Looking for the most intuitive, cost-effective and complete XBRL solution? WebFilings takes the mystery and complication out of XBRL mapping, tagging and reporting. Unlike “bolt-on” post-process solutions, our end-to-end SEC report management software enables accountants — not XML programmers — to tag SEC reports as they draft them. WebFilings is a revolution in regulatory compliance software, delivering the only complete, integrated solution to meet SEC reporting requirements.
Integrated, easy-to use XBRL tools and instant EDGAR conversion eliminate timeconsuming and costly internal and external processes.
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Our intuitive “one active document” collaboration tools simplify the entire reporting process from drafting through filing.
34 Re-Generation
B y A l l i so n E n r i g h t
Bridge the generational divide
38 Global Outsourcing
B y Sh er yl N a n c e - N a sh
It ’ s hit the $4 trillion mark, which means US outsourcing is rapidly deepening The question is, how will it impact the US economy?
42 Corporate Evolution
B y C a r o l yn Ta n g
Prepare for tomorrow ’ s business model
16 Technology Social Media Now
B y D a n i el D er n
What can LinkedIn, Twitter, Facebook, et al do for you?
20 Executive Suite CFO Jumpstart
B y C h r i st i n e B o c k el m a n
New CFOs have to ‘start before they start ’ to make it at the top
24 IFRS International Learning
B y D er r i c k Li l l y
Globalization continues to increase the need for IFRS in the classroom
28 Diversity Making it to the Top
B y Ren ee B ec k m a n
Mentors and sponsors are key in giving women a seat in the corner office.
30 M&A 7 Steps to M&A Success
B y Sel en a C h a vi s
Don’t make the front page with your merger or acquisition failure.
4 First Word
A message from the Illinois CPA Society ’ s President & CEO
6 Seen & Heard
News bytes, sound advice and practical business tips
10 Tax Insight Partner Payout
B y H a r vey C o u st a n , C PA
Self- employment tax on service partnerships is in for a change
12 Fraud Insight Suspicious Minds
B y Brad Sargent, CPA/CFF, CFE,CFS, Cr FA , FABFA
Are you skeptical enough?
14 Retirement Insight Un-Retirement
B y Ma r k J Gi l b er t , C PA /PF S
What, no gold watch?
46 Classifieds
46 Advertiser Index
48 Time & Talent
A shout out for ICPAS member volunteers
Garelli Wong and Jackson Wabash are Chicagoland’s experts in financial recruiting and staffing.
Our team unites employers with the right accounting and finance talent for direct hire, temporary and consulting assignments. We look and listen beyond the job description to combine the right skills with the desired experience.
To learn more about our dedication to finding the right fit, visit us on the web or call your local office.
Publisher/ICPAS President & CEO Elaine Weiss
Editor-in-Chief/Director of Publications Judy Giannetto
Creative Services Director Gene Levitan
Creative Services Manager Rosa Garcia
Publications Specialist Derrick Lilly
National Sales & Advertising Angie VanGorder
YGS Group, 3650 West Market Street, York, PA 17404
P: 800 501 9571 x176 F: 717 825 2171
E: angie vangorder@theygsgroup com
Circulation/Member Services Director Ron Jankowski
Editorial Offices: 550 W Jackson Blvd , Suite 900 Chicago, IL 60661
I C P A S O F F I C E R S
Chairperson, Sara J Mikuta, CPA Leaders Bank – Operations Center
Vice Chairperson, Robert E Cameron, CPA Cameron, Smith & Company PC
Secretary, Daniel F Rahill, CPA, JD KPMG LLP
Treasurer, James P Jones, CPA Edward Don & Company
Immediate Past Chairperson, Lee A. Gould, CPA/ABV, JD, CFE, CFF Gould & Pakter Associates LLC
I C PA S B O A R D O F D I R E C T O R S
Brent A Baccus, CPA, Washington Pittman & McKeever
William P Graf, CPA, Deloitte & Touche LLP
Edward J. Hannon, CPA, JD, Freeborn & Peters LLP
John A Hepp, CPA, Ph D, Grant Thornton LLP
Cara C Hoffman, CPA, Blackman Kallick LLP
Geralyn R Hurd, CPA, Crowe Horwath LLP
Leif J Jensen, CPA, Leif Jensen & Associates Ltd
Elizabeth A Murphy, PhD, CPA, DePaul University
Annette M O’Connor, CPA, RR Donnelley & Sons Company
Michael J Pierce, CPA, RSM McGladrey Inc
J Bradley Sargent, CPA, Sargent Consulting Group LLC
Edward H Stassen, CPA, Recycled Paper Greetings Inc
Reva B. Steinberg, CPA, BDO Seidman LLP
We all love a bargain finding something of value for a price that’s lower than we expected In these tough times we search even harder to find bargains for everything from airfare to a cup of coffee Price is an easy indicator of our success. Determining value, however, is a tougher task.
Va l u e i s s u b j e c t i v e S h o p p i n g a d e s i g n e r l a b e l m e a n s everything to one person and nothing to another. One person may place a high value on quality, and another simply on convenience
Yet when it comes to an educational experience we probably value many of the same things finding a new piece of information that changes the way we think, keying into an idea that improves how we work, or simply enjoying interaction and discussion with others
Now in its 30th year, the Midwest Accounting & Finance Showcase is designed to provide our members with the best bargain in CPE For only $280, you can get 16 hours of quality CPE in just two days, free access to over 80 exhibitors, and the chance to network with more than 2,100 of your fellow professionals.
Quite simply, you can’t beat the Showcase for value. Presentations like “Generations Apart Yet Only a Cubicle Away” might have you thinking a little differently about your co-workers; Dana “Rick” Richardson’s popular presentation on “Tomorrow’s Technologies” could have the next great idea for your business; and updates on everything from the state of the profession to the state of the economy provide a lot of food for thought Sessions designed to increase your productivity, efficiency and profitability will delve into topics such as auditing standards, individual tax, corporate tax, financial statements, cash and treasury management, tax research, fraud schemes and internal controls
The Showcase is just one of many ways we create value for our members, and we are confident you’ll find it relevant, current and in touch with your needs It’s a bargain on every level cost, quality, convenience and value
I f y o u h a v e n ’t r e g i s t e r e d y e t f o r t h e S h o w c a s e , o r w a n t t o l e a r n m o r e a b o u t i t , v i s i t www.icpas.org today
See you there
El ai ne W ei ss, ICPAS Presi dent & CEO
INSIGHT is the official magazine of the Illinois CPA Society, 550 W Jackson, Suite 900, Chicago, IL 60661, USA Its purpose is to serve as the primary news and information vehicle for some 23,000 CPA members and professional affiliates Statements or articles of opinion appearing in INSIGHT are not necessarily the views of the Illinois CPA Society The materials and information contained within INSIGHT are offered as information only and not as practice, financial, accounting, legal or other professional advice Readers are strongly encouraged to consult with an appropriate professional advisor before acting on the information contained in this publication It is INSIGHT’s policy not to knowingly accept advertising that discriminates on the basis of race,religion, sex, age or origin The Illinois CPA Society reserves the right to reject paid advertising that does not meet INSIGHT’s qualifications or that may detract from its professional and ethical standards The Illinois CPA Society does not necessarily endorse the non-Society resources, services or products that may appear or be referenced within INSIGHT, and makes no representation or warranties about the products or services they may provide or their accuracy or claims The Illinois CPA Society does not guarantee delivery dates for INSIGHT The Society disclaims all warranties, express or implied, and assumes no responsibility whatsoever for damages incurred as a result of delays in delivering INSIGHT INSIGHT (ISSN-1053-8542) is published six times a year, in February/March, May/June, July, August, September/October, November/December, by the Illinois CPA Society, 550 W Jackson, Suite 900, Chicago, IL 60661, USA , 312 993 0393
57% of businesses say they are likely or highly likely to acquire other companies in the next 12 months, versus 33 percent surveyed in November 2009.
Source: Ernst & Young
We asked ICPAS members about the social media sites they ’ re using Here’s what they had to say
Facebook (61 percent). Eighty-three percent of members who use Facebook are doing so for personal rather than business activities Forty-six percent are spending 1 to 5 hours on the site per week; 37 percent spend less than an hour on the site per week
LinkedIn (57 percent). Seventy-six percent of members use LinkedIn for business rather than personal purposes The majority spend less than an hour per week using the site
YouTube (39 percent). Ninety percent of members are accessing YouTube for personal use. The majority spend less than an hour per week on the site
This free online business suite allows you to manage your business in the cloud Anyone with a Google Apps account can log into myERP.com and get started With functions for CRM, sales, accounting, projects, purchasing, inventory and logistics, this application streamlines the key processes of any operation and is fully integrated with Google Apps, Gmail and Calendar
What ’ s more, by keeping all of your information in one place, the need for data entry is reduced, and small businesses can make decisions based on a real-time view of their activity The app is adaptable, and fits the needs of various companies, including service providers, manufacturing, wholesale and distribution
Get the free version of myERP com at go o gl e. c o m /en ter pr i s e/m ar k etpl ac e. Two simultaneous users can enjoy instant and indefinite access to the app ’ s full functionality
Twitter (14 percent) Sixty-three percent of Twitter users are accessing the site for personal purposes The majority spend less than an hour per week “tweeting ”
Blogs (12 percent) Fifty-seven percent of members use blogs for personal purposes, and 55 percent spend less than an hour per week accessing blogs; 37 percent spend from 1 to 5 hours per week on blogs
MySpace (8 percent) The vast majority (98 percent) use MySpace for personal networking, but spend less than an hour per week doing so
Flickr (5 percent). Eighty-seven percent of members access Flickr for personal use The majority spend less than an hour per week on the site
FourSquare (1 percent) / Second Life (1 percent). Sharing eighth place, both sites are mostly used for personal networking, with 91 percent of members spending less than an hour per week on each
Look out for our next survey question in your upcoming INSIGHT eBlast
Note: Last month’s issue of INSIGHT featured an article on the Mary T Washington Wylie Scholars and Fellows program KPMG, one of the program ’ s early financial sponsors, did not appear on the list of partner firms, and we would therefore like to take this opportunity to thank and recognize KPMG for its leadership support
Joining the ranks of such n o t a b l e o r g a n i z a t i o n s a s
The Walt Disney Company, EMC Corporation, Deloitte and Sara Lee, INSIGHT has been awarded silver place in the prestigious Magnum Opus Awards for Best CSR/ Green Series or Article To read the winning Sept/Oct 2009 “Eco Minded” Green Business Special Issue, visit the eINSIGHT “Content by Issue” archives [icpas org/ insight htm]
Technologists, designers and PC makers continue to push innovation boundaries Take a glimpse at what may lie in your desktop and laptop future
n D -roll: Replaces the conventional laptop with a lightweight, foldable unit modeled after artists' storage tubes The flexible OLED screen and arc- shaped keyboard fold into the tube when not in use, and the carrying strap features easy-access USB ports.
n VAIO Zoom: Incorporates holographic technology and a wireless charging system Turned off, the glass display is transparent and the keyboard is opaque
n iWeb 2.0: A 6.5 inch notebook with a keyboard that unfolds to desktop-like dimensions
n Siafu: For the sight-impaired, features a tactile interface that converts screen images to 3D shapes and uses voice recognition software to replace a conventional keyboard.
n Compenion: Features two touchscreens that slide over each other for easy portability The second display can serve as a soft keyboard or a digital writing pad Additional docking stations allow the unit to be used as a home entertainment center
n Moonlight: An all-in-one desktop featuring two light-sensitive illuminating displays shaped like a crescent moon The smaller, lower screen can serve as a touchscreen, an extension of the main display, or as a screen for a second operating system Visit C om puterWorld at com puterworld com /s/article/9 1 7 5 9 5 6 for a slideshow and description of these and other com puter technologies of the future
$45 of every $100 spent at a local business is put back into the local economy.
Source: Brass Magazine
1 Increase your visibility By adding connections you increase the likelihood that prospects or referral sources will see your profile first when searching for an accounting pro
2 Improve your connectability Fill out your profile as if it ’ s an executive bio, and include past companies, education, affiliations and activities Also include a link to your profile in your email signature
3 Boost your Google Page Rank LinkedIn allows you to make your profile information available for search engines to index Also customize your public profile’s URL to be your actual name, and strengthen its visibility by using this link online, such as for blog comments
4 Ask and answer questions LinkedIn Answers allows you to broadcast your business-related questions to the LinkedIn universe, and answering someone else’s question quickly gives you “expert ” status
5 Use Advanced Search Prospect for new business by searching industries, professions and businesses related to your niche Use quotation marks and “and” to get more specific results
Source: TheProgressiveA ccountant com
44 percent of business leaders plan to increase hiring in the next six months.
Source: Grant ThorntonAdecco Staffing US’ latest A m erican Workplace Insights survey reveals that 30 percent of working mothers are the sole breadwinners of their households However, 52 percent would stay at home with their kids if they had the means to do so Also, 74 percent want their children to pursue a different profession or career path than their own, and 56 percent agree that mothers make the best bosses
Adecco offers these tips for businesses seeking to reduce workplace stress for working parents:
Offer Flex-time Alternatives: Studies show that working men and women would reject a promotion if it required them to spend less time with their families By developing a work schedule that meets the needs of both you and your employees, productivity will increase, absenteeism will decrease, turnover will decline and employee morale will soar
Provide Targeted Leadership Development: Organizations that support leadership have a higher retention rate and happier employees Try incorporating programming and workshops targeted for working parents in the office, and feature female leadership programs and conferences that promise to strengthen top management skills
Allow Employees to Work From Home: Studies show that productivity increases from 20 to 40 percent when people work at home, since employees can work at their peak times with fewer interruptions and distractions, and they have more freedom from peer pressures and productivity norms Also, they spend less time and energy dealing with the daily commute
Years of investor and regulator demand for greater transparency in financial reporting among public companies is moving into the world of private business Fifty-two percent of private company leaders globally and 54 percent of US private company leaders believe greater transparency is a key benefit of financial reporting, according to Grant Thornton’s International Business Report 2010 Private companies in Ireland, the Philippines and Taiwan are the most enthusiastic about greater transparency, with 85 percent of businesses citing this as a key benefit.
Private business owners also were asked if they had heard of the simplified International Financial Reporting Standards for Small and Medium- sized Enterprises (IFRS fo r SMEs)
Globally, 53 percent said they are aware of it; in the United States, 63 percent are aware of the standards
Of those global private company owners who are aware of IFRS for SMEs, 52 percent say they would like their country to adopt it Mexico (89 percent), the Philippines (85 percent) and Chile (84 percent) are most supportive of the move
Only 41 percent of US private business owners who are aware of IFRS for SMEs are in favor of adopting it
Visit InternationalBusinessReport com to read Grant Thornton’s report
1. Limiting your networking efforts: Spread the word about your job hunt to everyone you know And work with a staffing firm that specializes in accounting/finance.
2. Posting inappropriate online material. A hiring manager may Google you, so make sure you keep your digital footprint professional Look for positive and professional ways to enhance your online image, such as commenting on industry blogs
3 Making your materials too general Customize your resume and cover letter to each position, and address your correspondence to the hiring manager by name whenever possible
4 Not doing your homework Before submitting a resume and again before the interview, research the prospective employer, its industry and its competitors Be knowledgeable of the successes of and issues confronting them
5 Failing to say thank you Promptly thank everyone who helps you in your job search In particular, send thank-you notes to the managers who interviewed you Email is fine, but also follow up with a handwritten note to help you stand out from the crowd
Source: A ccountemps com
Today ’ s accounting grads might have more success starting out at smaller companies than at big name firms and corporations, according to financial executives surveyed by Accountemps [Accountemps com] Fifty-six percent of CFOs, in fact, would advise entry-level professionals to begin their careers at small to mid-sized companies. The majority (60 percent) also recommend starting out specializing in general accounting
nd out how we can help you take control of your cash ow, talk with a Harris Business Banker today.
H a r v e y C o u s t a n , C PA
is an Ernst & Young retired partner who currently consults on substantive technical and professional standards issues An ICPAS member since 1986, he has also appeared as an expert witness on several cases
Much of the publicity surrounding the American Jobs and Closing Tax Loopholes Act of 2010 (H.R. 4213) revolves around extending various expiring provisions and the bill’s revised method for taxing “carried interests.” Some other rather obscure “pay-fors” contained in the bill, however, will have a significant impact on a greater number of our clients, as well as on our own businesses
The bill would impose self-employment (SE) tax on the income allocated to partners, including LLC members whose LLCs are treated as partnerships and which provide substantial services to the professional services businesses in which their partnerships are engaged specifically, businesses that provide services in the fields of health, law, lobbying, engineering, architecture, accounting, actuarial science, performing arts, consulting, athletics, investment advice or management and brokerage services
In addition, a shareholder ’s pro-rata portion of otherwise qualifying S corporation income would be subject to SE tax when the S corporation is a partner in a partners h i p e n g a g e d i n a p r o f e s s i o n a l s e r v i c e s b u s i n e s s T h i s provision would apply where the shareholder has provided substantial services for the business, and substantially all of the S corporation’s activities were performed in connection with the partnership.
T h i s S E t a x w o u l d b e i n a d d i t i o n t o a n y F I C A t a x imposed on the shareholder ’s salary as an S corporation employee What’s more, an S corporation engaged in a professional services business would generate SE income if the reputation and skill of three or fewer employees is the business’ principal asset
SE tax also would be applied to the income attributed to shares of a service to shareholder ’s family members who are not providing services.
A s I a m w r i t i n g t h i s , o n l y t h e H o u s e h a s p a s s e d t h e b i l l I w o u l d n o r m a l l y w a i t t o describe the provisions of a new law until it has been signed by the President. But Senate Finance Committee Chairman Max Baucus introduced the identical bill in the Senate at the same time as its introduction into the House.
Several senators were unhappy that the extenders weren’t totally paid for, and others wanted to exempt venture capital firms from the carried interest provisions However, by the time you read this column, the Senate likely will have acted, and I believe the bill will become law If the effective date of the House-passed bill survives (years after 2010), planning opportunities can be implemented before the end of the year.
Prior to the bill, many professional services entity partners sought to avoid the imposition of SE tax on their total income share by relying on the somewhat fuzzy nature of the law. The general rule includes “a partner ’s distributive share of income or loss from any trade or business carried on by a partnership of which he is a member.” However, SE tax law exempts
a limited partner ’s share of partnership income from inclusion except for “guaranteed payments for services actually rendered to or on behalf of the partnership to the extent those payments are established to be …remuneration for those services.”
Many states have liberalized their rules regarding the amount and nature of permissible participation in the activities of limited partners without jeopardizing their protection And this has enhanced the possibilities f o r u s i n g l i m i t e d p a r t n e r s h i p s w i t h a c t i v e limited partners to capitalize on the statutory exemption.
LLC members take the position that they should be treated as limited partners for tax purposes, with the same result S corporation owner employees take the position that they can pay themselves salaries that are subject to FICA taxes, but exclude their shares of S corporation income from any employment taxes where the only function of the corporation is to be a partner of a service partnership or a member of a service LLC
Adding to the confusion are 1994 and 1997 proposed regulations, both of which would have provided strict rules for when an owner would be treated as a limited partner for tax purposes, regardless of the type of entity or the nominal designation of the owner ’s interest. While neither proposal was ever adopted, recently an IRS official said the agency would not disturb a characterization based on the 1997 iteration For service organizations, following these rules is not an option, since they are specifically excluded by the 1997 proposals Non-service entities, however, might have some certainty
So what should you do if your organization or client has used any of the described techniques to minimize employment taxes? For non-service organizations, a review of the 1997 proposed regulations is definitely in order. Certain members may qualify as limited partners eligible for the exclusion contained in the current law if they work 500 hours or less annually, cannot contractually bind the entity, and have no personal liability for entity debts
For service organizations, be aware that the 1997 proposals have no application to service partners; also review H.R. 4213 to determine its application Continued minimization of employment taxes may require substantial changes to your organization’s s t r u c t u r e , b u t a l l a v e n u e s s h o u l d b e explored. The 2010 SE tax rates are reason enough to attempt some planning
Are you skeptical enough?
The AICPA recently released Practice Alert 1998-2, Professional Skepticism and Related Topics, which states that, “Generally accepted auditing standards require the auditor to exercise due professional care in the planning and performance of the audit and in the preparation of the auditor's report. Due professional care requires the auditor to exercise professional skepticism, which can be best defined as an attitude that includes a questioning mind and working practices that encompass a critical assessment of audit evidence Since evidence is gathered and evaluated throughout the audit, professional skepticism should be exercised throughout the entire audit process ”
In other words, a healthy dose of professional skepticism can go a long way Times have changed for client services professionals Accountants in particular walk a tightrope, facing a difficult bala n c e b e t w e e n q u e s t i o n i n g i n f o r m a t i o n and keeping clients happy Question a client too rigorously and you may lose that client Fail to question a client rigorously enough and you may be exposed to a world of woes.
Professional liability coverage is an additional “pocket” for recovering lost funds, and attorneys are indeed pursuing fiduciaries with greater vigor Lawrence
is the managing member of The Sargent Consulting Group, LLC, which specializes in forensic accounting and financial investigations
Brad is a frequent lecturer on forensics and fraud, and is chair emeritus of the American Board of Forensic Accounting He also serves on the Board of Directors of the Illinois CPA Society, and has been a member of the Society since 2002
A. Wojcik, Esq., a partner at DLA Piper US LLP, specializes in defending corporations, directors, officers, auditors, accountants, lawyers and other business entities He explains that, “In over 30 years of representing auditors I have learned that the ability to remain skeptical in the second audit of an entity and those audits thereafter is one of the most daunting tasks facing the audit team.
“ H e a l t h y p r o f e s s i o n a l s k e p t i c i s m r e q u i r e s a c o n t i n u a l reassessment of the changing dynamics of the business being audited, as well as a rigorous re-examination of the management of the entity and the pressures they are subject to,” he continues “The most significant threat to professional skepticism is the over reliance on ‘checklist auditing’ based on historical experience rather than an assessment of the risks to the business presented by the current environment in which it operates."
Wojcik has touched on a key element: Time It’s increasingly difficult to question data and practices as time goes by, since the client-accountant relationship becomes less form a l a n d m o r e c o l l e g i a l W h i l e t h i s c e r t a i n l y s t r e n g t h e n s b o n d s , i t c a n a l s o l e s s e n a n accountant’s independence
In light of this, what can you do to keep your professional skepticism healthy?
Talk to your staff: Often, staff accountants are the ones who see questionable data or practices firsthand. Make sure there are ways for them to report their observations SAS 99 calls for brainstorming sessions with the full audit team, and serves as a great guideline for any accounting function A staff accountant with a high degree of healthy professional skepticism can be quashed by someone higher up the organizational chart, creating a lasting morale problem I have spoken to many staff auditors and staff accountants who felt they had nowhere to turn with their concerns and questions. Rotate key positions: Rotating key personn e l i n c r i t i c a l f u n c t i o n s m a y m e a n s h o r tterm costs, but it will introduce new pers p e c t i v e s a n d h e i g h t e n e d i n d e p e n d e n c e , b o t h o f w h i c h a r e v i t a l t o d e t e r m i n i n g w h e r e p r o b l e m s e x i s t F o r r o t a t i o n t o b e effective you need accurate documentation of duties and functions; otherwise the job w i l l s i m p l y m o v e w i t h t h e p e r s o n b e i n g r o t a t e d A n o t h e r p l u s i s t h a t j o b r o t a t i o n communicates the fact that your organization is committed to enhanced diligence
Evaluate each client relationship: I s o n e client growing rapidly, unable to keep cont r o l s i n p l a c e , w h i l e a n o t h e r i s i n c a s h c runc h a nd c ost-c onta inme nt mode ? Unf o r t u n a t e l y, t h e s e s c e n a r i o s a r e r i p e f o r u n e t h i c a l a c t i v i t y A s s e s s t h e r e l a t i o n s h i p itself: Are you able to ask tough questions and confront issues? Is profitability “buying” your compliance and silencing your skepticism? Keep Wojcik’s words in mind i t ’s t h e s e c o n d ( a n d s u b s e q u e n t ) e n g a g ement that challenges you to stay skeptical C r e a t e a p o s t - e n g a g e m e n t c h e c k l i s t t h a t i d e n t i f i e s t h e s e i s s u e s a n d c o n t i n u e s t o assess the dynamics in play
Face yourself in the mirror: Have you been lulled into a comfort zone that inhibits the critical analysis of the data right in front of you? Getting comfortable in a long-term relationship is very human, but putting reminders in place, before and after engagements, helps to keep professional skepticism at the forefront
Q u e s t i o n i n g r e p r e s e n t a t i o n s , a s s e s s i n g potential difficult situations and documenting duties may have short-term costs associated with them, but they also pay longterm dividends Can you afford to let professional skepticism go on life support?
What, no gold watch?
is a principal in the financial advisory firm of Reason Financial Advisors, Inc
His 25+ years of finance and accounting experience includes 13 years in personal financial planning. An ICPAS member since 1982, Mark currently serves in the Society ’ s IA/PFP Member Forum Group and on its Committee on Structure and Volunteerism
The post-World War II picture of employment still influences the majority of today’s retiring workforce you go to work for one or two or maybe three large corporations, enjoy steady salary increases, participate in traditional defined benefit pension plans, enjoy employee and retiree medical benefits and, finally, retire between age 60 and 65 to spend the rest of your days playing golf, or traveling, or volunteering for your favorite charity
Phenomena such as globalization, deregulation, the shareholder economy, large government budget deficits, severe recessions and longer life expectancies (61 in 1935, 78 today) have conspired to change this comfortable picture, however
T h e r e s u l t ? Wo r k i n g r e t i r e m e n t s e s s e n t i a l l y a n entirely new definition of what it means to retire
Today’s retirees may well retire from their day jobs, or in the case of phased retirements, gradually ease off t h e i r w o r k l o a d s , b u t w i l l t h e n s e e k o u t a l t e r n a t i v e work, usually requiring fewer hours. This work may be less mentally or physically challenging, and may focus on the pursuit of a passion rather than a career climb (after all, they’ve climbed already)
Whatever the situation, financial advisors need to discuss the pros and cons of a working retirement with their clients. Here are a few of the points to cover.
1. Maintaining health. A working retirement helps a person remain physically and mentally active, which may reduce the onset of heart disease, dementia and other health risks Also, a working retirement contributes to a person’s sense of well-being since, essentially, the retiree remains a productive member of society
2 Filling the pipeline Economists predict an oncoming shortage of experienced employees in technical and other areas in the next decade as Baby Boomers retire Working retirements may help to ease that shortfall.
3. Filling free time. A working retirement fills 10 to 20 hours of a retiree’s week with meaningful part-time work. Some retirees find the shift from the 9-5 to, well, the 24/7 quite an unwelcome culture shock
4. Boosting income and retirement savings or investments. Working in retirement provides an income that should offset at least some ongoing living expenses, thereby allowing retirement savings or investment accounts to grow Income from a working retirement is often the best way to enhance a retirement account since it reduces or eliminates the amount withdrawn from the account This provides a bigger base upon which to grow the account, and therefore allows for larger withdrawals in the future.
5. Deferring Social Security. Social Security benefits generally can be accessed as early as age 62, albeit at a reduced amount By deferring the start of benefits to an age beyond normal retirement age (up to age 70), a worker ’s initial benefit payout will increase Whether
it makes sense for a client to follow this strategy depends on the Social Security benefit amount, the intended retirement age, additional anticipated income, and a best guess at the client’s longevity. The importance of a spouse’s benefit amount, his or her longevity, and the likelihood that they’ll pick a spousal benefit at some point should also be considered when choosing an early Social Security benefit For example, married couples may find that if the lower e a r n i n g s p o u s e c o l l e c t s b e n e f i t s e a r l y w h i l e t h e o t h e r s p o u s e delays benefits, then at the death of the primary earner, the lowerearning spouse will receive a larger spousal benefit Each situation is unique, however
1. Poor health. If a client is working in retirement out of financial necessity rather than a desire to fulfill a personal passion or to fill empty hours, there’s a greater chance that the work will be stressful, and therefore a health risk. Also, depending on the client’s personality, he or she may push themselves to such an extent that what began as part-time work may escalate to a more time-consuming pursuit again, possibly negatively impacting health
2. Discriminatory work environments. Retirees working during r e t i r e m e n t m a y e n v i s i o n a w o r k e n v i r o n m e n t w h e r e t h e y a r e prized for their many years of experience The reality may be far different. Age discrimination is difficult to prove but undeniably present in many offices.
3 Handling the generation gap Dealing with younger co-workers and managers who often face their own pressures to perform may create some alienation toward a part-time retiree Also, with the workplace changing dynamically to accommodate the work a t t i t u d e s a n d a p p r o a c h e s o f G e n e r a t i o n s X a n d Y, i n d i v i d u a l s working in retirement may find the workplace a rather frustrating and even stressful place to be.
4 A reduction in Social Security benefits In 2010, a client who receives Social Security benefits prior to normal retirement age will lose 50 cents of benefit for every dollar earned in excess of $14,160 In the year of normal retirement age, the limit increases to $37,680. In any year after normal retirement age, there is no limit and therefore Social Security benefits will not be reduced, regardless of the retiree’s earnings The good news, however, is that any worker who suffers this reduction of benefits will have benefits recalculated to a higher amount when normal retirement age is reached Another piece of good news is that the Social Security Administration reviews income records annually, and will increase future benefits if the Social Security recipient’s latest year of earnings (from working in retirement) is their highest earning year.
5 Taxation of Social Security benefits Social Security benefits also may be subject to income tax In 2010, a benefit recipient may pay federal income tax on 50 percent of Social Security benefits if the sum of adjusted gross income, nontaxable interest income and one-half of the Social Security benefits is between $25,000 and $34,000 for individuals ($32,000 and $44,000 for married couples filing jointly.) If that amount exceeds $34,000 for individuals ($44,000 for married couples filing jointly), then the federal income tax is levied on 85 percent of the Social Security benefits
In today’s economy, working in retirement may become much more the norm than it ever has been As advisors, we can provide a valuable service to our clients by making them aware of both the financial and non-financial factors affecting the decision to continue to work after retirement
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What can LinkedIn, Twitter, Facebook, et al do for you?
By Daniel Dern
Consider tools that can coordinate your social media outlets and save you time; in particular, tools that can aggregate your activities into a single screen and post to multiple places Pixelpipe com, for instance, allows you to “Upload photos, video and audio files once through the Pixelpipe Media Gateway, and distribute your content across over 100-plus social networks, photo/video sites, blogs and other online services.”
Similarly, by using Ping.fm you can post information to all your favorite services blogs, Facebook, Twitter, etc and all for free
If you're looking for new ways to both give and receive information within a community of co-workers, clients, prospects, colleagues, peers and, well, anybody else who might be interested, then it’s time to jump on the social media bandwagon.
While originally intended for personal use, social media has expanded into the professional domain, with internal productivity improvers in areas such as communication and information-finding/sharing; marketing, prospecting and sales; and job-hunting and hiring
First, a little background: Social media are considered "Web 2 0" technologies, meaning that they add "community" interactions This includes posting comments, advice and other content, and, often, automatically displaying new information posted on social media pages maintained by others within your network. Similarly, anyone who's linked/”friended” to your social media page sees anything new you might add, like uploading a picture, joining a group, or posting a link
Professional organizations, vendors and others that serve the CPA community are keeping ahead of the social media curve by establishing cyber-beachheads, like Intuit's Quicken Blog [blog quicken intuit com] and Community [community intuit com], and Sage's SageSpark com The Illinois CPA Society also is using social media to augment its communication with its members. To date, the Society has its own LinkedIn Group for members [linkedin.com/groups?gid=104410], Twitter feed [twitter.com/illinoiscpa] and Facebook "fan" page [facebook.com/ICPAS].
In a 2009 survey of CPAs online, Rick Telberg, president and chief executive of Bay Street Group LLC, reported that 54 percent were on LinkedIn, 48 percent on Facebook, 21 percent on Twitter, 12 percent on Plaxo and 6 percent on MySpace (And obviously odds are good that these numbers are larger in mid-2010 )
It’s easy to see, then, that for professionals and businesses, the social media "big three" are LinkedIn, Twitter and Facebook. Conveniently, all three offer free accounts and allow you to provide information to internet users who aren’t necessarily "connected" to you (so post information with care)
LinkedIn, in particular, is strongly associated with the business community, providing information about professionals’ areas of expertise, work histories and more It’s been so effective in this regard that a growing number of professionals are using it as their primary website LinkedIn even offers personalized URLs for free (for example linkedin com/in/danieldern) as an alternative to their default number IDs
LinkedIn Groups," says Jody L Padar, CPA/MST at James J Matousek CPA, Ltd "For example, I belong to a QuickBooks group on LinkedIn, where people can exchange questions and information It's like a topical mailing list And I belong to a local group in Schaumburg, Ill , near
where I live It's like a Chamber of Commerce locally based group, good for finding somebody nearby "
Tw i t t e r, b y c o n t r a s t , i s f o r b r i e f , “ a s - i th a p p e n s ” n o t e s P o s t s t o Tw i t t e r ( c a l l e d " t w e e t s " ) a r e l i m i t e d t o 1 4 0 c h a r a c t e r s i n length, which forces users to be succinct. To f o l l o w s o m e b o d y ' s t w e e t s , y o u g e n e r a l l y sign up as a "follower " However, anyone c a n f i n d y o u r t w e e t s b y u s i n g Tw i t t e r ’s directory or Google There are also many Tw i t t e r a p p l i c a t i o n s a v a i l a b l e t o m a k e i t easier to create and follow tweets.
"I tweet daily, up to five times a day," says Padar "It takes me about 20 minutes in the morning, catching up on what everybody has been tweeting I have over 600 followers, and I follow close to 700. If it grabs my attention, I'll click and read more "
P a d a r i s n ' t j u s t f o l l o w i n g t w e e t s f r o m o t h e r C PA s . " N o w I ' m a l s o f o l l o w i n g H R people, and broader business topics besides t a x I c o u l d g e t m u c h o f t h i s i n f o r m a t i o n elsewhere, but it's now coming to me from p e o p l e I k n o w a n d r e s p e c t I k n o w t h e i r r e p u t a t i o n s , s o w h e n t h e y s a y, ' R e a d t h i s article,’ I'm more likely to do just that."
And then there's Facebook, which, like MySpace com, lets individuals, along with c o m p a n i e s , o rg a n i z a t i o n s a n d o t h e r e n t ities, create a page to enter and aggregate updates, pictures and other information.
Padar says she started on Facebook a few years ago to connect with friends "Then I s t a r t e d t o s e e b u s i n e s s u s e s f o r i t , " s h e explains "Now clients have started to connect to me, asking me business things In f a c t , s o m e b o d y G o o g l e d f o r Q u i c k b o o k s help within Facebook and that led to a cold call for me "
To dispense advice on Facebook, "Set up a fan page for your topic," suggests author, speaker and social media consultant Paul Gillin. "That way you don't have to 'friend' people to communicate with them If you deliver good quality content, people will encourage their friends to become your fans "
Most businesses already use email and the web for internal information exchange; external promotion, marketing and prospecting; and as a hiring tool Social networks, thanks to their community features, can supercharge all of these activities.
" S h a r e b e s t p r a c t i c e s i n t e r n a l l y a m o n g your work teams," suggests David Strom, an i n d e p e n d e n t c o n s u l t a n t a n d s o c i a l m e d i a expert. "Communicate new customer wins or big engagements "
"Social media activity makes you more visible on Internet searches, which helps to lead prospective clients to you," says Gillin.
One key to using social networks to drum up business is to share information ask and answer questions, and post notes about news or about articles you recommend
"Find a niche a topic which you have some expertise in and information about you can share with the audience you want to reach," says Gillin For a CPA, for example, "'Tax benefits of saving for college' may be good for a blog theme." A
questions you can answer Make your information useful and findable ”
Social networks also can be good resources for employers and job-seekers "There are tons of job-related groups around," says Strom "For example, I run one on LinkedIn
called St Louis Job Angels, where we post about two or three new jobs a day and have nearly 1,000 members who are looking for new jobs or who are hiring managers posting positions "
"I also teach at the community college, and all my students use social media sites and tools to get in touch with professionals for leads," says Padar.
While social media can offer benefits, it also brings risks. There’s the matter of inadvertently sharing confidential information, for example, or being too casual online a n d c o n s u m i n g t o o m a n y n o n - b i l l a b l e h o u r s s o c i a l i z i n g S o g o s l o w ; c h e c k o u t other peoples' LinkedIn, Twitter and Faceb o o k s i t e s b e f o r e y o u c r e a t e y o u r o w n a c c o u n t, a n d s p e n d y o u r firs t we e k o r s o "lurking" reading more than posting Also a d j u s t p r i v a c y / s e c u r i t y s e t t i n g s t o f i t y o u r needs, and don't friend people you don't know personally or by reputation
And, cautions Gillin, "For CPAs and other professionals, be careful not to provide information that may be perceived as professional advice that you shouldn't be giving; in other words, information that violates your company, industry or professional compliance guidelines Remember that regulators do watch these Internet spaces."
P a d a r, h o w e v e r, s e e s m i x i n g p e r s o n a l and professional as a good thing, if done right. It’s all part of how social media works. "People do business with people they like. I f y o u d o n ' t l e t y o u r p e r s o n a l i t y s h o w through, you're filtering yourself. You don't have to air your life story or your problems, but if you don't tell me about you, I don't want to do business with you "
By Christine Bockelman
Congratulations, you’re the CFO Just don’t pat yourself on the back quite yet Turns out, you’re already behind in your work
“This is not a job with a honeymoon period,” says Steve Kass, district president in the Chicago office of Robert Half International “You’re expected to make an immediate impact ”
“You have to jumpstart your learning about the company and expectations,” adds George Bradt, managing director of PrimeGenesis, an executive onboarding group, and author of The New Leader ’s 100-day Action Plan. “You can’t come in on day one and start trying to figure this stuff out.”
So how do you get miles ahead before you’ve even parked in the executive lot? Start by following these six tips.
In a November 2008 Robert Half International survey, more than 1,400 CFOs from around the country identified increasing productivity (30 percent) and increasing profitability (20 percent) as the greatest challenges they faced in the first 100 days of their current positions Starting ahead of the
n d t h e organization’s unique risks Find out what the big problems are, familiarize yourself with challenging customers a n d g e t a g r a s p o n m a j o r i s s u e s t h a t y o u m a y h a v e t o tackle right away
Get to know the bankers, lawyers, tax advisors and auditors you’ll be dealing with on a regular basis Strong relationships with these key players are crucial, says Steve Ferrara, a former CFO who is now partner and assurance services business line leader at BDO in Chicago. “You need to instill confidence in your bank about what the new CFO is going to do to the business,” he says. “Make sure everything is in order and develop those relationships with people who are important to your business from a financial perspective.”
“Building relationships is one of the most important things a new CFO can do,” asserts Mark Joyce, senior VP and CFO at AmeriQuest Transportation Services in Oakbook Terrace, Ill
“People are going to be making an assessment of you, the new CFO,” adds Kass “The quicker you can take the edge off and build the relationship the better off you’ll be down the road ”
Get to know the important customers, too “A lot of people don’t pay enough attention to this, in my opinion,” says Joyce “If you have a few key customers, you should really understand what’s going on with those customers It goes hand in hand with understanding your own business ” 8
August 12, 2010 - Chicago, IL
Managing the Intersection of Corporate Governance, Risk Assessment/ Management and Strategic Leadership
Dan R. Dalton, PhD Founding Director of the Institute for Corporate Governance, Dean Emeritus, and the Harold A. Poling Chair of Strategic Management, Kelley School of Business, Indiana University
September 24, 2010 - Rosemont, IL
Midwest Financial Reporting Symposium
September 29, 2010 - Chicago, IL
International Financial Reporting Standards (IFRS) for Small and MediumSized Entities –1/2 Day Program
Marian Powers, PhD Adjunct Associate Professor, Kellogg School of Management, Northwestern University
October 18, 2010 - Chicago, IL
Developing and Implementing a Balanced Scorecard Framework
Mark Frigo, PhD, CPA, CMA Director, The Center for Strategy, Execution and Valuation, Kellstadt Graduate School of Business, DePaul University
Dedicated to meeting the needs of corporate finance professionals through high-quality executive education, knowledge resources and networking communities
making
Check
October 20, 2010 - Chicago, IL
Technical Workshop: FASB Review for Industry
Fred Christensen
November TBA, 2010 - Chicago, IL
Generations Apart...Yet Only a Cubicle Away
Dennis L. Faurote President, The Faurote Group and Adjunct Professor, Kelley School of Business, Indiana University
December TBA, 2010 - Chicago, IL
Strategic Cost Analysis: Tools for Lowering Your Company’s Costs
John W. Hill, PhD, JD
Arthur M. Weimer Chair in Business, Kelley School of Business, Indiana University
“You have to get everyone aligned around your mission, your objectives, your goals,” says Bradt. He recommends picking a few achievable priorities to tackle early on, so that you achieve an early win for yourself “The team will be impressed and it will be easier for them to get on board with your message and goals ”
Not everyone currently on board will be a good fit for your team, however On day one, start thinking about who’s going to stay and who you’ll cut loose but wait until you’re sure to act; don’t go simply on gut feeling or the opinions of others.
“You have to talk to other people who have been in this role,” says Jim Dimitriou, managing partner in the Chicago office of Tatum, an e x e c u t i v e s e r v i c e s f i r m t h a t f o c u s e s o n t h e role of the CFO. “There are many associations you can join that can help, and you need to g e t i n v o l v e d a n d s t a r t a s k i n g o t h e r s h o w t h e y ’ r e d o i n g t h i n g s . T h e y ’ l l t e l l y o u t h i n g s like, ‘We did two acquisitions last year and here’s how we did it.’”
“A lot of CFOs think they need to come in and be the hero, and they’ll get so bogged down in the day-to-day issues they never get to longterm planning,” Dimitriou warns “You’re going to be putting out more old fires than new fires in the first months ”
But, “In the first 90 days, you need to start thinking about where the company needs to be in the next two, three, five years, and make s u r e i t i s f i n a n c i a l l y s t r u c t u r e d t o a c h i e v e those goals, and your organization and infrastructure is prepared for all potential obstacles,” says Dimitriou. “An effective CFO has to have a vision and a plan This can be develo p e d b y m e e t i n g w i t h t h e C E O w e e k l y o r even daily if possible to talk about ideas and what is to be done next You need information to start planning long term and start freeing up the structure A good CFO works at least one day or two a week on this ”
Without a doubt, the first days, weeks and months for a new CFO are hectic, stressful and probably a bit sleep deprived. However, says Dimitriou, “Any new CFO has the ability to make an impact by making sure the company is set for the new world we will inherit after the recession Bone up on new government regulations, think about what your company needs to do to compete not just locally, but globally” and do it sooner rather than later
Member Town Hall Forum in Rockford
September 28, 2010 | Code: C37132
11:30AM - Networking and Lunch
12:00PM - 1:00PM - Program and Q&A
Best Western Clock Tower Resort 7801 E. State Street, Rockford, IL
Member Town Hall Forum in Peoria
October 5, 2010 | Code: C37133
11:30AM - Networking and Lunch
12:00PM - 1:00PM - Program and Q&A
Hotel Pere Marquette 501 Main Street, Peoria, IL
Member Town Hall Forum in Bloomington-Normal
October 6, 2010 | Code: C37134
8:00AM - Networking and Breakfast
8:30PM - 9:30AM - Program and Q&A
Chateau Hotel and Conference Center 1601 Jumer Drive, Bloomington, IL
Member Town Hall Forum in Champaign-Urbana
November 3, 2010 | Code: C37135
11:30AM - Networking and Lunch
12:00PM - 1:00PM - Program and Q&A
I Hotel and Conference Center 1900 South First Street, Champaign, IL
Member Town Hall Forum in Springfield
November 4, 2010 | Code: C37136
8:00AM - Networking and Breakfast
8:30PM - 9:30AM - Program and Q&A
President Abraham Lincoln Hotel 701 E. Adams Street, Springfield, IL
FOR ALL PROGRAMS:
CPE: 1 Credit Hour Cost: Free
By Derrick Lilly
the potential to be one of the greatest changes and challenges US accounting and finance professionals have faced to date And while the classroom is one of the foremost places professionals look for knowledge, in the case of IFRS, they’ll find inconsistency in whether or how the subject is incorporated into accounting curriculums
The trouble is, “IFRS is not one-size-fits-all. It’s going to affect all of us in different ways,” says Dennis R Reigle, MBA, AICPA special projects business advisor and an Arthur Andersen retired partner. “The questions are, how is this going to impact all of us, and what is the timing?”
These questions form the basis of debate amongst academic institutions, educators, students and accounting and finance professionals. With ever-changing guidance for how and when IFRS will be adopted in the United States, institutions and educators remain hard pressed to establish best practices for introducing the standards into the classroom Currently, all that’s really clear is the fact that global adoption of IFRS continues with or without us
c o m p a n i e s i n o v e r 1 0 0 c o u n t r i e s h a v e already adopted IFRS, and Canada, India, Brazil, Korea and Mexico have all announced plans to transition to IFRS by 2011 and 2012 This means that US professionals are seeing and working with IFRS well before it is fully if ever adopted on home ground
AICPA IFRS Resources: The AICPA’s IFRS website [ifrs com] has a wealth of overview information, educational materials, publications, news and videos pertaining to IFRS and convergence with GAAP.
Deloitte’s IFRS University Consortium: For accounting educators, the Consortium site [deloitte com/us/ifrs/consortium] offers a library of resources, classroom-ready course materials and case studies
Ernst & Young Academic Resource Center: This private website for accounting faculty offers free IFRS curriculum resources, including teaching modules with guides, notes, slides and case studies, and training, conference and speaker support. Contact Catherine Banks, EYARC program director at Catherine Banks@EY com to request access
KPMG IFRS Institute: Students and educators can enroll as members to the Institute [kpmgifrsinstitute com] at no charge to gain access to resources and information about IFRS The KPMG Faculty Portal [kpmgfacultyportal com] also offers seminar materials, case studies, on- demand webcasts and other educational resources
PricewaterhouseCoopers IFRS Ready Program: PwC ’ s program offers students and educators access to specialized websites that include self- study materials, videos, financial statements, instructional materials and other educational and technical resources Educators can access the IFRS Ready resources [pwc com/faculty], and students can visit pwc.tv and select Channel 1 to access the IFRS Ready links.
“The process to adoption of IFRS has become much more transparent; through convergence we are at the point now where the largest companies are intensively preparing for the move to IF RS , ” sa y s Da n Ra hill, C PA , JD, Illinois C PA Society Board secretary and KPMG LLP’s partner-in-charge, tax for the Chicago metro business unit “I’ve personally seen a big uptick in the IFRS discussion at large and middle-market firms and companies It’s not so much about the U S - G A A P c o n v e rg e n c e t o I F R S a n y m o r e , b u t the world’s convergence to IFRS Multinational companies are likely to have to deal with IFRS or national GAAPs substantially equivalent to I F R S f o r m a n y o f t h e i r s u b s i d i a r i e s ’ s t a t u t o r y reporting, so many graduating accounting students are going to have to know it ”
“ We k n o w m o s t g l o b a l f i r m s a r e a l r e a d y using IFRS, we know the Universal CPA Exam is going to cover IFRS in 2011, and we know graduates in 2013 or 2014 will need to be aware of IFRS, so we absolutely need to make our students aware of IFRS now,” emphasizes educator Marian Powers, Ph D , Kellogg School of Management’s Allen Center for Executive Education
at Northwestern University, Evanston, Ill and co-author of International Financial Reporting Standards: An Introduction.
What’s more, at the start of 2010, qualifying small and mediumsized entities (SMEs) were eligible to adopt IFRS for SMEs, a signifi c a n t l y s c a l e d - d o w n a n d s i m p l i f i e d v e r s i o n o f I F R S d e s i g n e d specifically for organizations without public accountability Most private companies and nonprofits in the United States meet the definition of an SME.
“IFRS for SMEs is really key,” says Powers “It’s going to push the need for IFRS education faster and further into our classrooms ”
“Many students are going to need to know IFRS as soon as they get into practice,” says Reigle. “The educational institutions that want to have high-quality and comprehensive accounting programs are going to have to include IFRS in some measure or another ”
Remaining passive when it comes to including IFRS in curriculums will leave students, educators and institutions behind, making them less competitive on an international scale A strong advocate for integrating IFRS education into early accounting curriculums, Powers stresses, “If we wait for educators to feel a high degree of comfort in IFRS we may be doing a disservice to our students We don’t want our students to say their education lacks something ”
Until a formal and thorough approach to IFRS education is universally put into practice, it’s going to be critical for educators and institutions to develop their own plans and curriculums
As one example, the University of Notre Dame, Indiana, continu e s t o m o d i f y i t s a p p r o a c h t o I F R S e d u c a t i o n . “ Tw o y e a r s a g o Notre Dame started putting IFRS-specific classes into its accounting program curriculum. While it was generally a Master ’s-level
class then, now they’re integrating IFRS into the sophomore-level and introductory accounting classes,” explains Rahill, who serves on the Advisory Boards at the University of Notre Dame and the University of Illinois. “Professors understand what is at stake, and they’re mobilizing and putting together their own curriculums at major accounting programs across the country ”
While it will be some time before true best practices are drawn out for introducing IFRS into the classroom, looking at what fellow educators and institutions are doing will help
“We have to stop and think about who’s in our classroom,” says Powers. “Most of our students in beginning accounting are business majors, and this may be their only opportunity in their acad e m i c c a r e e r s t o l e a r n a b o u t o n e o f t h e m o s t s i g n i f i c a n t a n d important accounting events ever ”
At the University of Notre Dame, Rahill points out that, “All business majors go through beginning accounting classes, so even someone who is going to end up in marketing, finance or management is going to know what IFRS is, which I think is great.”
A n o t h e r f a c t o r t o c o n s i d e r i s a s t u d e n t ’s g e o g r a p h i c a l b a c kground While US students’ needs for IFRS education is becoming increasingly important, foreign students’ needs are likely much more demanding right from the start “In my classrooms, about 50 percent of my students have international backgrounds; they aren’t US citizens They are coming from an international perspective and IFRS is something they need to be fluent in,” Powers explains.
Once you have an understanding of student needs and expectations, you can begin setting goals for the class. “My expectation for the students in the Master ’s of Science in Accountancy program is that they leave prepared and comfortable working in an environment using both international and US standards,” says James L Fuehrmeyer, Jr , CPA, MBA, associate professional specialist, Mendoza College of Business at the University of Notre Dame
The next step is to choose the content and depth of coverage. “Pick and choose the areas that you think are the richest and easiest to implement in the classroom,” suggests Powers, who proposes starting very simply and adding more layers as you, and as your students, become more comfortable with the material
“If the class is an introductory or intermediate-level course, then focus on highlighting the significant differences between US GAAP and IFRS; we’re just trying to get them some basic vocabulary and awareness here,” says Fuehrmeyer. “But once students are at an advanced or Master ’s level, it’s time to start teaching the ‘second language ’ Mature students should focus on learning how to operate in the IFRS environment using the international standards the same way they operate in a US GAAP environment ”
Another strategy is to use group discussions to keep IFRS in front of students “It’s a good way to keep their attention on the subject at hand,” says Powers. “A variety of IFRS topics lend themselves to group discussions, raising the level of awareness and appreciation for the differences between the two financial reporting systems ”
Methodologies aside, IFRS needs to be integrated into curriculums An official IFRS adoption date is yet to be determined for domestic public companies in the United States, but the fact of the matter is, the rest of the world is moving ahead with IFRS and subsequently current and up-and-coming CPAs need to be prepared. If US CPAs are to remain competitive, mobile and well-rounded, an education in IFRS is going to be essential.
It’s not a new story Women constitute nearly 50 percent of the workforce in America, yet in 2009 only 3 percent of Fortune 500 companies were led by a female CEO Obviously, career development opportunities and access to executive positions still elude the nation’s professional women.
Not that acknowledgement of the fact is as widespread as you’d think The results of a Bain & Company and Harvard Business Review study, Gender Parity in the Workplace, reveal that 66 percent of men believe women share equal opportunity and access to promotion (versus less than one-third of women) The survey also shows that about twice as many men as women believe that women have an equal chance at being recruited into executive roles, promoted on the same timeline as men, or appointed to key leadership positions And only 48 percent of men think gender parity should be a critical business issue
n Women are 61.8% of all accountants and auditors.
n In 2009, women were 55% of newly hired accounting graduates, and 41% of all CPAs.
n Women are 23% of all partners at firms, although they are 49% of all employees at accounting firms
n In 2009, women were 9 1% of all CFOs
n Women are progressing faster in smaller firms as opposed to larger firms
n Across firms of all sizes, women occupy between 11% and 31% of all senior leadership positions
n 41% of women senior managers aspire to become partners
n 25% of women staff desire to become partners
Cited from: Catalyst Women in Accounting Quick Takes [catalyst org/publication/204/women-in-accounting]
Pat Hurston, VP, Worldwide Operation of Billing and Collections at CNA insurance companies, explains that, “When I started my career over 30 years ago, I had to prove myself over and over again among my male counterparts with every rung that I climbed It’s true that not as many female executives occupy the C-suite, but I have seen some promising evolution since. If we can endure and stick with our career goals, the success will come Women need to change their mindset. The difference between the way men and women think affects our performance. Men come to the table assuming they will be accepted Women don’t I know women who have chosen the entrepreneurial path and left the corporate chambers for that very reason ”
As a testament to this, statistics show that women-owned businesses are growing at twice the rate of all other businesses Obviously, it’s going to take some pretty strategic moves to keep women in your ranks and promote them to the upper echelons of management. One tested and true strategy, however, is mentorship
“I have been a product of companies that had very good mentoring programs,” Hurston explains “I have had opportunities I wouldn’t have had otherwise because of these relationships Mentors take their protégés and get them exposed to strategic leaders in the organization, particularly male leaders who otherwise they wouldn’t have exposure to ”
But is mentoring enough? In her article, “When Female Networks Aren’t Enough,” Sylvia Ann Hewlett explains that to make the leap from the rank and file to the C-suite successfully, women need something more namely, a sponsor.
A sponsor is someone in a senior-level position who advocates for and facilitates career moves Unlike a mentor, who may focus simply on showing a protégé the ropes, a sponsor puts their reputation on the line, makes the right introductions, and directly intercedes on behalf of the person they are sponsoring to create in-roads to top management.
T h e c o n c e p t i s f a b u l o u s , b u t t h e r e a l i t y, perhaps, is not. According to the Center for Wo r k - L i f e P o l i c y ’s r e s e a rc h , 8 9 p e rc e n t o f highly qualified women don’t have a sponsor and 68 percent don’t have a mentor If we a g r e e t h a t s p o n s o r s h i p a n d m e n t o r s h i p a r e c r i t i c a l t o f o rg i n g l e a d e r s h i p p a t h s f o r women, it’s pretty clear why the C-suite is so devoid of female representation
Rather than leaving these significant relationships to chance, some big name compan i e s a n d f i r m s a r e t a k i n g a p r o g r e s s i v e approach Hewlett cites American Express as an example
Having found that the number of women in executive positions didn’t reflect the ratio o f w o m e n w h o w o r k e d a t t h e c o m p a n y ( m o r e t h a n 5 0 p e rc e n t ) , A m e r i c a n E x p r e s s created the Women in the Pipeline and at the Top program, with the blessing of CEO Ken Chenault. The program’s objective is to identify and develop future women leaders and to provide them with opportunities to regularly i n t e r a c t w i t h t h e e x e c u t i v e t e a m W h a t ’s more, in September 2010, American Express will sponsor the company’s first summit for executive women in the pipeline
D e l o i t t e , i n t h e m e a n t i m e , i s t a k i n g a n educational and mentorship approach The firm has partnered with the Simmons School o f M a n a g e m e n t t o c r e a t e L e a d i n g E d g e , a week-long program that assesses the leadership skills of a select group of future women l e a d e r s F u r t h e r m o r e , h a n d s - o n L e a d i n g t o
W I N i s a n 1 8 - m o n t h p r o g r a m D e l o i t t e h a s developed using one-on-one coaching, leadership meetings and direct interaction with top-level executives and sponsors at its core
T h e s t r u g g l e f o r g e n d e r e q u a l i t y i n t h e w o r k f o rc e i n g e n e r a l h a s b e e n a l o n g d i s -
cussed and deliberated topic And as such, it’s vital to keep a finger on the pulse of progress being made in the accounting profession Obviously, in-roads are being built among notable and newsworthy companies and firms. And, thankfully, they provide a very public example that others may follow
Renee Beckman, CPA, i s a seni or partner at Marco & Associ ates, L L C , a bo u ti qu e s ta f f i n g a n d r e c r u i ti n g f i r m s pe c i a l i z i n g i n a c c o u n ti n g , f i n a n c e a n d te c h n o l o g y R e n e e c a n be r e a c h e d a t 312 546 9800 or rbeckman@ marcofi nanci al com
make
M & A s have become quite a fixture on our recession-hit landscape, as small and mid-size companies find themselves in unwelcome and vulnerable positions And while mergers and acquisitions certainly can be highly profitable, a number of M&A failures in recent years have pointed to the dangers of unrealistic expectations and poor due diligence
This fact begs the question, is a merger or acquisition the right way to achieve growth? Are you looking for a strategy that will compliment your overall company objectives or are you jumping in head first out of greed or desperation?
“The biggest mistake companies make in M&A is to use it as a substitute for strategy, rather than as a way to implement an overarching, well thought-out strategy,” explains Sreenivas Kamma, Ph.D., MBA, associate professor of finance at Indiana University’s Kelley School of Business, adding that companies often use this “Hail Mary pass” because they haven’t figured out a way to attain a sustainable competitive advantage “Obsession for growth seems to make addicts out of all our CEOs Much like an addict, they pursue this growth through M&A regardless of the cost or the lack of any long-run benefits for their stakeholders ”
Here then, is a how-to guide for dodging the many M&A landmines strewn across your path
T h e f o u n d a t i o n o f a n y d e c i s i o n t o g o t h e M & A r o u t e should first be based on how it aligns with a company’s o v e r a l l m i s s i o n a n d s t r u c t u r e , P a t M c N a l l y, p a r t n e r- i nc h a rg e , C o r p o r a t e F i n a n c e C o n s u l t i n g a t B l a c k m a n Kallick, emphasizes. “Understand what your business is about, and then you need to understand what your options are,” he notes, suggesting that executives research both organic and inorganic strategies, and compare them side by side “It’s being prepared upfront and understanding why it is you want to do it Make sure you are committed to an acquisition because you will spend a lot of resources and money on the process ”
2. Preview the process
You
n Your organization enters a structurally unattractive industry or refuses to exit from one
Neil Dhar, partner with PricewaterhouseCoopers’ Transaction Services based in Chicago, says that once a company has determined that an M&A strategy is a good fit, it should scenario test the deal. The first phases will consist of looking at how to best design a deal from a structural and tax perspective, and then evaluating how that design will benefit a company from both a big picture strategic perspective and a day-to-day operational standpoint
n Your organization steps far from what it knows.
n The economic benefits of the deal are improbable
n The merger doesn’t result in any competitive advantage
n Your organization is not very creative in deal structuring.
n Your organization has poor checks, balances and incentives
“Have it assessed comprehensively from a deal structure and tax perspective, and ask important questions like, ‘How is this acquisition going to affect future earnings?” Dhar suggests. The overriding goal of M&A activity is to create long-term shareholder value. “Ideally, one plus one should equal three in r e g a r d s t o c r e a t i n g v a l u e I n e v a l u a t i n g a
are most likely to fail if...
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deal, look at how much synergy is going to be achieved by the organization,” he says
McNally agrees, pointing out that those solid cash-flow projections in the initial design and analysis phase can be crucial to longt e r m s u c c e s s “ S o m e c o m p a n i e s f i n d t h e m s e l v e s c a s h - s t r a p p e d because no one really sat down and did the analysis.”
Consider whether a merger or acquisition is going to do something that shareholders could just as well achieve by buying shares on the open market “How is this combination creating a sustainable advantage that will help me create a positive spread over my cost of capital?” Kamma questions The most common manifestation of this mistake, he says, is companies in low-growth industries buying faster-growing targets without realizing that everybody else is piling into that industry as well
In some cases, failures happen because managers have a flawed u n d e r s t a n d i n g o f t h e m a r k e t t h e y a r e g e t t i n g i n t o o r t h e v a l u e proposition that’s important to customers Offering an example, Kamma points to the Quaker Oats-Snapple merger failure, explaining that Quaker Oats “didn’t really understand that its distribution channels and promotional campaigns weren’t capable of reaching the target segment for Snapple customers, thereby destroying the promise of expanded and more economical distribution ”
o i d s t e p p i n g t o o f a r f r o m what they know, and avoid entering a fundamentally unprofitable industry even if it appears to be growing fast He also points out
that private company acquisitions and targets that can be easily restructured tend to be more successful in the M&A arena.
If you’re going forward with your M&A deal, determine how it will be financed Will it use debt, equity or a combination of both, for example. This is not simply a matter of lining up financing but of creatively assigning risks and rewards
W h e n n e g o t i a t i n g , K a m m a r e c o m m e n d s a s k i n g w h e t h e r t h e highest value players have been included, as well as all potentially influential agents. Also consider whether the right no-deal options have been laid out “Be disciplined do your homework,” he says “Negotiate on multiple attributes.”
The ability to integrate an acquired entity into an existing company infrastructure can be complex and risky, Dhar notes This is where leadership, communication, change management and discipline are critical on a number of different operational fronts, such as business operations, IT, HR, tax, synergy tracking and workflow strategy.
“If you are going to look at an M&A as a mechanism for your corporate strategy, you have to have a robust process in place to manage M&A integration,” he emphasizes “Far too many times, comp a n i e s d o t r a n s a c t i o n s , a n d t h e y a r e m i s s i n g c r u c i a l e l e m e n t s related to M&A integration Many times merger integration is what separates successful deals from unsuccessful ones.”
Another big problem with integration is “the excessive self belief our managers seem to have in their ability to transfer their skills to the operations of a target company,” says Kamma Pointing out that it is very hard to transfer skills even when the companies are similar, he says that the complexities are greatly enhanced when the companies operate in different industries
“Even a well-managed company like Federal Express had to unwind its acquisition of the freight company Tiger Express because they found out, much to their chagrin, that expertise in front-door delivery didn’t really equip them to succeed in back-door delivery, a business with a completely different set of challenges,” he explains.
Lack of due diligence in the area of integration can lead to a host of issues, Dhar cautions, including management, staffing, operat i o n a l a n d s u p p l y c h a i n c h a l l e n g e s “ S o m e c o m p a n i e s l a c k t h e ability to holistically integrate an acquisition,” he says.
The importance of due diligence throughout the process cannot be overemphasized, says McNally, who mentions a client who is now in a lawsuit equating to millions of dollars due to lack of critical oversight in the analysis phase
“ B e c a u s e t h e y h a d b o u g h t a n o t h e r c o m p a n y f r o m h i m a n d everything worked out okay, they thought they were dealing with an honest seller,” he says. “However, in the second transaction, the seller presented fraudulent financial and operational information Don’t short change due diligence.”
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In Kamma’s opinion, a company’s board of directors should take the lead role in the process of examining the investment thesis of the proposed transaction “Too often due diligence is treated like an afterthought; companies do due diligence like a customer in a car dealership ’I have decided to buy this particular Honda Accord, now let me check if there are any dings, scratches, etc,’” he explains. “But what the customer and the company in its due diligence should really be asking is, ‘Should I even be in this car dealership?’”
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By Allison Enright
i k e l y, y o u r a n s w e r i s g o i n g t o b e i n f l u e n c e d b y t h e n u a n c e s o f y o u r g e n e r a t i o n , w h i c h m e a n s t h a t , m o s t l i k e l y, y o u r
a n s w e r i s g o i n g t o b e r a d i c a l l y d i f f e r e n t t h a n , s a y, t h e a n s w e r t h e p e r s o n s i t t i n g
a c r o s s f r o m y o u w o u l d g i v e . W i t h m a n y o f t h e B a b y B o o m e r g e n e r a t i o n a n g l i n g t o w a r d s r e t i r em e n t a n d t a k i n g t h e i r i n s t i t u t i o n a l k n o w l e d g e w i t h t h e m , t h e o n g o i n g r i s e o f G e n X a n d G e n Y i n t o t h e l e a d e r s h i p r a n k s r e p r e s e n t s a h u m a n r e l a t i o n s c h a l l e n g e o f g a r g a n t u a n p r o p o r t i o n s
T h e B a b y B o o m e r g e n e r a t i o n c o m p r i s e s t h e l a rg e s t p o p u l a t i o n boom on record. And, for the most part, members are currently comfortably ensconced in boardroom-level positions. Gen Xers, however, are knocking loudly on the door, and have been for quite some time
The recent recession, though, has prompted a lot of Boomers to remain in the workforce longer than they traditionally would have, which means they’ve significantly delayed Gen X professionals from taking their rightful places at the helm.
“Boomers must now embrace sharing managerial power,” says Johnson Training Group’s Larry Johnson, co-author (with his Gen X d a u g h t e r M e a g a n ) o f G e n e r a t i o n s I n c : F r o m B o o m e r s t o
“Now that we are getting older, we have the perception of being the wise ones And to a great extent, we are But the issue is, as we walk out of the door we take this knowledge with us It will leave a huge gap,” he explains
With that scary thought in mind, mentoring programs are paving a smoother road to the transition of power. “Progressive firms are the ones that have very good mentoring or coaching programs in place,” says Dennis L Faurote, CPA, president of the Indianapolisbased Faurote Group, a workplace consultancy and coaching firm (Faurote will give a keynote presentation on multi-generational workforce issues at the Illinois CPA Society’s Midwest Accounting & Finance Showcase held August 24-25 in Rosemont, Ill.)
Faurote feels that intergenerational mentoring programs enable ‘gentors’ a portmanteau of the words generation and mentor to learn from each other and simultaneously benefit the workplace “It is usually the more senior people who mentor the younger, but there is just as much value with the younger mentoring the older It just doesn’t happen as often as it should,” he says.
Deloitte, which already has a formalized professional mentoring program in place for its Gen Y employees, is taking special care to ease the generational transition of leadership Lora Rothe, Midwest region talent leader for Deloitte Services LP in Chicago, s a y s t h e c o m p a n y h a s i n v e s t e d $ 3 0 0 m i l l i o n i n d e v e l o p i n g D e l o i t t e U n i v e r s i t y, a s t a t e - o f - t h e - a r t l e a r n i n g a n d l e a d e r s h i p development center in Westlake, Texas, that will offer customized d e v e l o p m e n t a n d g r o w t h o p p o r t u n i t i e s f o r D e l o i t t e e m p l o y e e s when it opens in 2011
Remember the movie Real i ty Bi tes? The biopic trailing a group of early twenty-somethings as they whined and groaned about finding their places in the workforce?
In the early 1990s, members of Generation X got a bum rap. The problem wasn’t that they weren’t willing to work hard; it was that
they wanted to live and work differently than their Boomer and Traditionalist bosses
“Gen X got the reputation that it was difficult to work with. We were tagged as ‘gold-collar workers ’ That’s not true The real sense of frustration came from our managers having blinders on about how we could operate in the workplace They had one idea spend face time with other people and we had another,” says Meagan Johnson, proud Gen Xer and co-author of Generati ons Inc
When you get down to it, the misfire that tagged the entire generation as slackers amounted to a communication problem And to a certain extent, the same misfire is tarnishing the developing reputation of Gen Y professionals in the workplace too, says Faurote
“It’s interesting Over time, you get a new generation into the workplace, but a lot of the issues that existed 10 or 20 years ago are similar today as far as the lack of understanding of generational differences,” he explains “Part of the difference is the expectations of the younger generations They are more vocal and demanding, and those expectations have changed a bit from my generation as a Boomer ”
Successful managers are listening and adjusting the workplace to accommodate the new workforce “Today, management isn’t about what should or shouldn’t be. It’s about what works,” says Larry Johnson “If that’s what works best for them, that’s what you should do.”
For Gen Xers, that means allowing them to be independent and self-directed on how they will accomplish a particular task. For members of Gen Y, it means giving them structure and a clear set of expectations. These generational tendencies developed from t h e d i s t i n c t s t y l e s i n w h i c h t h e s e i n d i v i d u a l s w e r e r a i s e d F o r example, Gen X is also known as the latchkey generation since adults of this generation were raised to be independent and to figure things out for themselves. Gen Y, on the other hand, was raised in a much more structured environment think soccer moms and an activity and performance expectation for every day of the week. G e n Ye r s a l s o a r e a c c u s t o m e d t o a n d e x p e c t c o n s t a n t f e e dback, and they’re more vocal about it.
These generational patterns are drastically different than those of the Boomer generation. Baby Boomers excel in a teamwork environment and dig meetings to talk about issues Gen X, meanwhile, sees meetings as a necessary evil and a time waster.
Not surprisingly, workplace conflicts do develop The adage, “you can’t please all of the people all of the time” is particularly apt Faurote, for example, tells the story of a managing partner at a professional services firm in the late 90s who grumbled about the work ethic of Gen X, saying that Gen X workers didn’t know what it was like to have a tough time He went so far as to say it would take a good recession to get their attention and get them to work the right way “He felt that he was giving up everything to the staff and that they were running the office,”
dot-com bubble burst, he checked back in with the partner to see how things had worked out they hadn’t.
“People have to stop looking at making adjustments as catering to people. Instead they should listen and serve those needs. For the younger generations, they let employers know what they need, but they are also going to have to listen,” says Faurote
The issues that typically come up in generational conflicts center around work ethic, work style and communication But what managers and company leaders need to understand is that good employees, regardless of generation, bring their own style to the table
Gen Y came of age with the internet, cell phones and a constant stream of modes of communication They will do their work from just about anywhere, the office not necessarily being their most effective work environment So if a Gen Y worker who knows his responsibilities wants to leave the office after just half a day on a Friday when there’s a big project due on Monday, let him. He’ll finish the project working from his laptop (or Blackberry, or iPad, etc.) on Sunday. However, if he’s working with a Boomer on the project, the Boomer will likely only see that the Gen Yer left without doing his job And there’s the disconnect
“The younger generation is willing to work hard, but they don’t have to be seen to be productive They see it as ‘if I get my work done, it doesn’t matter where I do it,’” says Meagan Johnson
And it’s a manager ’s responsibility to bridge the gap “One of the big things is setting expectations and understanding both sides Say, ‘Sometimes we have to be here and work with one another
and under those circumstances you may have to be here for a 10hour day When it’s not critical, you can leave early and get the work done later Let’s figure out how to make it work,’” Faurote suggests. “The younger generation has to be aware that sometimes their preference works and sometimes it doesn’t There’s a fine balance there, and if you understand the communication differences that exist you can work with them ”
At Deloitte, senior executives and partners stay on top of generational issues through a Generation Y Advisory Council, which is made up of Gen Y employees, Rothe explains The council acts as a sounding board for company initiatives and researches issues particularly relevant to Generation Y This year, for example, the c o u n c i l i s l o o k i n g a t m e n t o r i n g r e l a t i o n s h i p s a n d w o r k - l i f e f i t , amongst other things
Like any big initiative, buy-in from the top is a must. Partners, executives and senior managers have to see the value of working with each generation’s needs and according to each generation’s work style, even if they differ significantly from their own. One of the things Faurote often hears from senior executives when delivering his training program on generational differences is how a company never made accommodations for them when they came through the doors.
“They say, ‘They told me to do something and I did it ’ But that’s not the world we work in today,” he explains “You make the connection to the business case and show them how it is costing them a lot of money in lost productivity, unhappy clients, employee turnover, etc to not do this ”
What Gen X and Gen Y Want in the Workplace
Gen X: Independence, work-life balance, greater responsibility, training/development, sabbaticals, recognition, engagement
Gen Y: Feedback, community/friendship, stability, direction, flexibility
What Gen X and Gen Y Bring to the Workplace
G e n X : I n d i v i d u a l i s m , h a r d w o r k , w o r k - l i f e b a l a n c e , l e a d e r s h i p , independence/autonomy.
Gen Y: Technological skill, idealism, social responsibility, flexibility, volunteerism
Source: Generations Inc , by Larry Johnson and Meagan Johnson; AMACOM 2010
Outsourcing used to be thought of as yet another management fad but, obviously, it isn’t
Outsourcing spending has continued to climb at 10 to 20 percent for the last decade. The size of the outsourcing industry has grown to $4 trillion annually in the United States and $6 trillion globally, according to the International Association of Outsourcing Professionals® (IAOP®), the standard-setting organization and advocate for the outsourcing profession.
“Outsourcing is here to stay as long as Fortune 2000 companies continue to view it as a viable means of achieving their growth strategy targets,” says Sally Wright, president of Alliance Consulting Group
The chief motivation for outsourcing has been and remains cost savings, especially as the United States continues to claw its way out of the recession
“Organizations need to be more competitive in an increasingly c
stockholders for increased profits,” says Fred Maidment, professor with the Department of Management at Ancell School of Business at Western Connecticut State University “Prices are driven down in a global economy, so companies must become efficient Labor is often a chief component in the production of goods and services. If the cost of labor can be reduced while maintaining or enhancing productivity and quality, then attempting to do that is only good business Simply put, do you want to pay Wal-Mart prices or Nieman Marcus prices for the same good?” he asks
It’s hit the $4 trillion mark, which means US outsourcing is rapidly deepening. T he
economy? By Sher yl Nance-Nash
Outsourcing is an integral aspect of American corporate success, and without it, we’d be in trouble,” says David Poole, head of Capgemini’s Business Processing Outsourcing (BPO) North America organization in Chicago “Any real action to restrict outsourcing is antiquated and unsustainable A company that outsources is increasingly nimble, with the ability to reinvest savings and zero-in on innovation and their core competencies. Ultimately, this is what will help American companies and the country emerge completely from this economic slump ”
Cost savings is part of the picture, but not the whole picture The true benefits of outsourcing are achieved by taking a strategic look at the business structure and functions, determining which functions are better kept in-house, and defining areas where outsourcing can increase productivity and invigorate local economies In most cases, outsourcing back-office functions helps companies manage costs, streamline business operations and stimulate revenue growth, says Poole.
“Since most businesses don’t gain an advantage with administrative activities, why waste time and money trying to make them unique?” he asks While it’s true that staffing cuts may result from outsourcing, advocates contend that the funds saved can be allocated to highly strategic business areas, and remaining staff are better able to focus on their core competencies
“As we’ve seen too frequently, companies that are not focused eventually fail, causing the greatest job loss of all When considering the long term, outsourcing is a crucial catalyst for growth and job creation,” Poole explains.
Outsourcing is increasingly a value play, adds Dwayne Prosko, KPMG LLP advisory director “It’s about having access to better talent and better capabilities, and being able to free up staff from transactional activity so they can concentrate more on being a business partner.”
According to the results of IAOP’s global membership surveys, conducted with support from Accenture over the past 18 months, outsourcing has established itself as a strategic management pract i c e t h a t l e a d i n g c o m p a n i e s a r o u n d t h e g l o b e a r e i n c r e a s i n g l y using for high-value, knowledge-based processes.
“Increasingly, companies are outsourcing to do more than cut costs, but to add value, increase business flexibility and prepare for future growth,” said IAOP Chairman Michael Corbett “Companies that are using outsourcing are poised to emerge from the current economic crisis stronger.”
It’s not just big companies that are outsourcing Mid-market and even smaller companies are looking at outsourcing as a way to reduce costs and gain access to skills they can’t afford in-house
Historically, manufacturing and banking, financial services and insurance industries outsourced the most, but today organizations in almost all industries are engaged in outsourcing to some degree, says Gabriel Tinti, global marketing manager for Stefanini IT Solutions, a provider of onshore and nearshore IT consulting
Another trend, says Maidment, is that more work is being outsourced and offshored farther up the food chain In other words,
legal, are jumping on the outsourcing bandwagon
Outsourcing arrangements are also becoming more integrated. Prosko explains that, “In the past, there may have been a very functionally oriented arrangement, but now across the organization people see the value in coordinating and governing outsourcing arrangements in a similar way.”
But for all the wonders of outsourcing, it’s far from a perfect system. “When it comes to risk, the jury is still out,” says Prosko. “Companies expect an outsider to add value, but that outsider may not be motivated to add value to do things faster and better. They may be focused on keeping the shop running and operating well, but not necessarily on doing what you need to do to take your company to the next level, year after year after year Companies have to realize that these deals have to be closely managed; they don’t manage themselves Work is required ”
While it’s possible to craft custom and complex agreements of almost any kind, it’s extremely difficult to staff and manage those complex agreements “So many firms are looking to standardize as
options for clients moves from a custom order to ordering ‘off the menu,’” explains Thomas Young, partner and managing director of infrastructure for sourcing advisory firm TPI “Additionally, outs o u rc i n g a g r e e m e n t s a r e m u l t i - y e a r i n n a t u r e , s o i t ’s c r i t i c a l t o build flexibility into the relationship so that firms can adapt to the changing marketplace ”
Research is a must “’Strategic Overshoot©’ is the tendency to operate in another country, often China these days, before careful analysis of the actual business and market conditions rationalizes the decision The real solution is often much closer to home,” says Michael L Hetzel, vice president, Americas for Pro QC International “Nothing gets more valuable on a boat,” he says, adding that, “For manufacturing outsourcing it’s also important to consider the locations of offshore markets and potential markets, along with proximity to your customers’ supply chain elements Outsourcing architecture must be based on a matrix rather than a flat model ”
“Both outsourcing and offshoring are planned strategic moves on the part of the organization,” says Maidment “They are not to be done in a panic to save money when the organization is in trouble If they are done that way, they are almost certain to fail These are strategic decisions not to be taken lightly and organizations must plan these moves It’s not unusual for the planning to take a year or more ”
Then there’s the loss of control over the outsourced function to consider When it was performed in-house, the organization had direct control over personnel, resources, methods and processes But when the function is outsourced to an outside provider, that control is lost Many companies simply aren’t prepared for the culture shock
“I advise my clients that the success of outsourcing transactions hinges on not only structuring and negotiating good contracts, but also implementing effective, flexible processes for governing the relationships with their outsourcing service providers that accom-
O n s h o r e o u t s o u r c i n g : “ T h e p r o c e s s o f e n g a g i n g
another company within your own country for BPO or ITO services For the US, it means hiring a US-based company to provide services ”
Offshoring: “The transfer of business or IT processes to o t h e r c o u n t r i e s . D o m i n a n t o f f s h o r i n g l o c a t i o n s i n c l u d e India, China and the Philippines ”
Nearshoring: “The transfer of business or IT processes to companies in a nearby country, often sharing a border with your own country In the US, nearshoring describes work sent to Canada and Mexico Nearshoring is a popular model for companies that don’t want to deal with the cultural, language or time zone differences involved in offshoring ”
R u r a l s o u r c i n g : “ S e n d i n g w o r k t o s e r v i c e p r o v i d e r s i n domestic locations where salaries and operating expenses are lower (such as the Midwest for the United States) An alternative for companies that want to avoid the negative aspects of offshoring ”
Cited from Sourcingmag com
modate and address the inevitable changes that occur in these relationships,” says Jeff Andrews, a senior partner specializing in outsourcing with the law firm of Thompson & Knight
Think, for example, of the classic example where US toy manufacturers found high lead content in the paint being used to manufacture their toys in China “This is a quality control issue that ruined toy company sales,” explains Maidment
T h e r e a r e o t h e r c o m m o n p r o b l e m s , i n c l u d i n g d e l i v e r y c h a ll e n g e s , r e j e c t s a n d p o o r v e n d o r i n t e r f a c e . W h e n o f f s h o r i n g i s added into the mix, problems may impinge upon currency, overseas deliveries, customs and all the other things that go hand in hand with international commerce Additionally, says Maidment, you can run into problems with Human Rights Watch if you don’t c a r e f u l l y m o n i t o r y o u r v e n d o r t o m a k e s u r e i t i s n ’t e x p l o i t i n g workers “Nobody wants to be another Nike!” he exclaims
And there certainly have been some unpleasant surprises “For any buyers concerned just with cost savings benefits, reality was nothing but shocking Cheapest rates often mean failure to deliver the required level of quality,” says Alex Golod, VP of global delivery and managing partner with Intetics, a global sourcing company
Realize the complexity of what you’re getting into. “Outsourcing transactions are inherently challenging They combine all the complexities of M&A transactions with those of long-term service relationships,” says Andrews. “The scope and evolution of services; the transfer of personnel and assets; the licensing and ownership of intellectual property; resource-based pricing; performance standards and credits; compliance with laws; termination rights; and allocating risk through representations, warranties and indemnities, are but a few of the difficult issues that have to be addressed to achieve a successful outsourcing relationship ”
Given the potential economic impact of outsourcing, the pressure for companies to get it right is enormous
“Outsourcing creates jobs for Americans A company that outsources is able to reinvest its savings to focus on innovation, which is what this country desperately needs. Over time, the business can build, expand and emerge from the economic slump in a stronger position because it has been able to focus on its core business,” says Poole
A strong company at the beginning of a growth cycle will enrich t h e l o c a l a n d n a t i o n a l e c o n o m i e s b y a d d i n g h i g h e r- l e v e l j o b s , s e r v i c e s a n d f u n c t i o n s , a l l b o r n o f t h e i n t e l l i g e n t a n d s t r a t e g i c application of outsourcing, he adds
“While it’s a small comfort to those who lose their jobs in the short term, the US economy stands to gain as a whole in the long term. Offshoring benefits US consumers by lowering the costs of goods and services,” Andrews explains
What’s more, outsourcers are increasingly offering the option of r u r a l s o u rc i n g , w h i c h i n v o l v e s o u t s o u rc i n g w i t h i n t h e U n i t e d States in communities outside large cities that have the talent and capability to take on large projects “A combination of nearshore and rural sourcing works for many companies,” says Tinti
“Offshoring is a two-way street,” says Maidment, “and not all the jobs that are going around the world are leaving the developed world and heading for the developing world. Many of those jobs are going from one developed country to another, and some are going from the developing world to the developed world ”
Although Americans may be distrustful of companies that practice outsourcing, says Wright, “They can’t deny that it stimulates the economy by keeping those companies in business ”
By Carolyn Tang
a n d y o u t h i n k o f s h o p s , fa c to r i e s a n d offices But today’s company isn’t defined by four brick walls Thanks to technology, knowledge instead of products is the number one asset, and decentralized entities are able to hire the best, most cost-effective employees from anywhere in t h e wo r l d , e n g a g i n g w i t h t h e m ove r t h e i n f i n i te confines of the internet Coupled with this is an u nwave r i n g d e m a n d fo r a n d co m m i t m e n t to e t h i c s w h e t h e r t h i s m ea n s a n a l y z i n g a co mpany’s impact on the environment or guaranteeing absolute transparency in all a company does
“It’s hard to exaggerate the difference computers have made,” says Dr. Louis Cain, professor of economics at Loyola University, Chicago, adjunct professor of economics at Northwestern University, Evanston, Ill and co-author of Ameri can Economi c Hi story “Over the last 20 years, reports that were ‘overnighted’ from one office to another are now routinely emailed.” Cain believes that while technology has not changed the basic structure of the organization, it has driven growth
Rob Hankey is the vice president of operations for HRWorX, LLC, a small software company that targets human capital and financial management functions. He believes that the impact of technology was so gradual that many of us take it for granted “All this information and technology is so ubiquitous and commonplace,” he explains “Our kids have no idea what a landline is, or of the fact that texting didn’t exist just a few short years ago.”
Cain also points out that technology has enabled companies to shift their focus from manufacturing to knowledge-sharing “Looki n g o v e r t h e 2 0 t h c e n t u r y, i t ’s c l e a r t h a t t h e s e r v i c e s e c t o r h a s grown relative to agriculture and manufacturing In fact, while 95 percent of the labor force was involved in agriculture in the first census in 1790, over 75 percent is now involved in services. Farme r s a r e l e s s t h a n 1 p e rc e n t o f t h e l a b o r f o rc e , ” C a i n e x p l a i n s “Brains have come to dominate brawn ”
Hankey agrees that today’s US corporations place more emphasis on driving revenue through information rather than through products “IBM, the great ‘big iron’ product maker of the world, is now an information consultancy, and Verizon and AT&T are no longer concerned with the infrastructure, but with how to get the latest information into the hands of its users,” he explains.
Since knowledge capital is front and center in corporate priorities, companies are putting more emphasis on the right hire “Finding, recruiting, developing and retaining top-notch talent is now the focus of business and government alike,” says Hankey
And this focus on human capital has extended beyond US borders The United States’ comparative advantage in graduate edu-
cation has also lured in students from overseas, particularly for b u s i n e s s a n d c o m p u t e r s c i e n c e , s a y s C a i n “ F o r e i g n b u s i n e s s schools seek out partnerships with US business schools; the engineering staffs at most high-tech companies are miniature versions of the United Nations,” he notes
The emphasis on finding the cream of the crop has forced companies to hire outside the box, quite literally
“Traditionally, work has been onsite,” explains Ellen Pack, vice president of marketing with Elance, Inc , an online talent marketplace that enables companies to hire and manage professionals o v e r t h e i
o r k move online With online work, businesses can hire talent anywhere in the world, on-demand ”
When asked when the shift to a virtualized workforce occurred, Pack references a 1998 Harvard Busi ness Revi ew article by Professor Thomas W Malone and Robert J Laubacher, titled “The Dawn of the E-Lance Economy ” Its core proposition was that “the devolution of large, permanent corporations into flexible, temporary networks of individuals” was already underway
“While the idea has been around for more than a decade, it’s really in the last two to three years that this shift has truly begun to take hold,” says Pack. “Fueled by the current recession, there has been a rise in the number of highly qualified, independent professionals, as well as an increase in the number of companies both large and small looking to find new, cost-effective and flexible ways to manage and leverage online talent.”
The virtualization of the workforce also enables companies to efficiently scale their staffs up or down as needed, without losing productivity “Start-up companies can now benefit from global talent to eliminate unnecessary overhead, and launch with an effic i e n t , s t r
r t u a l o n - d e m a n d w o r k m o d e l . N e w a n d established companies have a competitive advantage in having the flexibility to easily find and hire specialized talent when needed,” Pack explains.
Griffin Boyce is the founder of PsycView, a software solution t h a t a l l o w s d o c t o r s t o c o n d u c t m e d i c a l v i s i t s f a c e - t o - f a c e w i t h long-distance patients, to find a lab near the patient, and to locate pharmacies in surrounding areas to fill prescriptions. Boyce made the decision to go virtual after comparing the costs of hiring, relocation and office space rental “Overall, that decision will save us more than $110,000 over the first year The trade-off is that, as the founder, I have to do more managing than I would if we were all in the same office,” Boyce explains.
Additionally, by saving on overhead, Boyce is able to funnel more cash into attracting top talent “For employees, it’s great They get paid more than they would have been, and we can be more generous with bonuses. And there’s also schedule flexibility for most positions,” he says “To me, this represents an ideal way of working and everyone just loves it It requires a little more discipline than the usual working environment, but the benefits are enormous ”
Boyce also observes that a decentralized structure has led to a fundamental change in how employees are rated Instead of being measured by how much time they put into a project, they are evaluated by the quality of their work “It used to be that the employee who put in a 16-hour day would get accolades, and that was held as the gold standard for a good employee,” he says
B u t e x t e n d e d h o u r s d o n ’t n e c e s s a r i l y g i v e t h e b e s t r e s u l t s , Boyce contends “In the technology industry, it tends to mean the o p p o s i t e i n c r e a s e d c o s t s o f d e b u g g i n g s o f t w a r e , d e c r e a s e d quality of the end product ”
“ W h e n y o u r u n a d e c e n t r a l i z e d c o m p a n y, ” s a y s B o y c e , “ y o u have the luxury of having a smaller office, or no office at all, w h i c h n o t o n l y r e d u c e s o v e r h e a d s , b u t a l s o l e a d s t o a m u c h smaller carbon footprint.” Indeed, the company of the future is more conscious of its impact on the environment
GreenOrder is a consulting firm that helps companies achieve competitive advantage through environmental innovation. Sarah K i n g , a p r i n c i p a l w i t h G r e e n O r d e r, s a y s t h a t “ g o i n g g r e e n ” i s common parlance in the corporate world However, she admits that philosophy alone is not going to drive business; sustainability strategies need to be prioritized and must become an integrated part of how we do business
“Sustainability is becoming increasingly core to business and culture. Employees from every business function and at every level in an organization want to know how sustainability relates to their day-to-day job,” says King
Ernst & Young partnered with GreenOrder to prioritize environm e n t a l l y f r i e n d l y p r a c t i c e s w i t h i n i t s o rg a n i z a t i o n , i d e n t i f y i n g n e a r- t e r m o p p o r t u n i t i e s t o i m p r o v e e n e rg y p e r f o r m a n c e i n offices, cutting down on business travel, reducing paper usage a n d e n g a g i n g c o m p a n y l e a d e r s h i p t o e d u c a t e e m p l o y e e s a n d clients on green issues
“Ernst & Young is projected to save millions of dollars a year, a n d t h e s e i n i t i a t i v e s w i l l d r i v e a w a r e n e s s o f ‘ h i d d e n ’ c o s t s , encourage cross-functional communication within the company, and mitigate client risk,” says King
She strongly advises companies to drive awareness of environmental initiatives from the top down, explaining that, “C-suite leadership is essential Top-level management can take a broader, cross-functional view, and take action where it matters most ”
GE is one high-profile example of a company doing just that. In 2005, the company launched its “ecomagination” initiative, with the goal of growing revenues through environmental innovation and sustainable business operations In February 2010, GE Energy Financial Services, a unit of GE, announced that it would make a $65 million preferred equity investment to fund construction of a wind farm in Oklahoma, with an option to invest $100 million more once commercial operations commence. The wind farm is expected to generate enough electricity to power approximately 45,000 average Oklahoma homes and, according to US Environmental Protection Agency methodology, avoid approximately 413,000 short tons a year in greenhouse gas emissions the equivalent of taking nearly 72,000 cars off the road
“Coupling our private investments with government incentives such as state renewable portfolio standards and federal grant and loan programs has proven to be a powerful driver of renewable energy and job creation in the United States,” said Kevin Walsh, managing director and head of Power and Renewable Energy at GE Energy Financial Services, via a press release.
King explains that progressive enterprises are going beyond the concept of just being green A decade from now, she contends, companies will be using the lens of sustainability to rethink prod-
ucts, processes and relationships in order to compete and meet market demands “In 10 years, I don’t think there will be a debate over who has a green job and who doesn’t sustainability will be a p a r t o f e v e r y o n e ’s j o b i n t h e s a m e w a y t h a t t e c h n o l o g y h a s become a part of everyone’s job today,” she says
Steven Randall, partner with Vonya Global, a Chicago-based internal audit firm, believes that the US corporation has gone from a culture of “Just do it” to one of “Just do it right.”
“Corporations and executives are more concerned about doing things the right way than they ever have been in the past,” he says “Look at all the scandals, from financial malfeasance to the use of lead paint in toy manufacturing and massive recalls in the auto industry Events such as these are driving a higher level of ethics and integrity in corporate America.”
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