthatopenuptheirsystemstorisk,damagetheirbrandrecognitionandinfringeonprivacy.Effectivelyincorporatingsocialmediameanshavingacomprehensivestrategicplanthataddressesallthoseissues,accordingtotherecentlypublished“SocialMedia:BusinessBenefits&Security,Governance&AssurancePerspectives,”producedbyISACA.

ISACA,aglobalproviderofIT-relatedcertifications,conferencesandmore,saysmarketing,informationtechnology,humanresourcesandlegalallshouldbeinvolvedincreatingasocialmediapolicy.Hereareafewoftheareasandquestionstobeanswered:Personal use inside the workplace• Issocialmediauseallowed?• Whatbusiness-relatedcontentshouldbe

postedordisclosed?• Canworkplace-relatedtopicsbediscussed?

• Whatsites,contentorconversationsareinappropriate?

Personal use outside the workplace• Whatbusiness-relatedcontentshouldbe

postedordisclosed?• Whatstandarddisclaimersareinplaceifan

employerisidentified?• Whatarethedangersofindividualsposting

toomuchpersonalinformation?Business use• Issocialmediauseallowed?• Whatistheprocesstoapproveuseofa

socialmediatool?• Whatrangeoftopicsorinformationis

permittedtoflowthroughthechannel?• Whatactivities(applicationinstallation,

game-playing,etc.)arenotallowed?• Whatistheprocesstoaddresscustomer

issuesthatarepostedorarisethroughasocialmediatools?

ToreadthecompleteISACAstudy,visit:http://tinyurl.com/socialmediasecurity.

‘FRiending’ STRaTegiC, SeCuRe SoCiaL Media PoLiCy

FRee CoRnFLaKeS and oJSevenin100businesstravelerssayafreebreakfastatthehotelisthemostimportantfactorinselectingahotel.ThatwasasurprisingfindintherecentnationalEmbassySuitesHotelsecondannualBusinessTravelSurveyconductedbyBraunResearch.

Fewerbusinesstravelerssaidtheywerelimitingtheirtripsbecauseoftheeconomicdownturnthandidin2009.Notsurprisingly,29percentofbusinesstravelersoptforahotelbecauseofitsproximitytotheirbusinessmeetings,while27percentpickpriceasthekeyselectionfactor.Only3percentsaidthemostimportantfactorwaswhetherthehotelprovidedfreeshuttleservicetoandfromtheairport.e

aCRoSS TiMe zoneS, CuLTuReExecutivesfindthemselvesfacedwithadditionalchallengesastheyoperateinmultiplecornersaroundtheworld.ResearchingonlinegaminghelpedanalystsatIBMcomeupwithsixkeyrecommendationsforoperatinggloballyintheirpaper,“LeadershipinaDistributedWorld:LessonsfromOnlineGaming.”Therecommendationsinclude:• Applyvirtualcommunicationtoolsand

facilitationtechniquestoconnectmoreeffectively.

• Usecollaborativespacestogatherknowledge,expressideas,andsharepassionsandconcerns.

• Spendmoretimeonsettingorganizationalcontextandcommunicatingwhereanorganizationneedstogo.

• Usedashboardslinkedtothecollaborativetoolstocapturereal-timeinformationaboutpeople,activitiesandoutcomes.

• Providemorefrequentguidanceandlinkperformancetorecognition.

Toreadthefullreport,visithttp://tinyurl.com/ibmglobal.

global

1 substantial capital is required to register a company.AsofJanuary2010,theBulgarianparliamentdecreasedtheminimuminitialcapitalrequiredforregistrationofalimitedliabilitycompanyfromEUR2500($3,075)toEUR1($1.23).Thechangewasannouncedasoneofthesignificantanti-crisismeasures.

2Tax rates are high.TheBulgariangovernmentintroducedthelowesttaxratesinEurope—10percentbothonpersonalandcorporateincomethatcontributestostrongforeigninvestmentflows.TheValue-AddedTaxisatthestandardrateof20percentandpersonalincomeistaxedataflatrateof10percent.

3distinction and discrimination exist between international and national companies.CompanieswithforeigninterestestablishedinBulgariaoperateunderthesamerulesandconditionsaslocalcompanies.Furthermore,Bulgariahassigneddoubletaxtreatieswith67countries.Doulbetaxtreatiesvarybutgenerallyallowthetaxpayertopaytaxinonlyonecountry.

4Bulgaria’s economic environment is unstable.PeggingtheBulgarianlevtotheEurohashelpedachieveandmaintainmacroeconomicstability.TheprogressachievedwasacknowledgedbythemajorinternationalcreditratingagenciesgivingBulgariaaninvestmentgraderating.Bulgaria’sexchangerateisfixedtotheEuroat1.95583BGNto1Euro.

Top 10 misconceptions about doing business in … BulgariaBy Donka pechilkova, Dasons Business Services Bulgaria

16� VOLUME 10 • ISSUE 4 • SUMMEr 2010

5labor force is low-qualified, incompetent and expensive.BulgariahasatalentedandeducatedlaborforceandoneofthelowestwageratesintheEuropeanUnion.Thereare43universitiesandspecializedcollegesin16citiesthroughoutthecountry.

The Leading edge 17

global

6Bulgaria has a socialist president and is still a communist country.Bulgariaisaparliamentarydemocracy.InJuly2009,theright-wingpartyGERB(CitizensforEuropeanDevelopmentofBulgaria)secured116ofthe240seatsintheBulgarianparliamentanditsleaderBoikoBorissovbecametheprimeminister.

7Foreigners cannot work without a permit.Asof2007,withtheaccessionoftheRepublicofBulgariatotheEuropeanUnion,citizensofEUcountriescanexercisetheirrighttofreemovementwiththeintentiontoworkintheRepublicofBulgariawithoutrequiringaworkpermit.

8 Bulgaria’s transportation infrastructure is underdeveloped. Bulgaria’stransportationnetworkisbeingrenovated.BulgariabenefitedfromEUinfrastructurefunds,whichresultedinrapidimprovementswithintheentireBulgarianroadnetwork. Furthermore,therearefourinternationalairportsinBulgaria.ThebiggestairportisinSofia.However,thereisanairportinPlovdivmainlyusedforcharterflightsaswellasairportsinVarnaandBourgasthatareusedforlocalflightsandforcharterflightsduringthesummer.BulgariaalsohastwomajorportsontheBlackSea,VarnaandBurgas.BothactasEast-WesttransportcorridorgatewaysofBulgaria.BourgasisthesecondlargestportinBulgariaandisincloseproximitytoSerbia,FYRMacedonia,GreeceandTurkey.

9 it is complicated to register a company in Bulgaria.RegistrationoflimitedliabilitycompaniesandjointstockcompaniesinBulgariacanbeapprovedwithinfiveto10workingdaysfromthedatethedocumentationissubmittedtotheCommercialRegister.Bulgariaranked50outof183economiesbytheWorldBankreportin2010fortheeaseofdoingbusiness(anincreaseof31positionsfrom2009).

10 There is no substantial foreign investment in Bulgaria.EconomicstabilityandBulgaria’sEUaccessionhavemadethecountryanincreasinglyattractiveoptionforinvestment.SomeofthetopinvestingcountriesincludeAustria,Germany,GreeceandRussia.Hotinvestmentsectorsincluderealestate,construction,informationtechnologyandsoftwaredevelopment.e

If you have any questions about doing business in Bulgaria, contact Donka Pechilkova of Dasons Business Services Bulgaria, a Leading Edge Alliance firm. She can be reached at donka.pechilkova@dasons.eu.

Q: We’re ramping up to hire again. last year, we let a few people go and blamed it on demand, even though the truth was their performance was sub-par. How do we bring in new people successfully when most everyone thinks the (still unemployed) ex-workers were let go because of demand?

a: You’vecertainlygottenyourselfintoabitofabind.Youletgoofemployeeswhoweren’tuptoparusingthecoverofadownturnintheeconomy.Nowthatanuptickforyourbusinessmeansyoucanhireagainyouhavetoeithercomecleanabouttherealreasonswhytheywereejectedormakeupsomestoryastowhyyouarehiringothersinlieuofthem.Youalsomustdosoknowingthewholetimeyourex-employeeswillknowwhathappensthroughyourcurrentones.You’redarnedifyoudoanddarnedifyoudon’t.

BeforeIcommentonthisissueIthinkweshouldconsiderwhathasreallyhappened.Youaredoing,ormoretothepointnotdoing,what

Q&a

in a nutshell by chris desantisLacK OF TranSparEncy, FEEDBacK OpEnS WOrLD OF prOBLEMS In FIrInG, hIrInG

do you have a workplace question do you have a workplace question you want answered? What do you you want answered? What do you want to know to make work a better want to know to make work a better place?place? send your questions to desantiscP@aol.com to get chris desantis’ two cents as to what he thinks you might want to do.

mostpeoplewhoworkinorganizationsloathe,providingrealperformancefeedback.Yoursituationisadirectresultoftakingtheeasywayoutindealingwithperformance.Thisisasystemicissueandonethatpervadesalllevelsofanorganization.CharlesJacobs,whowroteManagement Rewired,statedthatwearesimplynotwiredtoreceivefeedback.Ashumans,weresistauthorityingeneral.Thefactthatsomeoneinauthorityisgoingtogiveusfeedbackgetsavisceral,negativeresponsefromsomewheredeepinsidethereptilianpartofourbrains.

Ifourfirstreactiontohearingwewillreceivefeedbackistobecomedefensive,itmakesgivingittoanotherpersondifficultfromtheget-go.Also,mostfeedbackisofthe“management-by-exception”variety,pointingoutsomethingthepersonisdoingincorrectlyorbelowestablishedstandards.Ionceheardthephrasethatmanagersare“environmentalcreators.”Ifthat’sthecase,whichIbelieveitis,maybeweshouldconsidergivingmorebalancedfeedback.AsKenBlanchardwouldsay,“catchthemdoingsomethingright.”Ifwecontextualizethelargerbodyoftheircontributionsbypointingoutwhattheyaredoingwelloratleastcompetently,thencorrectivefeedbackisnotonlyheardbutitisreceivedfarlessdefensively.Theoverallfeedbackisthatthispersonismakingadecentcontribution.

Providingbalancedfeedbackworksforthemajorityofemployees,butwhataboutthebottom10percent?Wouldeverybodyinthatcategorybetheretodayiftheyreceivedthecourse-correctivefeedbacktheyneededalongtheway?Ithinknot.Youdidn’thirethemasthebottom10percent,youleadthemthere.Frankly,weallhavegiftsandabilitiesthatgiveusachanceatsucceedingatsomething,somewhere.Ifthisperson’sabilitiesdon’tmatchyourcompany’sneeds,thispersonshouldknowitsoonerratherthanlater.It’saboutdignity,respectandintegrity,yoursandtheirs.

Sobacktotheproblemathand,howdoyougetoutofthisdilemma?First,Iwouldnotbringbacktheex-employeesjusttoperpetuatethe“demand-is-diminishing”fallacy.Iwouldmeetwiththecolleaguesoftheex-employees

(aswellasanyoneelsethismessagewouldimpact)andsaythatthejobsasyouseethemtodaynolongermatchtheoriginaljobdescriptions.Tellthemyouhavedecidedtointerviewnewpeopleforthepositions.Explainthatyouacceptyourresponsibilityfornotstatingthisearlierandbyextension,holdingoutafalsehopetothosethatwereletgo.But,thecutswererequiredandyoutookadvantageofthesituation.Nowthatthesituationhaschangedandyourcompanyisontracktogrow,youthinkthereshouldbesomechangesinyourmanagementbehavioraswell.Tellthemyouwillbemoretransparentaboutwhatishappeninginthebusinessandmoredirectandbalancedinprovidingfeedback.Weallneedtoknowwherewestand.Youwillbeforgiven,notinthemomentbutsoonerratherthanlater.Ionlyremindyouitisyouractions,notyourwords,onwhichyouwillbejudged.e

Chris DeSantis uses his 20 years’ experience in training and development as an independent consultant. He specializes in the design and delivery of management and organization development interventions. A presenter at Leading Edge Alliance seminars, DeSantis focuses his work on assisting individuals or groups in identifying obstacles to effectiveness and subsequently works with them to create user friendly solutions aligned with the company’s strategic initiatives. He earned his undergraduate degree from the University of Notre Dame, an MBA from the University of Denver and an MA in organizational development from Loyola University.

18� VOLUME 10 • ISSUE 4 • SUMMEr 2010

The leading edge offers:• access to the best and brightest CPas 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 strength and reputation to attract the highest quality team members.

• The alliance offers accounting and consulting services through a global network of firms with more than 15,000 professional staff in more than 430 offices.

• The Leading edge alliance offers world-class 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 (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 top quality firms who are very successful, have deep client relationships, and strong ties to the community. The alliance provides members with an unbeatable combination: the comprehensive size and scope of a large multinational company while offering their clients the continuity, consistency and quality of service of a local firm. Member firms have access to the best and brightest team of business advisors—a peer-to-peer connection that provides the right business solutions for clients.

alabamaalbaniaafghanistanargentinaatlantaaustraliaaustriaazerbaijanBahrainBaltimoreBangladeshBelgiumBoliviaBostonBrazilBritish Virgin islandsBuffaloBulgariaCayman islandsChattanoogaChicagoChileChinaCincinnatiClevelandColombiaCroatiaCyprusCzech Republicdallasdaytondenverdominican Republicecuadoregyptel SalvadorFinlandFort Lauderdaleghanagermanygreeceguatemalaharrisburg, Pahartfordhong Konghonoluluhouston

hungaryindiaindianaindonesiaiowairelandisraelitalyJordanKazakhstanKenyaKnoxvilleKoreaKuwaitLas VegasLatviaLebanonLexingtonLondonLos angelesLuxembourgMacedoniaMadison, WiMalaysiaMaltaMauritiusMemphisMexicoMiamiMichiganMinneapolisMissouriMoldovaMontenegroMontrealMorocconashvillenebraskanetherlandsnew orleansnew Jerseynew yorknew zealandnorth Carolinanorwayorange County, Caoregon

PakistanPalestinePanamaParaguayParisPeruPhiladelphiaPhoenixPhilippinesPittsburghPolandProvidencePuerto RicoRichmondRenoRomaniaRussian FederationSan FranciscoSaudi arabiaScotlandSeattleSenegalSerbiaSingaporeSlovakiaSloveniaSouth CarolinaSpainSwedenSwitzerlandTaiwanThailandTokyoTorontoTucsonTunisiaTurkeyukraineunited arabemiratesugandauruguayu.S. Virgin islandsVenezuelaWashington, d.C.VietnamVirginia/West Virginia

The members of the Leading edge alliance are leaders in many key markets, including:

Visit Leadingedgealliance.com for a detailed listing of member firms.

The Leading edge 19

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