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volume 10 n issue 1fall 2009

Cut off the fraud line

Identify ways to curb theft in your company

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Advice and information to help you manage your businessPKf TexasPublished bY

Doing Business in India • Balancing act: Short-term v. long-termPLUS:

2 VOLUME 10 • ISSUE 1 • FaLL 2009

Dear Friends and Colleagues:Welcome to The Leading Edge, our flagship publication designed to inform, educate and inspire you on the latest issues affecting the greater-houston business community.

First up is a story by Daniel Travis on President Obama’s 2010 budget. Were last year’s campaign promises considered in preparing the 2010 budget? Focusing on the president’s second year of office and four key issues related to accounting and taxation, Daniel offers insight into energy and tax incentives, individual tax issues for low- and high-income earners, and changes to international taxation.

Did you hear about the Houston Business Journal’s 40 Under 40? These are 40 of Houston’s most influential business leaders, under the age of 40, who contribute tenfold to the marketplace and our community. In another of our series of leadership profiles, Radhika Bhavsar talks with Gaurav Khandelwal, CEO of ChaiONE, a digital agency that creates applications for the iPhone. I was amazed by his entrepreneurship and creative spirit, and know you will be as well.

To complement Mr. Khandelwal’s community involvement, this issue’s Cubester® Chat from Radhika Bhavsar, Dawn Hodges and Pablo Kurewosky offers advice to young professionals to get more involved in the community by participating in two of Houston’s most well-respected organizations, the Greater Houston Partnership and the World affairs Council. Once again, our Cubesters demonstrate how they bring tremendous intellectual capital to our firm.

Finally, I want to ask for a round of applause for our LEa Task Force Members who meet quarterly to discuss, assign and write the stories in this magazine. This is no small feat—and is fairly rare for a CPa firm to have a group like this to discuss and debate potential stories that help you grow through insight and information. Task Force members include Craig abbott, Radhika Bhavsar, Raissa Evans, Maggie Fleming, Sonia Freeman, Eddie Goldsberry, annabella Green, Chris Hatten, Dawn Hodges, Jeff Koenig, Pablo Kurewosky, Jen Lemanski, Karen Love, Greg Price, Daniel Travis and Gary Voth.

as always, please remember our doors are always open for your calls and visits. Let us know how we’re doing by calling me or any of our advisors.

Kenneth J. Guidry, CPa President

PKF Texas Menu of ServicesAudit and Accounting• audits• Internal audit• Transaction services• Evaluation and implementation of internal

control systems• Employee benefit plan audits• Systems consulting• Mergers and acquisitions• Special agreed upon procedures• Operational audits• SOX 404 planning & compliance• Forensic accounting / Fraud investigations

Business Process Consulting• eCommerce strategy consulting and implementation• Entrepreneurial planning and business

plan development• Business process measurement

Entrepreneurial Solutions• Profit Enhancement Plus • Reviews & compilations • Turnaround management • Strategic planning• Healthy Start Package® for business start-ups• Outsourced controller & CFO• Cash flow management• accounting software support

Information Technology Consulting• application software selection assistance• Business system design and implementation• Hardware selection and implementation• Network infrastructure evaluation and

implementation• Microsoft Gold Certified Partner

Litigation and Insolvency• Bankruptcy and insolvency consulting• Insurance claims• accounting malpractice• Tax controversies

Tax• Federal, state and local planning and compliance• Research and development tax planning• Cost segment analysis and accounting for buildings

and manufacturing facilities• Tax controversy management and resolution• Estate, gift and tax trust planning• Business succession planning

International Tax• Global tax minimization planning and

implementation• Tax advantages for exporters• Transfer pricing studies and planning• Withholding tax compliance and planning for

cross-border payments• Income and estate planning and compliance for

resident and non-resident aliens• Financial accounting for income taxes (FaS 109)

FALLvoLumE 10

ISSuE 12009

The Leading Edge

LEa Magazine is now available in a new online, electronic reader called “Nxtbook.” Visit our publications page at PKFTexas.com, and click on the most current issue.

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Members are top quality firms who are very successful, have deep client relationships, and strong ties to the community. The alliance pro-vides members with an unbeatable combina-tion: the comprehensive size and scope of a large multinational company while offering their clients the continuity, consistency and quality service of a local firm.

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Leading edge advisory Committee

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Karen Kehl-Rose The Leading edge alliance

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natasha Fletcher, amanda horvath, Crystal Madrilejos, Stacy Vickroy

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andrea Jager graphic designer

volume 10 • issue 1 • fall 2009

The Leading Edge is published four times per year by Wise Group, 812 Huron Road, suite 201, Cleveland, ohio, 44115, (216) 523-1212, faX (216) 241-5458. Periodicals postage paid at Cleveland, Ohio.

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4 Cut off the fraud line

13 The lessons of 2009

14 Business balancing act: Short-term demands vs. long-term vision

9 News and information from our firm

16 Top 10 misconceptions about doing business in … india

18 In a nutshell: Q&A Chris DeSantis responds to your workplace dilemmas

19 The Leading Edge Alliance

thethe

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The Leading edge 5

cover

B eware of the trusted employee.

The one who never likes to take vacation because he doesn’t want someone else to have to do his work.

The one who’s eager to take on more duties, especially additional money-handling responsibilities,

so the company doesn’t have to hire someone else.The one who seems to be driving a new car

and regularly wining and dining, seemingly out of line with his salary.

As antithetical as it might seem, experts say that employee you trust the most might be the one ripping you off. Fraud costs U.S. businesses an astounding $994 billion a year in lost revenue, according to the Association of Certified Financial Examiners.

And today’s wallet-squeezing economic climate only adds to what might be an already

By Paul O’donnell

Continued on page 6

Cut offsmoldering pressure to steal from the company.

Intense personal financial pressure on employees in this economic crisis is causing a spike in fraud cases, according to a survey of experts conducted by ACFE.

Pervasive layoffs at companies across the country are partly to blame.

More than one-third of in-house fraud examiners say layoffs eliminated some of the controls designed to prevent employees from diverting company cash into their own pockets.

Fraud requires opportunity, pressure and rationalization often fueled by drug or gambling addictions or extramarital affairs, says Jeff Firestone, an associate director at SS&G Financial Services, a Leading Edge Alliance firm.

“In an economy like this, people are hurting for cash,” he says. “And that becomes the need.”

This past summer, Firestone was working to unravel a $2 million embezzlement from a small employer that took place over several years.

It came to light when customers began contacting the company’s CEO about unpaid bills. The CEO’s response was “that’s impossible,” Firestone says.

“People don’t think it will happen to them,” he says. “Very few people are willing to spend the money to be preventive.”

But the more the CEO checked into it, the more suspicious he became.

Firestone says the company’s controller turned out to be the embezzler. In a small office, the controller handled the accounting functions and kept the books. He had achieved a level of trust, and consequently, the firm’s top executives weren’t closely monitoring his work.

In the end, the controller was cooking


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the balance sheet by hiding cash flow, not recording liabilities and inflating assets, Firestone says.

Companies can’t rely solely on internal accounting controls to be fraud controls because the people who typically commit fraud often are the ones also putting those controls into place, he says.

Sometimes, the fix can be as simple as breaking up the cash functions—a segregation of duties that provides a basic check and balance, he says. Separate employees should be signing the checks and handling the reconciliation, “no matter what size the office.”

“Any additional layer you can put on the controls by providing oversight is really the key to it,” Firestone says.

Classic modelThe classic fraud model often starts out small, with the employee pocketing a few hundred

U.S. business losses attributable to employee fraud

Median loss to the company from

employee fraud

Percentage of employee frauds

involving losses of at least $1 million

Number of years a fraud typically goes on before being detected

Source: Association of Certified Fraud Examiners’ 2008 Report to the Nation

$994 billion

$175,000

25

2

By the numbers

dollars. As the schemer gets away with it, the stakes typically increase.

Some embezzlers go as far as setting up ghost employees or phantom vendors to siphon money from the company, Firestone says. Even a check written to the Internal Revenue Service can be easily turned into a fraudulent disbursement.

“If you write ‘IRS’ on a check, you can easily see how it can be made into ‘Mr. Smith’,” he says.

Jeff Aucoin, an associate director at Postlethwaite & Netterville, a Leading Edge Alliance firm, says he started seeing an increase in calls from clients in the spring.

He thinks there are three reasons for the increase, with two related to the economic downturn:1. A reduction in operating cash flow for

companies. As companies turned their attention internally to begin cutting costs, they began discovering fraud that might have been going on for several years.

2. In response to the economic downturn, employee pressures begin to build. Job loss, foreclosure, reduced pay and benefits—all are common forces in today’s economy. He calls this “good people turned bad’’—fraud becomes the means to pay the bills. “When you back people into the corner, they’ll do things they otherwise wouldn’t do,” Aucoin says.

3. Reductions in work force through layoffs or downsizing result in duties being consolidated among the remaining workers. A company might have had a segregation of duties that provided an important check and balance before consolidation occurred.

Companies often don’t stop to consider how they might be creating opportunities for fraud by turning over consolidated duties to one employee, Aucoin says.

Like others who work in the fraud field, Aucoin says the biggest issue is convincing business owners it can happen to them.

“They trust their employees implicitly,” he says. “The people who commit fraud are the longtime employees who’ll pick up the owner’s kids on the weekend or who have keys to the owner’s house.”

Business owners also tend to think their auditors will catch any wrongdoing, he says. “It’s a false sense of security.” Auditors plan the audit to detect a material mistatement in the financial statements. The specific audit tasks do not automatically “detect fraud.”

If auditors inadvertently detect fraud, the employee involved often lies to them, he says.

“Fraud is committed by people, and people lie,” he says.

Warning signsBusiness owners must be attentive to warning signs of an employee facing increased pressure, he says. That could include employees who work all of the time, who are controlling of their departments or responsibilities or who are facing major changes in their home life, such as a spouse’s job loss.

“It’s your responsibility to know if fraud is going on in your organization,” Aucoin says. “You have to look for the indicators of fraud. You don’t want your customer to tell you about it. That’s kind of embarrassing.”

So what are those indicators? In ACFE’s 2008 Report to the Nation, the

group identified a wide range of behavioral red flags in 959 fraud cases investigated between January 2006 and February 2008, including:• Livingbeyondone’smeans• Financialdifficulties• Wheeler-dealerattitude• Controlissues/unwillingnessto

share duties• Divorceorfamilyproblems• Unusuallycloseassociationwithvendor

or customer• Irritability,suspiciousnessordefensiveness• Addictionproblems• Pastlegalproblems• Pastemployment-relatedproblems• Complainingaboutinadequatepay• Refusaltotakevacations• Excessivepressurefromwithinorganization• Instabilityinlifecircumstances• Excessivefamilyorpeerpressure

for success• ComplainingaboutlackofauthorityBilling and check tampering schemes are the

most common forms of business fraud, according to the report. But fraud can touch virtually every aspect of a company’s cash and payroll functions, from creating phantom employees to skimming and expense reimbursements.

One-fourth of fraud cases studied by ACFE caused at least $1 million in losses and frequently extended over two years. The median loss was $175,000. The largest median losses were in the manufacturing ($441,000), banking ($250,000) and insurance ($216,000) industries.

Small, privately owned companies are

Continued from page 5

The Leading edge 7

Confessed embezzler does it againBarry Webne is a rarity in the world of fraud.

Convicted in the 1990s for embezzling $1 million from a manufacturing company in suburban Cleveland, Ohio, Webne became a tell-all insider after his release from prison six months later.

He regularly spoke to anti-fraud professional groups about how easily businesses could be swindled. He even served as a consultant to companies trying to prevent white-collar crime.

If only Webne practiced what he preached.

In October 2008, Webne was sentenced to a maximum 63 months in prison for embezzling another $1 million from a different employer.

But the ruses he used were the same—writing company checks to himself, falsifying payrolls and faking bookkeeping entries to conceal his misdeeds at two subsidiaries of Block Communications Inc., publisher of the Toledo Blade newspaper in Ohio. His thefts occurred from 2001 to 2006.

During an interview in 2006 with the Association of Certified Fraud Examiners, two years before being caught for the second time, Webne described embezzlement as an incurable addiction.

“If you put me in a position of trust again, chances are I’m going to violate that trust,” he prophetically said in the interview. “The only way to cure me is to not put me in that position.” e

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Who gets hit by fraud

Private company

Public company

Government

Not-for-profit Source: Association of Certified Fraud Examiners’ 2008 Report to the Nation

$300,000

Who gets hit the hardest

39.1%

28.4%

18.1%

14.3%

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$278

,000

$142

,000

$100

,000

$109

,000

med

ian

loss

Continued on page 8

especially vulnerable, with a median loss of $200,000 for businesses with 100 or fewer employees, according to the report.

Fraudster portraitThe ACFE report also paints a portrait of who is most likely to commit fraud:• Employeesearninglessthan$50,000ayear

commit 40 percent of frauds. They also are more likely to be susceptible to financial pressures as a key motivator of their behavior.

• Intwo-thirdsoffraudschemes,theperpetrator acts alone. But schemes involving two or more employees cost companies four times more than sole fraudsters.

• Sixof10fraudstersaremen,andmostarefirst-time offenders.

• Lengthofemploymentdoesn’tseemtomatter, but longer-term employees tend to commit much costlier frauds.

• Morethanhalfthecasesinvolveafraudsteraged 40 or older—most likely because older employees tend to hold positions with more authority and access to company resources.

• Almost50percentofoccupationalfraudsinvolve the accounting department or upper management.

• Lessthan25percentoffraudstersarecompany owners or executives, but they are responsible for more than half of all financial statement frauds. Fraud committed by the highest levels of the company’s organizational chart also result in the biggest losses.

The impactFraud takes away about 7 percent of companies’ annual revenues each year, the ACFE estimates. P&N’s Aucoin says any business executive would jump on an opportunity to raise their bottom line by 7 percent, yet most won’t pay any attention to preventive measures to reduce fraud.

“Companies need to be aware of it and know it can happen to them,” he says.

In the ACFE survey, almost 90 percent of respondents say they expect fraud—particularly embezzlement—to continue to increase over the next year.

Aucoin says the No. 1 way in which fraud is detected is through fellow employees. The ACFE report credits tips with the initial discovery of 46 percent of the cases it studied.

Aucoin suggests establishing a tipline open to workers, customers and vendors. There are


cover

ample third-party vendors offering such low-cost services.

For larger companies, he says, it could require a full-blown fraud risk assessment. For smaller companies, it might be as simple as getting bank statements mailed to the owner’s home, instead of the business.

Perfect stormSteve Lee, managing director of Steve Lee & Associates, a Los Angeles-based forensic accounting firm, thinks the economy is creating “the perfect storm” for workplace fraud.

That storm consists of increasing pressure on employees to make ends meet, declining belief of business owners that fraud is just another cost of doing business and diminishing preventive measures as a result of cutbacks.

A company with warehouses might decide it can do without a costly closed-circuit monitoring system or that it can reduce security from three shifts to two, he says.

For too long, companies accepted fraud as a cost of doing business because it would cost them more to try to eliminate it, Lee says. That tolerance is quickly diminishing as companies look for ways to protect every dollar they earn.

Lee’s firm worked with a retail client to uncover a fraud scheme involving a branch manager who oversaw a half-dozen stores. The manager recruited one employee in each store to set up a second cash register to process sales. None of those sales went to the company. Instead, the manager and the employees he recruited to carry out the scheme pocketed the money.

The fraud went on for months, until accumulated differentials in inventory

eventually caught up with them, Lee says. That type of skimming is common and tends to be associated with less educated and younger perpetrators, he says.

Lee’s firm also works on more sophisticated frauds, such as one involving a sporting goods company that manufactures its products in Asia and ships them to the United States and other global destinations. The men hired to run the Asia factory operated two shifts producing goods for the company.

Everything seemed fine until the sporting goods company got a call one day from a Japanese customer, Lee says. The customer complained that it ordered “100 baseball bats but got 1,000.”

Lee says the sporting goods company realized something was amiss because it didn’t have customers in Japan. “That got everybody wondering what was going on,” he says.

The baseball bats had been box-shipped from China. As the sporting goods company backtracked the shipment, it led them back to the men running the Asia factory, Lee says. The men not only operated two shifts for the company, they also set up a third shift to produce goods for a fraudulent parallel company.

“This is a classic misappropriation of assets scheme,” Lee says. “There isn’t sufficient oversight. (The factory) is 8,000 or 9,000 miles away.”

Lee says his firm is seeing an increase in inquiries about C-level fraud—the type of

hoW fraud GetS deteCted

Tip from co-worker, customer, vendor 46.2%

Internal controls 23.3%

By accident 20%

Internal audit 19.4%

External audit 9.1%

Notified by police 3.2%


Continued from page 7

common fRaudsSkimming: Employee accepts payment from a customer but doesn’t record the sale

Cash larceny: Employee steals cash or checks from daily receipts

Billing: Employee creates shell company that bills employer for nonexistent services

Check tampering: Employee steals outgoing check to a vendor and deposits the money into personal bank account

expense reimbursements: Employee files fraudulent expense report, claiming nonexistent personal travel or meals

Payroll: Employee adds ghost employees to the payroll

Cash register disbursements: Employee fraudulently voids a sale on a cash register and steals the cash

Cash on hand misappropriation: Employee steals cash from a company vault

non-cash misappropriation: Employee steals inventory from warehouse or storeroom


big-ticket stealing associated with the likes of Bernard Madoff, the Manhattan financier whose $65 billion Ponzi scheme has been called the biggest investment fraud in Wall Street history. Prosecutions of people operating Ponzi schemes is up considerably, with dozens of cases this year alone. Most involve millions of dollars.

Electronic financial systems contribute to these schemes growing quickly, Lee says, though he notes they seldom are single perpetrator crimes.

“It’s virtually impossible to do without a coordinated effort,” he says. There is reporting, statements produced, adjustments to books and records.

The people who commit these crimes aren’t motivated by intense financial pressures, says Lee, who has worked in the fraud investigation business for more than 20 years.

“I can’t think of a single Ponzi scheme I’ve worked on where the perpetrator needed the money,” he says.

He thinks so many Ponzi schemes are coming to light now because everyone is more focused on finances and that the down economy often collapses the house of cards holding up the scam. He suspects many were going on for years, largely out of sight, out of mind.

The tide went out and what was left on the beach were financially devestated people across the country, Lee says. “Now it’s visible and everyone cares.” e

THE LEaDING EDGE 9

The proposals: A brief look into obama’s 2010 budgetBy Daniel Travis, CPA

2009 got off to an interesting start. A new president was

sworn in to office. The downward spiral of stocks began leveling off and started producing gains. We witnessed more financial scandals from lack of disclosure and oversight. Royal Dutch Shell posted its largest annual profit to date. And, as of this writing, health care reform and how to pay for it continues to be heavily debated.

Taken individually, these events help shape our economy and our world. Taken collectively, they contribute to the Obama administration’s fiscal year 2010 revenue proposals presented in May 2009 with four major areas of emphasis:

An increase in financial 1. reporting and disclosure.A reduction in oil and gas 2. exploration, and production tax incentives. Individual tax relief for low 3. income earners and expansion for high income earners.Changes to international 4. taxation.

As a result of recent financial scandals and a need to fund the health care reserve, President Obama wants to make financial information more transparent by increasing the reporting requirements. The most immediate change focuses on updated filing requirements for the Foreign Bank Account Report, expanded to disclose more detailed information. The majority of revenue raisers for the healthcare reform revolve around increasing withholding on transactions and stiffer monetary penalties for failing to file tax

returns and complying with electronic filing requirements.

One of the largest impacts on the energy sector will be the reduction or elimination of many tax incentives for oil and gas companies. Several of the more significant changes would be repealing the expensing of intangible drilling costs (IDC), repealing the percentage depletion, eliminating the Section 199 deduction for Domestic Production Activities, and increasing the amortization period of geological and geophysical (G&G) costs from two to seven years. What’s interesting is that there is no

suggestion that percentage depletion be repealed for another form of natural resource production, including coal.

Enacting these changes will generate added tax revenue from the energy sector. However, it will almost certainly come at the cost of decreased exploration and production activity, because businesses and investors may decide that projects are not economically viable without the tax incentives. These changes also will impact the administration and the United States’ goal to become independent of foreign oil, because investments in the energy sector will not be as

attractive as they currently are. In addition, many seem to forget that not all oil is “Big Oil;” many small businesses, entrepreneurs and their employees make their living from oil and gas.

Obama structured most of his presidential campaign around individual taxation; his proposals carry out several of his campaign promises. Multiple proposals are aimed at reducing the tax burden on lower income tax earners by initiating the Making Work Pay and American Opportunity tax credit, as well as modifying the earned income tax credit and the

PKF TExAS

Continued on page 10

VOLUME 10 • ISSUE 1

fall 2009


gaurav Khandelwal is CEO of ChaiONE (www.chaione.

com), a digital agency providing strategy, Web, iPhone and Facebook application development services. Founded in 2005, ChaiONE quickly became one of the leading development firms in Houston, with such clients as Microsoft, Intel, Hearst, Nestle and many more. As part of the Houston Business Journal’s “40 under 40” competition, Khandelwal was named one of the top business leaders in Houston, an award he claims as both flattering and gratifying.

RaDhIKa BhaVSaR: Where did you inherit your entrepreneurial spirit?GaURaV KhanDELWaL: A fierce desire to pay for college, business family and scarce resources all contributed to the entrepreneurial spirit.

I came to the United States

for college from India with my first semester’s tuition check and $100. From the beginning, it was clear I would need to find ways to earn money for tuition outside of campus jobs. International students do not get any student loans. I worked in construction, sold cutlery, delivered pizza, ran a catering business, a Web site business, spun records at parties, and built and sold an online HR company during my last semester of college. The need to make tuition payments on time

had taught me the first rule of business: Cash is king.

RB: What made you choose your current professional field?GK: When I was growing up, my parents chanted names like “Microsoft,” “Intel” and “IBM” every morning in between their prayers when they knew I was around, because they really wanted me to look at technology as a career option. A keen interest in computer science and economics developed, spurred by the dot-com boom and the ability to earn revenue remotely. A long stint at a major consulting firm helped build key strategic skills, coupled with an eye for niches to focus on building a digital agency with an emphasis on enterprise iPhone applications.

RB: how do you measure success? What does the “40 Under 40” recognition mean to you?

Getting to know Gaurav Khandelwal By Radhika Bhavsar

GK: It’s tough to measure success because it’s such a fleeting feeling. As soon as the goal gets close, I tend to set a higher one thinking this one must have been set low. The 40 under 40 is flattering and gratifying. It helps set a milestone and serves as a stepping block for greater challenges and higher recognition.

RB: You’ve achieved considerable success at such a young age. how did you handle the learning curve?GK: I spent a lot of weekends at bookstores reading up on books that MBA students would typically be reading. Recommendations from senior executives, mentors and friends at Ivy Leagues helped me select key reading that would help grow the business. Daily challenges with the business, such as culture, human resources, performance feedback, pay raises, conflict resolution, change

PKF TExAS

child tax credit.However, he is also carrying

through on his promise to tax the upper-income earners to a greater extent, mostly by allowing to expire or modifying several of the Bush-era tax cuts. Some of the larger items include reinstituting the 36 and 39 percent tax brackets, increasing the capital gains rate from 15 to 20 percent, and decreasing the point at which itemized and personal exemptions are phased out.

Of the four areas of emphasis, the largest focuses on the international tax arena, which is expected to raise close to $210

billion if the proposals are passed as they are currently written. The Obama Administration has made multiple recommendations to increase the reporting of international transactions and close perceived loopholes that offer opportunities for favorable tax treatment to multi-national corporations.

These three proposals have a significant impact:

Disallow the entity 1. classification election for a foreign entity to be disregarded from its owner if the owner is created or organized in a different jurisdiction.

Defer deductions related to 2. foreign source income until that income is recognized on the entity’s U.S. tax return, except for research and development.Alter the foreign tax credit 3. by requiring credits on taxes paid to be determined at a consolidated level and match the taxes paid to its underlying income.

The first of these is targeted at various international business finance structures, and may have the unintended consequence of causing other countries to raise their taxes to prevent the United

States from grabbing the tax dollars first. The latter two can be viewed reasonably as efforts to level the playing field and may not attract much opposition.

As Congress as it works its way through these proposals, the outcome has a significant impact on the way we all do business. We will wait with great anticipation to see which proposals are passed, what the final verbiage is and how each one will impact us. e

Daniel P. Travis, CPA, is a tax senior associate for PKF Texas. Contact him at (713) 860-5432 or [email protected].

The proposals: A brief look into obama’s 2010 budgetContinued from page 9

THE LEaDING EDGE 11

PKF TExAS

management, outsourcing and many more, can only be met via constant learning. Book stores are a great place to get education!

RB: Who, outside of your firm, do you admire and look to for advice and/or mentoring?GK: Although there are several mentors that I have had the privilege of reaching out to for advice, the one whose advice holds true everyday is Howard Rambin, chairman of Moody Rambin Interests. Howard’s experiences taught me basic business principles, including fixed versus variable cost, incentive-based selling and asset allocation. His story is educational and inspiring.

RB: how has the current economic situation affected you as a young professional and a business owner? GK: I quit my full-time job as a

consultant last summer at the height of the economic uncertainty to work full time for my company. I consider a time like this as an incredible opportunity to grow business and build mindshare.

RB: What are your future plans for your company?GK: We plan to be the No. 1 digital agency in Houston in the mobile application development space in 2009. Our long-term plans include strategic acquisitions, dominant mindshare in the mobile apps market and an exit to a global player.

RB: What advice do you have for today’s young professionals who are ambitious, but might overlook those who blazed the trail before them?GK: I would offer the following advice: 1) Make $3 before you spend $1, 2) Read Rich Dad Poor Dad and put money into business

savings every month, and 3) Find a mentor who has reached goals that you aspire to reach. e

Radhika Bhavsar is an Audit associate with PKF Texas. Contact her at (713) 860-1400 or [email protected].

Cubester® Chat: YPs need to think internationallyBy Radhika Bhavsar, Dawn Hodges, CPA, and Pablo Kurewosky

“It isn’t just what you know, and it isn’t just who you know.

It’s actually who you know, who knows you and what you do for a living.” —Bob Burg, bestselling author and one of the most sought after speakers in the corporate world.

This quote stands true for young professionals today. With increased globalization, the world is becoming a smaller place with bigger opportunities. “Connections” now carries a whole new meaning. It is increasingly

important to be aware and to stay in touch with the dynamic world environment, and with the changing faces of today’s economic, financial, political and global structure.

Globalization has transcended various barriers, yet its effect can be felt at micro levels. As a result, it is essential for today’s young professionals (YPs) to be more active in their communities and contribute to shape today’s world.

We know that networking is essential in today’s work

environment— but networking also transcends physical boundaries. International networking platforms and arenas are increasing in numbers, providing young professionals opportunities to advance their careers and explore new fields of interest. Networking helps secure potential clients and generates revenue for the company because it is an excellent source of making contacts and connections. Networking puts people in a position where they

can learn about new, cutting-edge innovations and strategies.

Various forums are available for people from all walks of life to share their opinions and values—and raise a voice. Organizations such as the World Affairs Council (WAC) and the Greater Houston Partnership (GHP) offer dedicated, structured efforts to bring together young professionals and give them an opportunity to broaden their perspective.

Continued on page 12


PKF TExAS

We spoke to Kirsten Davis, program officer for WAC Houston and David Khawaja, director of International Business for GHP, on their views of young professionals participating in international issues.

“Networking and establishing international ties early in one’s career builds the foundation for creating a global relationship network—and thinking ‘internationally’ will allow you to diversify your experience, taking what you learn and adapting it to your career,” says David, who serves as the direct liaison for any business or official inquiry originating from Europe, Middle East or Africa.

In addition, he feels it is important to be connected internationally for business opportunities, as well as to understand the international community’s business environment and how it operates. “Young professionals can get involved with the Partnership’s international business division by becoming a member of the GHP and taking advantage of its abundant resources and events,” he says.

The GHP works closely with foreign bilateral chambers of commerce and 91 foreign consulates located throughout greater Houston, offering 2,000 member companies resources for specific international business opportunities and events to meet foreign dignitaries, ambassadors and other high-profile global business leaders through events such as luncheons, panel discussions and receptions.

WAC started its Young Professionals program in 2001, but has had a focus on YPs even before that time. Kirsten says the WAC conducts events, including a speaker series, business luncheons, workshops and forums each month, to meet its mission of presenting all sides of current global

issues to further an understanding of international relations and foreign policy. We think the WAC’s Young Professionals program is a great venue for dialog on policies, while connecting like-minded people across the globe. Kirsten mentions that the plan is to educate YPs in an interactive direct format, helping them experience the world first-hand. The WAC partners with various leading business and other organizations to create a pool of resources, and even has regional councils to share resources and offer reciprocal advantages to all members.

Social media certainly helps network internationally with blogs and YP communities dedicated to different causes and concentrating on various business fields. Social and professional networking Web sites, such as LinkedIn, Facebook, Plaxo and Twitter, connect individuals all over the world. In a recent Leading Edge Alliance YP Special Interest Group poll, 60 percent of respondents indicated they personally use LinkedIn, while 76 percent of respondents use Facebook.

To run with the trend and expand their intellectual capital, many organizations make successful, innovative efforts to recruit and maintain a multifarious taskforce, with more companies dedicating their efforts to creating programs to involve young

professionals. In the same LEA survey, 78 percent of respondents indicated their firm’s corporate social responsibility outreach efforts include YPs, while 79 percent indicated that “YP initiatives” undertaken by their firms are very important to them.

To echo Kirsten Davis, “Consistency is the key to networking, and expanding your network is an invaluable resource.” One of her success stories includes a friend who was able to secure a Rotary sponsorship for a business education trip to Egypt to be immersed in the culture and learn more about the Middle East business environment.

In this increasing environment of global uncertainty and dynamism, it is in the best interest

for YPs to think internationally and make use of the multitude of options when it comes to being connected to the world. Using sites such as LinkedIn, Facebook, Plaxo and Twitter are great tools for Young Professionals who are just getting started in their careers. The best way for a young professional to become connected is to get face time. Going to events held by organizations such as the World Affairs Council and the Greater Houston Partnership is the best way for a young professional to boost their career internationally. e

Radhika Bhavsar and Pablo Kurewosky are Audit associates, and Dawn Hodges, CPA, is a senior Tax associate with PKF Texas. Contact them at (713) 860-1400 or [email protected], [email protected] or [email protected].

Cubester® Chat: YPs need to think internationallyContinued from page 11

PKF Texas at a GlanceMark Scimemi, J.D., has joined the Tax team as a Senior Manager. An attorney focusing on State and Local Tax, Mark provides state income and franchise tax consulting, research and analysis for multi-state clients across a variety of industries, including energy, energy services, manufacturing, professional services and technology. He also advises clients on sales and use tax solutions and taxability related to new facility construction as well as maintenance and operations. He has managed multiple discretionary and statutory incentive engagements for large privately-held and publicly-traded businesses. Welcome to the team Mark!

The Leading edge 13

briefs

The lessons of 2009

eXPeRienCe vs. ‘FReSh OuT’After months of cutting jobs, employers looking to replenish their staffs are facing the age-old question of hiring experience or youth.The trade publication Workforce Management says the trend by many employers is toward “fresh outs”–new graduates fresh out of college.

The publication cites Schlumberger Ltd., the world’s largest oilfield services company, for developing an elaborate recruitment and development program for “fresh outs” for its field operations. It has been a long-standing part of the company’s hiring strategy. e

Buy When The BeaR ROaRSIf you’re decades away from retirement, you might be wise to buy stock in today’s bearish market.

A study by financial investment firm T. Rowe Price shows that those who began systematically investing in equities in past severe bear markets were significantly better off 30 years later than investors who began in bull markets.

The study used four hypothetical investors, each putting $500 a month into a retirement account that invested in a portfolio replicating the S&P 500 Index over a 30-year period. The investors started in 1929, 1950, 1970 and 1979.

The investors who started making contributions in 1929 and 1970 began just before two of the worst bear markets in modern history. They had the opportunity to buy at low prices, thus accumulating more shares early on and putting them in a better position to gain from future bull markets.

The investors who started in 1950 and 1979 were on the verge of two of the most rewarding decades for equity investing. However, they were accumulating shares at a higher cost.

Over the long haul, the investor who started in 1970 would have posted a remarkable total return of 1,753 percent in 30 years, compared with a 400 percent return for the investor who began in the bull market decades of the 1950s and 1980s.

The conclusion, according to T. Rowe Price, is that young investors shouldn’t shy away from today’s stock market because their returns can be significantly better over time. e

nOTed TeCh enTRePReneuR neiL PaTeL iSn’T WaiTing unTiL The end OF The yeaR TO PuT TOgeTheR hiS LiST OF BuSineSS LeSSOnS LeaRned in 2009.

Patel, co-founder of Internet companies Crazyegg.com and Kissmetrics.com, came out in late August with a posting on his blog, Quicksprout.com, of the “10 Business Lessons I learned this year.”

Here are Patel’s pearls of wisdom for budding entrepreneurs:1. “Shoot for the stars and you’ll land on the

moon.” If your goal is to produce $100,000 in revenue, devise a plan with $250,000 in revenue in mind.

2. “Think for yourself.” Don’t ignore advice from smart advisors but do your own research and draw your own conclusions.

3. “Teachers open the door, but you must enter by yourself.” If you don’t have the

drive to be successful, you won’t succeed.4. “You never achieve real success unless you

like what you are doing.” If you enjoy what you’re doing, it won’t seem like work and you’ll stand a better chance of succeeding.

5. “Customers don’t know what they want.” Focus on solving customer problems.

6. “Simplicity is the ultimate sophistication.” You’ll waste less time and money by creating something that’s bare bones, getting feedback, then modifying your product.

7. “You learn more from success than failure.” Learn from your mistakes but study how others achieved success.

8. “Run your business like NASCAR.” In auto

racing, the team that wins is the one that does every little thing right.

9. “Too much of a good thing is a bad thing.” Sometimes, you make smarter decisions with limited capital.

10. “Business opportunities are like buses. There’s always another one coming.” Looking for opportunities with limited downside can be a smarter play than scouting only for those with unlimited upside.

Many of Patel’s points are basic, but he thinks few businesses really operate that way. His claim to fame is working with large companies like General Motors, Hewlett-Packard and Viacom to show them how to make more money from the Web. e

tactical

sales are sagging. Cost-conscious customers are scaling back, picking

and choosing only services they absolutely need. Payroll is looming and vendors, pinched by today’s economic forces, are demanding payment upfront.

The competing pressures of running a business in a take-no-prisoners economy make it hard to concentrate on anything but the present. And that might be a business owner’s biggest mistake.

It’s an age-old question. How do you focus on future needs and growth of your business when it’s taking everything you’ve got to keep it running today?

Balancing the short-term with the long-term is more important than you might think.


Business balancing act: Short-term demands vs. long-term visionBy Paul O’donnell

Mike Schultz, president and founder of Wellesley Hills Group, a sales and marketing consultancy in Framingham, Mass., says perfect balance can be achieved by remembering four basic principles:

Create regularly scheduled time to think about and plan for the future. Once-a-year retreats often turn into

useless exercises because follow-up falls short. He compares it to working out—management teams don’t compete in marathons by training once a quarter.

Focus on the “what” and the “why,” more than the “how.” If a company’s goal is to triple in size and become

the industry leader in profit margin, top executives must safeguard against inevitable “how” questions turning the discussion into “a dissenter’s argument.”

Stop making excuses. Everyone has the same amount of time each day. If you’re feeling stuck, Schultz says, it’s up to

you to re-examine your priorities and make the changes you need to make to move forward. “It’s up to you to be able to do it,” he says.

Don’t forget to focus on today. Some leaders get too pie-in-the-sky and lose their grounding in reality. They

also can lose credibility if their team questions their grasp of the present.

1

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BaLancIng thE ShOrt-tErM wIth thE

LOng-tErM IS MOrE IMpOrtant than yOU

MIght thInk.

The Leading edge 15

tactical

Schultz says he sees some firms neglect long-term planning because senior partners aren’t interested in making their company best in class. Their firms do quite well without them having to exert much effort or spend much time on business development.

“They’re just milking it,” he says. “They don’t do this because it’s not really necessary for them to be successful.”

Desire is what separates leadership teams content to make the playoffs from those wanting to win it all. It starts at the top. “You can tell when someone is setting up the chess pieces for success,” Schultz says.

One law firm he worked with changed its billable hours practice to focus more on rainmaking, Schultz says. The firm requires senior associates to spend a minimum of 200 hours on business development.

In times of economic stress, marketing and business development become more vital to companies. Another of Schultz’s clients is a mid-sized professional service firm that wants him to work with its managers on how to network, build relationships and establish a foundation for becoming a “trusted advisor.”

While long-term thinking is critical, it can’t become the only form of business planning. Schultz says he worked with an executive who wanted to embark on a new line of business because she saw revenue opportunity of $5 million a year.

The more questions he asked, the more enamored she became with the new opportunity. But when they dissected her current business, Schultz says, they determined its growth potential was three times greater than the new opportunity.

Market pulse and a crystal ball The necessity of balancing short-term tactics with long-term goals is a lot like “changing a car’s tires while still going 70 mph down the highway,” says Beth Zimmerman, principal of Cerebellas LLC, a strategic advisory company in Long Beach, New York.

Her job is to help businesses find, define and exploit hidden revenue potential. She says she helps business executives make smart decisions

by gathering the right intelligence and data.“Running a business definitely requires one

hand on the pulse of the market and the other on a crystal ball,” she says.

Every two years, Zimmerman says she takes her own medicine. She hires an outside researcher to talk confidentially with her clients. She started her firm six years ago after working for a global firm as a senior marketer and brand strategist. Her research showed her clients viewed her in her old role, even though she positioned her firm to become more strategy oriented.

“I made changes immediately upon hearing that information,” she says.

She changed virtually all of her business communication to reflect a strategic focus and started blogging on business strategy. Two years later, her research showed her firm was 100 percent identified with strategic planning.

Collecting research data every two years is only part of how Zimmerman keeps her business relevant to its clients. She says she constantly talks with clients about what’s going on in their businesses and industries, networking and asking similar questions of professionals she meets.

In today’s economy, “a lot of people are throwing strategy by the wayside,” Zimmerman says. “There’s a general impatience. They’re looking for fast results. In that quest to feel like they are doing something, they make bad decisions.”

She sees a lot of businesses spending money now on cosmetic items—new marketing brochures and Web site redesigns. “At the end of the day, they’re really not fundamentally changing the way they are running their business,” she says.

Zimmerman remembers working with a client whose business served as an intermediary between buyers and sellers. The Internet, however, stood to take away its niche because the buyer and seller could connect directly.

Changing how that company did business required vision and courage, she says. “It required them to say this is not how business is being done in my industry today.”

The company ended up creating a two-pronged business model—using an Internet-

based system for transactional sales where the buyer could purchase directly from sellers, while retaining a key consultative role for its sales force.

In her own business, when the economy collapsed, she noticed her customers were looking to buy only what they needed and nothing more. “Businesses and consumers were looking for surgical ways to address their needs,” she says.

Her broad strategy programs were too costly and too time consuming for some clients. Her answer—break apart the full program into a suite of affordable mini-services.

“I understand the myopia of the day,” Zimmerman says. “People are coming in and trying to grind it out to the end of the day or the end of the quarter. That type of narrow focus will only get you so far.”

Not as good as they thinkMany companies tout themselves as “solution providers.” They see that as their competitive advantage.

Schultz’s company surveyed more than 230 professional services buyers earlier this year for a benchmark study on how clients buy. The study sought to identify challenges and problems in the purchasing process and gauge how well professionals do at business development.

The top problem encountered by buyers was providers who didn’t listen, he says. That was singled out by 38 percent of survey respondents.

“You might be listening to them, but they don’t perceive it,” he says.

One third of buyers say providers don’t respond to their requests in a timely manner. What’s timely? Schultz says it’s whatever the client thinks it is.

His study only serves to reinforce what other well-known business research concludes—“a lot of firms think they’re better than they are,” Schultz says.

For example, restaurant managers often approach customers after only a couple bites and receive an “it’s fine” response so the managers think the meals are fine. But what if they asked a little later when the diners have had more time—would the answer be different? e

global

1 India is a third-world country with an underdeveloped economy.In terms of purchasing power parity,

India is the third-largest economy in the world today, behind the United States and China. India is the second-fastest growing economy in the world today.

Average annual GDP growth rates exceeded 8.5 percent for four consecutive years up until 2007-08. The 2008-09 GDP growth rate is pegged at 6.7 percent by Central Statistical Organisation. India is one of only two economies in the world that is projected to register GDP growth rates in excess of 6 percent in 2009 and 2010, according to a January 2009 estimate by the International Monetary Fund. The Foreign Exchange Reserve is $256 billion. A resilient capital market driven by positive sentiment has recovered 65 percent from its all-time low, with most indices trading close to a 52-week high.

India is the only country other than China achieving an increase in fundraising in global markets despite the economic downturn. India recorded a 24.7 percent increase over the previous year, as opposed to 7.3 percent by China.

2 Establishing and starting a business venture in India is inefficient, time-consuming and suffers from

bureaucratic and regulatory hindrances.The horizon for establishing a new business

entity in India drastically reduced to 30 days in 2008. It is expected to be reduced further on enactment of the Companies Bill 2009. Most approval and procedural compliances can now be completed online, significantly reducing the time, cost and complexity involved for setting up new companies.

With this change in policies, foreign companies are permitted to open branch offices, liaison offices, and project offices. Procedures and compliances for the same are pro-investor with simplified approval processes.

Globalization and liberalization reforms are increasingly permitting smoother and swifter

entry into business—India has recognized limited liability partnerships since April 1, 2009, to facilitate increased foreign participation in Indian business and offer a globally approved platform.

3 Foreign investment in India is hampered by stringent regulations, cumbersome, ongoing regulatory

compliances and complex repatriation rules.For the past half decade, India has been

ranked as the second most attractive investment destination in the world after China, according to IMF World Economic Outlook, January 2009. Foreign direct investment inflows over the past two financial years aggregated to more than $50 billion as reported by the Ministry of Finance, Department of Industrial Policy and Promotion.

Foreign direct investment is currently prohibited in only four sectors, while all other sectorsarepermittedundertheautomatic/approval route. Where approvals are required, dedicated mechanisms are in place to expedite the same.

Repatriation of foreign investments and capital appreciation/profitsearnedonsuchforeigninvestments is generally automatically permitted invirtuallyallactivities/sectors,exceptafew,where there is limited lock-in period.

4 India’s consumers are underprivileged.Private consumption is the largest expenditure component of GDP in

India. Total Consumption was recorded at 66 percent of GDP in 2009, higher than Europe (58 percent), China (42 percent) and Japan (55 percent). It is expected to be the most attractive retail market in the world by 2010 with a $471 billion market size, according to global management consultants AT Kearney.

Productive Indian consumers are expected to make up almost 50 percent of the population by 2013, according to KPMG.

McKinsey Global estimates that India’s consumer market, currently the 12th largest in the world, will be fifth by 2025.

India’s prosperous middle class of

250 million to 300 million people, with increasing disposable surpluses, along with the change in social norms, are increasing their earnings and spending, placing India as a leading market opportunity.

5 An India brand signifies cheap goods and services—at low cost and lower quality.India offers strong delivery capability

backed by quality and cost competitiveness across industries.• Indiaisthebestdestinationforproviding

outsourcing activities, including IT services and support, contact centers, and back office support, according to AT Kearney’s Global Services Location Index, 2009.

• Indiaofferstheworld’slargestpoolofeducated, English-speaking professional, managerial and technical manpower including accountants, doctors, lawyers, scientists and bankers.

India is a global leader in information technology and outsourcing:• Morethan80percentofFortune500

companies are outsourcing to India.• ITandoutsourcingexportserviceshave

more than tripled in the past four years to over US$35 billion in fiscal year 2009.

• 65percentshareofglobaloffshoreITservicesmarket and 46 percent of the offshore business process outsourcing market.

India is among the largest telecom markets in the world:• Subscriberbaseofmorethan400million

customers increasing by 8 to 10 million per month.

• Industryprojectedtoexpandby16percentyear on year for the next three years.

• Projectedtobecomethesecondlargesttelecom market globally by 2010.

• Lowestwirelessnetworktariffsintheworld.India is a strong global player in the

manufacturing/manufacturingoutsourcingspace:• Manufacturingandinnovationcapabilities

highlighted in 2009 by the introduction of the world’s first $2,000 car, Tata Nano.

Top 10 misconceptions about doing business in … indiaBy dewan Chopra | dewan P.n. Chopra Consultants Pvt. Ltd.


• Largesttwo-wheelermanufacturerandfifthlargest commercial vehicle manufacturer in the world—preferred investment destination for some of the world’s most reputed Auto original equipment manufacturers manufacturers. Manufacturing outsourcing is rapidly increasing.

• Second-largestcementproducerintheworld total installed capacity of nearly 220 million tons per year.

• Fourth-largestpharmaceuticalindustryinthe world.

• Fifth-largestandlowestcostproducerofsteel globally.

• Amongthelargesttelecomequipmentmanufacturers in the world—expected to grow at a compounded annual growth rate of more than 28 percent over the next three years.

Additionally, India is also recognized as a strong market player in various other industries, including textiles, biotechnology, and health care.

6 India does not have robust judicial systems.Independent expert redressal panels

have been established to address and resolve interpretational queries and grievances of appellants in an efficient manner.

These include:• Authority for Advance Rulings: Empowers

non-residents to obtain decisions on contentious matters under the income tax law.

• Arbitration: Provides a forum for alternative, out-of-court, dispute a resolution on domestic and international arbitration matters.

• Dispute Resolution Panel: Dedicated panel to settle disputes pertaining to transfer pricing laws and taxation of foreign companies has been proposed to be established in the Union Budget, 2009.

• Indian Courts and Judiciary: Highly respected globally for their independence, fair play and for justice rendered, based on a well-established judicial system.

7 India has a complex and punitive taxation structure.Effective corporate tax liabilities in India

are in substantially the same bracket as other developing economies such as Brazil, China and Russia, according to World Bank Doing Business in India, 2009.

Tax holidays, exemptions and benefits have been introduced into the direct tax framework to encourage investments across priority sectors and

regions. These include, subject to conditions:• Sectoraltaxholidaysandexemptions

granted to enterprises operating in specified sectors such as information technology, infrastructure, power and renewable energy.

• Territorialtaxholidaysandexemptionsextended to enterprises that set up operatingunits/industrialundertakingsinspecified (underdeveloped) regions.

• Substantialtaxdeductionstoenterprisesthatundertake significant capital expenditure, research and development, and activities.

India has further entered into double taxation avoidance agreements with more than 90 countries across the world to facilitate foreign investments into the country.

India’s tax structure offers a rational approach: • Introductionofadirecttaxcodethat

proposes to substantially simplify and rationalize tax laws, promote certainty and significantly reduce direct taxes.

• Imminentconsolidationofindirecttaxesinto a single goods and services tax.

• Nosuccessiontax.Nogifttaxongiftstoprescribed relatives.

8 India still remains weak in recognition, enforcement and protection of intellectual property rights.

As a signatory to the Trade Related Intellectual Property Rights Agreement (TRIPS Agreement) in 1995, India today is in total compliance with its international obligations under the TRIPS agreement.

India has recognized intellectual property rights including patents, copyrights, trademarks, designs and geographical indications. Details laws, rules and regulations have been framed in accordance with globally accepted IP standards to protect intellectual property rights.

Increasing confidence of IP holders in the extant enforcement mechanism is reflected in the near fourfold increase in IP applications over the past six years to more than 150,000 applications in 2007-08, according to the Confederation of Indian Industries.

9 India lacks regulatory commitment to enforce corporate governance policies and investor protection guidelines.

The National Stock Exchange of India is the world’s third largest in terms of volume of trade, reflecting strong investor confidence in the existence of systems, processes and mechanisms to enforce corporate governance

The Leading edge 17

policies and investor protection guidelines.These include:

• SecuritiesandExchangeBoardofIndia:Established to promote the development of, and to regulate, the securities market.

• NationalFoundationforCorporateGovernance (NFCG): Established with the objective of promoting good corporate governance and effective stakeholder participation by creating a framework of best practices, structure, processes and ethics.

• CompetitionCommissionofIndia:Seeks to protect the interests of the market/economyfromanti-competitiveagreements, cartelization, mega-mergers, etc. by ascertaining that the interests of stakeholders and the economic environment at large are not being compromised.

• CompaniesBill2009:Proposesvariousmeasures to regulate the ethical standards of corporate business practices.

10 India is a politically unstable nation governed by old leaders from diverse coalitions, impairing

its development potential.India is the world’s largest operating multi-

party representative democracy, modeled around a federal structure, with partially self-governing states that are united by a central (federal) government.

In May 2009, the Indian National Congress and its allies were victorious with a clear majority in the general elections, establishing a stable government for the next five years.

Under the twin leadership of Dr. Manmohan Singh and Sonia Gandhi, the government is widely recognized and appreciated globally as reform friendly with strong beliefs in democratic principles. Their party is credited with being responsible for the successful economic policies that have led to the current growth. The Indian Stock Market has gained more than 25 percent since the election results. In the words of U.S. President Barack Obama,“The elections have strengthened India’s vibrant democracy and upheld the values of freedom and pluralism that make India an example for us all.”

The Indian political system further boasts of several young politicians, armed with degrees from Ivy League universities with contemporary strategies of economic growth. This has further infused dynamism into the political system. e

Dewan Chopra of Dewan P.N. Chopra Consultants Pvt. Ltd., a Leading Edge Alliance firm, can be reached at [email protected].

global

Q: Our company has had two rounds of layoffs (total of 10 people or about 10 percent of workforce) in last year. As the top executive, how can I foster a culture where people are willing, and even eager, to work hard?

We’ve gone through layoffs, changed and expanded employees’ responsibilities and weathered through their survivors’ guilt, all while focusing on a new line for our core product. But now it’s time to focus on the future—how do we go about doing that and forgetting the past?

A: First off, congrats. You’re still in business. That you’re weathering this tough economic climate speaks well of your leadership. Since I don’t have specifics, I will offer some prescriptive suggestions, assuming you are a good person who wantstodorightbyhis/herpeople.

As the top executive your behavior and actions to a great degree determine the climate your people work in. Years ago I heard the term that managers are “environmental creators.” Your people pay attention to what


Q&a

In a Nutshell by Chris DeSantisLayOFFS crEatE nEw FUtUrE, SharE thE nEwS

Do you have a workplace question you want Do you have a workplace question you want answered? What do you want to know to make answered? What do you want to know to make work a better place?work a better place? Send your questions to [email protected] to get Chris DeSantis’ two cents as to what he thinks you might want to do.

you don’t say as much what you say or do. What kind of environment inspires you to love what you do? A good deal of your enthusiasm for working is likely tied to your position.

You have control of what you do and you make the decisions. You have access to data, you know what is costing money, what is making money and what your business is good at and what it needs to be better at doing. You don’t have someone looking over your shoulder as you work. You are empowered to see hope for the future because the cuts have given the company necessary breathing room.

Consider what your employees might like as part or their positions. Give them a little of what you’ve got. Financial information about where the company has lost money and where it is making money is a good start. Give them as much information as possible to understand how their decisions and contributions have an impact on the bottom line.

Typically, decisions made during downturns tend to reside at the top as resources are scarce and profits are few. If that is the case, give back to your managers control of the decisions in their areas. Tell each one how important his or her contributions have been to helping the company survive the downturn.

A great deal of what employees want is what you have—control of their lives and direction. I suspect because you have a new product in the pipeline you must have a vision. Share that vision, it will provide direction and paint a picture for them of a better future and the parts they will play in it. Inspire them.

Don’t dismiss the past. Remember, “people who forget the past are doomed to repeat it.” You shouldn’t forget what people have gone through. What I believe you want is closure. I would suggest you have a mock wake and symbolically bring to a close the last year.

Thank people for their hard work, their sacrifices, their sweat and for just hanging in there. Share horror stories of how tough it’s been but close the wake on the future. Tell them that in no uncertain terms, tomorrow “we” begin anew. We have survived a baptism by fire and we are tough, resilient, and focused. We have the products, the people, and the processes needed to not only weather any storm but to grow this business.

A little inspiration is a wonderful lubricant but as it needs to be attached to real and tangible ways of operating that bring the best out in people. Tell them what needs to be done, by when and standards of the deliverables. Unleash their full potential and then get out of their way and you’ll likely remain top dog for years to come. e

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

The Leading Edge offers:• access to the best and brightest CPas and business advisors—a peer-to-peer

connection that provides the right solutions for clients.

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

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

• The strength and reputation to attract the highest quality team members.

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

• The leading edge alliance offers world-class business advisory expertise and experience with innovation, progressiveness and quality.

To find out more about The Leading edge alliance, visit www.Leadingedgealliance.com or contact Karen Kehl-Rose, president, at (630) 513-9814 or [email protected].

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

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

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

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

The Leading edge 19

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pkf texas you manage your business cut offpublished by volume 10 n issue 1 fall 2009 cut off the...

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