Business Insider Magazine - Volume 3 - Issue 2 - 4th Issue 2007

INSIDE: No Recession Says Los Angeles County Economic Development Corporation The South Bay Los Angeles B2B Magazine • Fourth Issue 2007 • Volume 3, Issue 2 • www.BusinessInsider.us • Complimentary Copy

BUSINESS insider The HR Balancing Act PINK

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Tips From South Bay Human Resources Professionals

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e end 2007 and ring in 2008 by bringing you timely information on one of the most timeless topics in business management — human resources. I can’t think of a better way to judge how well a business is run than by how well it manages its people. We decided to theme this issue “The HR Balancing Act” and found that to be an accurate description for the evertoughening challenges that confront South Bay businesses. Companies continually need to find better ways to hire people and to motivate them to maximize their productivity. The health care crisis has brought topics like health and wellness out of the gym and into the workplace. Corporate America now faces potential liability for how it manages employee 401k plans, something rarely thought about just a few years ago. And with a tight employee-driven job market, companies are challenged to recruit and retain the right talent like never before. Employers need to pay more attention to how they appraise their employees and think about how it will affect company morale and performance. And many businesses are subjected to greater scrutiny to ensure they are not hiring undocumented workers. It truly is a balancing act that requires great dexterity to perform successfully and our professionals who submitted articles for this issue would surely suggest you don’t work without a net. We also ran an in-depth article on the economic forecast for 2008 and I personally want to encourage readers to research and factor in global monetary policy, which is very precarious at the moment, in any predictions about the future of the economy. With the dollar dropping rapidly on the world market, it is wise to focus on more than local economic factors like our solid employment base and brisk regional manufacturing, which were the kind of indicators the Los Angeles County Economic Development Corporation used to determine their prediction that the South Bay is not facing a recession in the coming year. David Whitehead Publisher

In This Issue… COVER FEATURE: The Great HR Balancing ACT

17–29, 32–34

Tips From South Bay Human Resources Professionals Appraising Employee Performance Guiding a Company’s Most Precious Assets for Long-Term Success

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Employee Retention Strategies

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Transform Workplace Stress Into Strategic Advantage

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A Healthy Workforce is Worth Your Investment Corporate Wellness in the Workplace

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Fiduciary Responsibility of Handling My Company’s 401 (k) Plan Do I need an Independent Investment Advisor

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Where Have all the Accountants Gone? Candidates’ Market Creates Recruitment Challenges for Accountancy Firms

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Employers Face Tougher Regulations for Hiring Undocumented Workers Proposed Regulations Could Impose Hefty Fines on Employers

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Health Care Solutions for Small Business Owners

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Technology Insider Corporate Compliance IT Requirements with HIPAA, SOX and Other Regulatory Governances

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Techno-Ignorance Corporate Illiteracy for the Information Age

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The Real Deal Mortgage Money is Back if You Can Qualify

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WHO Comes First Why it Matters to Put “Who” First in Hiring Decisions

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No Recession for the South Bay Says the Los Angeles County Economic Development Corporation

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How to Recession-Proof Your Business

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Community Announcements and Business Events Calendar Meeting, Event And Banquet Resources

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BUSINESS insider MAGAZINE The South Bay Los Angeles Business-to-Business Magazine Publisher & Editor David Whitehead Contributing Writers Kathleen M. Branconier, Lori D. Burzminski, Pat Byrnes, Tom Fuszard, David Holper, Ken Roberts, Karl Schmidt, Brian Simon, Tony Traven, Duncan Tooley, Bob Volkel, David Whitehead, R. Boyd Zack Graphic Design & Production David Whitehead & Susan L. Wells Copy Editing & Proofing Brian Simon Advertising Sales Manager David Whitehead Assistant to the Publisher Alexandra C. Hart BUSINESS insider MAGAZINE Welcomes Input From The Community: All Letters to the Editor should be concise and include the writer’s name, address and phone number. BIM will publish select letters addressing relevant issues and topics discussed in the magazine. We will not publish street address, email address or phone number. If the editor comments about a letter, the reader may respond with at least as many words as were used by the editor. We would like to stimulate a sincere dialogue. All letters become property of BUSINESS insider Magazine and are subject to editing for length, content, grammar, punctuation, etc. Letters may be submitted by email to:

[email protected] Or mailed to: BIM Letters to the Editor P.O. Box 1032 Palos Verdes Estates, CA 90274 (310) 872-9732 www.BusinessInsider.us www.TheBizBoard.net BUSINESS insider MAGAZINE makes every attempt to provide business decision-makers with current and accurate information. However, BUSINESS insider MAGAZINE disclaims any implied warranty about the correctness or accuracy of information published in BIM and www.BusinessInsider.us or its appropriateness for a particular purpose. You assume full responsibility for using the information and understand and agree that BUSINESS insider MAGAZINE is neither responsible nor liable for any claim, loss, or damage resulting from its use. Opinions and/or claims of BIM contributing writers and advertisers do not necessarily reflect the opinions of BIM’s publisher.

© 2007 BIM Publications & BUSINESS insider MAGAZINE All Rights Reserved

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anyway? Does your company need to be concerned with the regulations? Are you in danger of being out of compliance? Do you need to hire a consulting firm to come in and perform a compliance audit on your company? If you are working in the health care industry, then you must concern yourself with both regulations. HIPAA enables health care providers and insurance institutions to exchange information in a standardized and secure manner that is easy and uniform. Privacy of Individually Identifiable Health Information is regulated by entities covered by HIPAA. But what about organizations that are not part of the health care industry? Must we expend our IT resources and dollars on the HIPAA regulations? To answer these questions, we need to refer back to the regulations and guidelines set forth. As clearly stated in the United States Department of Health and Human Services website (http://www.hhs.gov/ocr/hipaa/bkgrnd.html), the HIPAA regulations do not apply to companies outside the health industry. SOX is a completely different beast altogether. The SarbanesOxley Act (SOX), enacted in 2002, helps improve corporate governance of American public companies. An offshoot of the Enron and WorldCom financial scandals, this law increases the level of scrutiny of public companies. More importantly, it makes CEOs and CFOs personally accountable for any financial misstatements. Public companies now realize that unlike any other regulation, SOX compliance is a state — not an event. SOX compliance requires continuous monitoring and reassessment of financial risks and controls to close any loopholes that could potentially lead to misstated financial statements. The key element of the SOX regulations is the requirement that companies must establish — and then maintain — bulletproof accounting procedures that eliminate any possibility of creative accounting. The new systems must promptly identify any personnel who attempt to alter established accounting methods or any existing financial records in an effort to enhance their company’s financial performance reports. The question to ask is if SOX applies to your company. As enacted, SOX applies to: All publicly traded companies in every industry in the U.S., each of their divisions, and all of their wholly owned subsidiaries as well as any non-U.S. public multi-national company engaging in business here. While not required by law as yet, private firms may also comply with the SOX financial framework requirements in preparation for initial public offerings (IPOs), private funding or simply to achieve a “best practices” benchmark. The SOX elements below require actual certification or specific public actions by companies to remain in compliance.

Sect 302 CEO/CFO Certification of Annual and Quarterly Reports a) The CEO and CFO review the entire report. b) The report contains no misrepresentations. c) The company presents its financial information fairly. 6 S

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d) The CEO and CFO handle the internal controls. e) The CEO and CFO report any deficiencies in internal controls or fraud involving the management of the audit committee. f) The CEO and CFO indicate any material changes in internal controls.

Sect 404(a) Internal Control Reports Each annual report must include an “internal control report” stating that management takes responsibility for an adequate internal control structure and an assessment by management of the control’s effectiveness. The report must note any shortcomings in these controls.

Sect 404(b) External Auditor’s Attestation Registered external auditors must attest to the accuracy of management’s assertion that internal controls are in place and are effective. Sect 404(a) Internal Controls Report is the area in which a significant IT play takes place. Internal controls include audit ability of systems both manual and automated. Information Technology systems that derive or provide information to financial systems used for reporting must include checks and balances to ensure consistency from one point to the next and

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to prevent a single individual from falsifying that information.

What does SOX compliance require? Public U.S. corporations across entire enterprises must establish a financial accounting framework producing financial reports that are readily verifiable with traceable source data. The source data must remain intact and not be subject to undocumented revisions. Any changes to software application programs within the enterprise that have any bearing on the corporate financial condition must include documentation as to what was changed, why the change, by whom, and when. Because financial data and financial applications are all embedded within a company’s IT enterprise, the responsibility for compliance to SOX requirements divides almost equally between the corporate finance and IT departments. SOX compliance requirements for IT rely on the Control Objectives for Information and related Technology (COBIT), established by IT Governance Institute (ITGA). The framework guidelines defined by COBIT dictate all major accounting firms’ initiatives to audit company IT infrastructure compliance or shortcomings to SOX. SOX compliance essentially requires a complete change in corporate mindset from an IT perspective. It entails adopting and adhering to a structured approach to software and database systems. Some of the software change management objectives established with COBIT include the following: • Software changes must regulate in accordance with the organization’s change management procedures. • Procedures to control the handover of software from development to test to production environments should be set. • Development personnel cannot migrate applications and data from the test environment to production. • A similar software management process is in place whether developing a new application or modifying an continued on page 13 4

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HERE WAS A TIME WHEN THE RICH AND POWERFUL DIDN’T NEED TO KNOW HOW TO READ OR WRITE IN ORDER TO RULE. But can you imagine anyone

doing so today without higher education? Let alone basic literacy. Imagine a time shortly after the invention of movable type when mass literacy overwhelmed society and those too old to learn had to fake it lest they seriously compromise their credibility and authority. Well, the new information age has done it to us again. Techno-illiteracy is the great knowledge gap of our time that is torpedoing productivity in the workplace. Unfortunately, a large part of the problem is with senior management and older employees. Personal computers started popping up in workplaces across America in the mid-eighties, captivating the young and curious while drawing contempt from the not-so-young in corporate management who thought this computer thing was just another passing fad. This contempt finally turned to fear that has carried into the 21st Century, where it is still impeding the proper implementation of technology in the workplace. If you can relate to this, don’t feel bad. You are not alone. This is something that always happens when technology takes a quantum leap ahead of decision-makers’ capacities to learn what it really is and how to make intelligent decisions regarding its use. It all makes sense when you think about it. When the technology wave started in the mid-eighties, early baby boomers had begun to dominate corporate management. The vast majority of them never used computers when they were growing up. Unless they majored in computer science or a technical field that required them to use mainframe computers, they were educated on paper and most of them spent decades learning how to manage paper-driven systems while the computer work was done on mainframes by those mysterious nerds locked behind the glass doors. Business people were largely insulated from the emerging technologies. However, that insulation disappeared rapidly about 20 years ago and many older baby boomers still haven’t recovered from the shock or adapted to the tools they must now use to conduct business. And oh how their subordinates have suffered as a result. The “paper chase” rapidly morphed into a “megabyte chase,” then to a “gigabyte chase” and is now on the verge of becoming a “terabyte chase.” It’s not surprising that pre-tech educated managers went into panic mode when they realized they had no competence to manage this stuff and it’s just getting worse every year as they become less trainable. Now we know why those old nerds who pioneered computing thought it was a better idea to keep the real computers with them behind locked glass doors. 8 S

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BY DAVID WHITEHEAD Managers facing techno shock did everything they could to delay or sometimes sabotage the implementation of technology until they realized they couldn’t hold back the tide long enough to reach their retirement. Others tried to fake it by pretending they knew about technologies where they had no training or education, and gave bizarre directives as a result. Some still do: “Why waste time booking your flight on line when you can call my travel agent?” Or, “Why don’t you want to use those beautiful paper forms with the triplicate carbons I spent good money printing for you?” To the tech-savvy generation, these kinds of directives seem moronic, but there are still Neanderthals out there giving them and enforcing archaic systems. For those of us who have spent our careers coping with techno-phobic bosses and co-workers, it has been a frustrating experience indeed. I’ve had to deal with people with authority who didn’t understand the tools I used to do my job. Most importantly, they didn’t understand the quantum leap in productivity gained by automating systems and thought we were being less productive when problems crept up while we were developing and troubleshooting our new procedures. Forcing employees to continue with tedious low-tech systems they know are less efficient harms morale in the long run and causes younger tech-savvy staff to lose respect for management. These sorts of problems are still with us and won’t go away anytime soon. So if you have been covering up your own techno-illiteracy for years and it has been causing problems in your workplace, it’s time to face up to it even if you are an old dog. If you’re not ready to retire, you are going to have to learn some new tricks to maintain your position of authority and keep the respect of your subordinates. continued on page 38

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The Real Deal: Mortgage Money is Back if You Can Qualify BY KEN ROBERTS

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n the never-ending saga of the Mortgage Meltdown, Credit Crunch, Sub-Prime Fallout and corresponding Real Estate Market Correction, let’s take a break and see where we are. Certainly we have not seen the worst of losses and write-downs from hedge funds, pension funds and bank exposure to sub-prime investments. Estimates project as much as $400 billion in losses by the time the smoke clears. This is a drama that will unfold slowly over the next year. The creation of a $100 billion superfund as a stopgap measure ensures to prolong the coming agony, at least until after the elections next November. More on this later… The good news is that mortgage money is back. The secondary market investors for Jumbo loans, those over $417,000, have returned to the marketplace. Real estate loans are bundled together into mortgage-backed securities and sold to pension funds and other investors. A large part of the trauma of the credit crunch that started in August was the inability of lenders to sell mortgages they funded off warehouse lines extended by banks. Investors pushed away from the table and refused to purchase Jumbo mortgages. The ability of lenders to fund and then sell off loans means they will not run out of money to lend. I am thrilled to report that rates for Jumbo loans have returned to normal. We are back to a more traditional spread between Conforming and Jumbo loan amounts, about .5%. So while rates are very good again, underwriting guidelines are dramatically different. The changes intend to right past wrongs in loose lending standards that allowed people to overextend themselves. The goal is to protect consumers from themselves or anyone else who might abuse the system. This tightening of guidelines will dramatically reduce future defaults, but on the flip side make it much more difficult for everyone to qualify. As I have said before, the interest-only option loan is a very powerful financial planning tool when used properly. When coupled with a financial plan to invest what would normally be principal reduction payments to get a compounded rate of return (as opposed to paying down simple, tax- deductible interest), it is the way to create wealth. With interest-only loans, instead of allowing borrowers to qualify at the interest-only payment, new guidelines require bank underwriters to use either the fully amortized payment or the fully indexed, fully amortized payment. The fully amortized payment is principal plus interest. Let’s take a $500,000 purchase with 20% down. That would mean a $400,000 loan with, say, 6% for the rate of an interest-only loan. The interest-only payment is $2,000 per month. The fully amortized payment is almost $2,400 per month, a $400 difference. To qualify for the interest-only payment, the borrower needs about $78,000 in annual income. The same borrower needs about $90,000 to qualify for the additional $400 fully amortized payment. Now let’s see what happens when we use the fully indexed, fully 4

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amortized payment. Most interest-only loans are essentially adjustable rate mortgages. They usually have a fixed interest and payment rate for the first three, five, seven or ten years. After the fixed term of the loan, they change into an adjustable rate mortgage. There is no negative amortization, and they are tied to an index like the six-month LIBOR (London Inter-Bank Offered Rate) plus a margin (lender profit). As of this writing, the six-month LIBOR is 4.853 with a typical margin between 2.25 and 2.75, depending on the lender. To calculate the fully indexed rate, you add the index value to the margin, say 2.5, and your fully indexed interest rate is 7.353%. That is what your interest rate would be after the first adjustment at the end of the fixed term if that were occurring today. The fully indexed, fully amortized payment on our $400,000 loan example at 7.353% is $2,757 per month. So borrowers must qualify for a payment that is $757 per month higher than their actual payment. That would require an annual income of over $100,000! So today, the borrower who makes $78,000 can only qualify for a $290,000 loan and a $390,000 purchase price with the same $100K down payment. With borrowers qualifying for less, you can imagine the impact on the real estate market. For those interested in the negative amortization, absurdly low teaser rate loan programs sometimes called Pay Option Arm or Pick-APay, guidelines are also changing and rightfully so. These loans give you the option of paying less than you owe; meaning much less than the interest-only payment. If you use the minimum payment option, your loan amount actually increases rather than decreases in the first several years. Originally designed to help well-heeled borrowers manage their cash flow more effectively, these loan programs have singlehandedly caused more mayhem than any other. The low starting payment rate, (as low as 1%), has been used to sell an abnormally low monthly payment to unsuspecting borrowers without fully disclosing the pitfalls. That and it being used by people buying more house than they can clearly afford has been a lethal combination. Imagine paying 1% and owing 7.5% or more. When loaded up with a three-year prepayment penalty and high margin, this loan could have a 9% fully indexed rate! The only safety valve is a negative amortization life cap. When the loan amount increases to 110%–125% of the original loan amount (lenders vary), the borrower loses the option to make minimum payments. The good news is that it stops eating up your equity. The bad news is you end up with a payment that’s triple what it was! From our $400,000 loan example, a 1% payment rate requires a minimum payment of about $1,287 per month. If there were a 110% negam cap reached within two years of taking out the loan, the new minimum payment would be $3,093 per month at 7.353%. At 9%, it’s $3,592 per month or almost three times the original minimum payment. New guidelines require borrowers to qualify at the negative amortization loan amount cap (110–125% of your actual loan) and the fully indexed, fully amortized rate. So they are taking the worst continued on page 16 B

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C E R OC L R U U M INT M I N ES N ITD E I N RS I D E R

WHO,

WHAT, WHEN, WHERE AND WHY… And you will notice it starts with the WHO. As business leaders, we focus on the WHAT, WHEN, WHERE and WHY, but seldom do we understand the WHO part of the equation when hiring or assigning people to specific roles. I work with several businesses and it is common for a person to be hired for WHAT they are, looking into their background, education and experience. And then be fired for WHO they are. This may seem like an oversimplification, but it can have a huge impact on your business. So let’s talk about the WHO. Every individual possesses measurable talents or work traits that are unique. These are not skills that can be learned, but rather represent the way a person actually views the world and processes information. For instance, there are individuals who are extraordinarily intuitive and can instantly relate to people. Throughout their lives, they have been able to connect with people. In this case, their social skills are high on the work trait scale. Therefore, they would be well suited for face-to-face customer service or some form of sales. If you combine that work trait to relate to and interact with people along with that of someone who is organized, can instantly recall a great deal of information and can work in a fast paced environment, then you have a person who would be ideal for the restaurant industry or event coordination. Also, hiring managers assume this type of person would work well at any position. Let’s think about this for a moment. In any job or role, there are specific responsibilities and different types of work that need to be done. If the vast majority of the work to be performed requires a person to focus for extended periods of time while entering information into a computer and double-checking the information for accuracy, then would you want to hire someone who needs to interact with people? What would happen if you hired someone who loves to 10 S

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interact with people and then set them down at a computer for the majority of the day? Do you end up with a happy employee? Or does this person constantly get up during the day and wander around the office in order to chat with co-workers? So what normally happens in this case? You establish a policy that limits breaks and then you have a formal discussion with the employee in question and explain the need to bear down and focus on the job at hand. Does this sound familiar? Now when the problem continues and they keep getting up and wandering around the office, then further action is taken and soon you are looking for someone new. Of course, during this period you invested a significant amount of time, energy and money in the recruitment and training process. More importantly you have seen a loss in productivity — an expensive proposition no matter how you slice it. There is a way around this problem. You can definitively identify the type of work a person does best through the use of an assessment tool. Furthermore, you can use this information to better understand existing staff and reallocate the work, based upon what each person is naturally good at, as a way to maximize workplace performance while also improving morale. The mind-set shift causes you to stop managing the process and trying to change employees’ behavior. Instead, you can organize tasks to suit a person’s work traits by understanding WHO they are and the kind of work you are assigning them. Once your organization is focused on WHO people are and what type of work they are best suited for, then the conversation starts to change in relation to managing people. Managers start focusing on a person’s strengths, instead of trying to overcome weaknesses. They start assigning work based upon what an individual does best and keep an eye out for training programs in alignment with these work traits. In this case, the employees enhance their skills through targeted training geared toward

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what they inherently do best and enjoy the most. This concept applies to every position and any type of company. Now managing people becomes less stressful and more enjoyable. Why this occurs is quite remarkable. When managers are no longer investing their energy fighting to change the natural behaviors of their staff, managing people requires less effort. Think about this. How much time does it take to manage your best people? Then how much time does it take to manage those who are misplaced? Extremely progressive /proactive companies know you can measure work traits and gain a significant insight into the WHO when making hiring decisions and clearly matching the type of person with the position. This applies equally when creating project teams using existing employees. The distinction is: Knowing WHO people are and how they will respond in specific roles instead of guessing. Knowing comes from measuring work traits using an accurate assessment tool and then developing the skills and knowledge to apply it. Also, excellent companies measure the effectiveness of their hiring practices. I’m going to refer to this as a company’s “batting average.” Great companies not only measure employee retention, but also how effective they are at hiring people that make them better. They keep score. The best way to keep score and see how effective you are at hiring people is to use standard performance criteria for any position and compare the job performance of new hires with existing staff. How many singles do you hit? This is where new hires rank in the top 50%… How many doubles? Top 25%… How many triple and home runs? This is where new employees statistically rank in the top 10%. Out of all the employees hired in your company in the last year, what is you batting average? Are most of your employees happier and more productive and is the company more profitable? There is no need to make excuses for market conditions, but are you getting better and are you growing.? 4

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The best employers really care about creating a positive work environment. They are balanced. Of course you have to be profitable to stay in business, but with the right balance both objectives can be accomplished. Finally, they understand WHO people are through the use of an assessment tool and train the front line managers and supervisors on how to

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use this knowledge. Then they can train their staff on how to measure batting average and have some fun figuring how to maximize potential and bring out the best in people. Tony Traven is a licensee for Culture Index in the Los Angeles metro area. Tony can be reached at 310- 683-3607 or at [email protected].

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C C E O O L U N M O M N I ICN S I N I D S E I D RE R

BY BRIAN SIMON

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ESPITE GLOOM AND DOOM PROGNOSTICATIONS

across the country on the heels of the sub-prime collapse, the South Bay economy is not heading into recession, according to the annual forecast released at the end of October by the Los Angeles County Economic Development Corporation. The report anticipates marginal area economic growth of 0.9% in 2007 and 0.7% in 2008, thanks primarily to favorable short-term prospects for key South Bay economic drivers, including the defense/technology, recreation/tourism, international trade, transportation and manufacturing sectors. It also predicted brighter long-term outlooks for so-called “boutique” industries such as automotive, biomedical and oil (refineries). Workers’ payrolls should also increase by 4.7% this year and 5.4% in 2008. Despite the relatively good news, the South Bay faces several challenges in the near future, the report concludes. These include dealing with shortages of both land and housing; finding ways to ease traffic congestion, particularly on the 405; and resolving negative perception surrounding future Los Angeles International Airport upgrades as well as environmental obstacles to port expansions.

The presence of LAX, two ports, Los Angeles Air Force Base and attractive coastal communities continue to foster the South Bay’s economic prospects. Still, though the LAEDC forecast predicts continued growth, the projected figures for the South Bay actually fall short of those anticipated for the state and county.

Jobs and Population Assuming the inclusion of San Pedro and Wilmington as well as communities in the Harbor Gateway area, the South Bay’s total population will swell to just under one million people by January 2008. According to 2006 stats, there were about 486,000 jobs in 12 S

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the South Bay, with the highest concentrations in professional and business services and manufacturing. Job losses are expected in manufacturing, construction and information over the next year. However, the area’s thriving aerospace and high tech sector, centered primarily in El Segundo and Redondo Beach, will keep manufacturing afloat and in better overall shape than elsewhere in the County, the forecast notes. Retail sales are also expected to jump by 4.6 percent.

Business Stats The 2005 census lists 26,553 businesses in the South Bay, with retail leading the way (with just over 12 percent of the total), followed closely by professional/scientific/ technical services, and health care/social assistance. More than half the businesses have four or fewer employees, while just 27 have over 1,000. More than one-third of the total businesses in the South Bay are based in Torrance and Gardena.

Wages According to 2006 data shown on the report, the South Bay boasts the third highest annual average wage ($51,689) among LA County’s 14 regions, trailing only the Westside and Central/Downtown LA. Among South Bay cities, El Segundo ranks number one by far in annual average wage at $81,621, thanks to the presence of the high-paying aerospace and technology sectors as well as more than a dozen Fortune 500 companies. Among industries, the professional/scientific/technical sector pays the most on average ($96,008).

Real Estate Like everywhere else, the South Bay will continue to suffer from the current housing downturn which is not expected to begin recovery until at least 2009, the forecast states. Default notices and foreclosure rates are also expected to grow in the foreseeable future. The area’s intrinsic appeal continues to fuel housing demand, but new construction is limited by the scarcity of available land. 4

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On the other hand, industrial real estate is thriving, with vacancy rates of just 2.2 percent, primarily due to the South Bay’s favorable location situated between two major ports and LAX. The vacancy figures are expected to remain low due to the shortage of land to build larger warehousing complexes. On the office side, the South Bay’s overall vacancy stats are higher than the rest of the County (13.2 percent versus 9.5 percent), but the numbers are notably skewed due to two inordinately troubled areas (the 190th Street corridor adjacent to the 405 Freeway and Century Boulevard next to LAX). The report lists several key recent expansions into the area, mostly in El Segundo where IT and co-location firms have begun to flock as an alternative to Downtown Los Angeles. Though asking leases in the area continue to rise, they are still significantly lower than those of the Westside.

Insider Summary The presence of LAX, two ports, Los Angeles Air Force Base and attractive coastal communities continue to foster the South Bay’s economic prospects. Still, though the LAEDC forecast predicts continued growth, the projected figures for the South Bay actually fall short of those anticipated for the state and county. Not everyone is as optimistic as the LAEDC. Just before the release of the economic forecast, a Los Angeles Business Journal article suggested that a recession was more likely in Los Angeles than in the country in general. Declines in home sales, decreased construction, weak retail/wholesale activity and financial market upheaval prompted the pessimism. Yet, as writer (Anderson Center for Economic Research at Chapman University Director) Esmael Adibi explained, “These outcomes should not be surprising. Significant economic slowdown and possibility of recessions are the natural outcome of prolonged periods of growth and years of risk-taking behavior. The adjustment period will be painful in the short-run but will ensure a long-run growth.” S

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CORPORATE COMPLIANCE continued from page 7 existing application. • Staff must follow procedures that ensure all requests for change get assessed in a structured way for all possible impacts on the system. • Formal procedures that ensure signoffs or approvals should govern the release of software revisions and releases. • Installation of software changes must address data conversion. • An independent (from developers) group must test changes prior to installation into the production environment. • Back-out plans for software changes should be in place. • Internal control measures should ensure distribution of the correct software element to the right place, with integrity and adequate audit trails. • The software management framework should require that a test plan be created for every development, implementation and modification project. For SOX compliant companies, gone are the days of the ‘quick change’ to IT systems made by the development staff. In many respects, the pressures SOX exerts on the IT side of an organization force a higher level of control and ultimately a higher level of overall software quality. With independent testing required of all changes and new systems as well as management signoff, the likelihood system bugs appear will diminish. Effectively implemented, SOX causes the IT enterprise in US corporations to grow up and act like real software developers/Implementers. Additionally, COBIT establishes several measures to ensure security of systems and data integrity. The list below is a subset of the security measures required by SOX. • Create security measures in line with business requirements, including translating risk assessment information to the IT security plan. • Control, monitor and log the use of sensitive software utilities. continued on page 37

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HOW TO RECESSION-PROOF YOUR BUSINESS BY BRIAN SIMON

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ELIABILITY HAS ALWAYS BEEN THE FOUNDATION of the

American economy. Even in the face of various wars, acts of terror, natural disasters, market crashes, political turmoil or other cataclysmic events, one could always bank on the fact that over the long haul the stock market goes up, homes appreciate, wages increase and the economy grows. Then again, all bets may be off in the wake of 9/11 and given that the long-term effects of the increasingly global economy remain to be seen. Yet so far, nothing has altered this tried and true formula. The recent housing downturn, drought and escalating costs for oil and energy have prompted mumblings of a recession on the horizon. Yet according to the latest forecast by the Los Angeles County Economic Development Corporation, this is unlikely to occur. In the business world, recessionary cycles tend to cause a shake-out not unlike evolution: the strong survive and those who cannot adapt become extinct. Whether a recession is coming or not, it is always prudent to be prepared in the event of any economic downturn. While some business owners see cutting expenses and laying off staff as a quick fix, that mindset often does more harm than good, especially when considering the long-term goals of a given company. First, the bad news: Nothing is completely recession-proof. That said, there are a number of wise safeguards business owners can implement to ensure that the hard times won’t be crippling. Then again, in the words of South Bay Economic Development Partnership 14 S

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Executive Director Joe Aro, “You don’t need a recession to put you out of business.” Many of the following quick tips are just as valid during economic booms. After all, it is better to plan for the worst-case scenario so you are always ready for it if and when it arrives.

Though it’s important to remain focused on your core business products and services, it doesn’t mean you should pigeonhole yourself. Find new applications for your product that can re-invigorate relationships with existing customers.

Keep a Cash Reserve While it’s imperative to monitor spending and to keep a watchful eye on expenditures and revenues, it’s also critical to set some additional monies aside for a rainy day. Even some extremely well-run businesses shut their doors in the wake of 9/11. Why? They didn’t have a cash reserve to carry them through the lean periods. How much is enough? Theories vary, but (as is the case in personal finance), at least six months of operating expenses is recommended.

Keep Your Customers at the Forefront When it comes down to it, there is nothing more important than your customers. According to statistics from the U.S. Small Business Administration, far and away the biggest reason customers leave a business is not because of price or product quality, but because they feel unappreciated. Stay in contact with your clientele via newsletters, mailers, e-mails or periodic phone calls to keep them current on any new products or services, but most importantly to make sure you are not forgotten. Additionally, customer surveys are a useful way to invite interaction and ask for input on how your service can improve.

Stay Ahead of the Curve “The rule in business is to obsolete yourself before someone else does,” says Joe Aro. Keep a close eye on any and all new technology you can incorporate into your business, whether that means integrating time-saving software, upgrading your product, or using Web 2.0 applications to streamline communications.

precisely when companies should step up and evaluate their marketing plans and look to broaden their efforts through both existing and new print, online and other media options. At the same time, be careful to focus that effort on your core target market and not to waste advertising dollars by simply “getting your name out” to whomever.

Diversify Your Customer Base

Cut Waste, Not Want

Though it’s important to remain focused on your core business products and services, it doesn’t mean you should pigeonhole yourself. Find new applications for your product that can re-invigorate relationships with existing customers. Then look beyond the tried and true to determine if you can appeal to a previously untapped market. “You can’t run your business in a vacuum — not in a global market,” Aro says. “You have to ask yourself who else can use that product?”

Reducing fixed operating expenses — those not affected by sales revenues — can help ease financial woes during a downturn. Examples may include securing better deals for printing services and health insurance and eliminating unnecessary extravagances such as corporate limousines and expensive meals. If cutting staff becomes necessary, it should not mean unreasonably increasing the workloads of those employees who are left.

Increase Advertising and Marketing

Maintain Open Communication with Staff

It may seem to go against the grain to spend more when you have less. Thus, many business owners make the mistake of cutting back on advertising when times are tough, stating that they have to reduce expenditures. Yet this is

Keep your employees abreast of what is happening with the company — keeping them in the dark spawns distrust — and look to them for important and creative input that can make a difference. Enlisting employees to develop creative ideas that can streamline operations not only helps the bottom line but also increases morale.

Reducing fixed operating expenses — those not affected by sales revenues — can help ease financial woes during a downturn. Examples may include securing better deals for printing services and health insurance and eliminating unnecessary extravagances such as corporate limousines and expensive meals.

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Sources: 7 Surefire Strategies to Recession-Proof Your Business by Collin Almeida (PowerHomeBiz.com): Recession Proof Your Business (Blogbusinessworld.blogspot.com) Surviving a Downturn by Ross Hall (PowerHomeBiz.com) Kevin Donlin (Guaranteedmarketing.com)

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KEN ROBERTS continued from page 9 case scenario and making you qualify for that upfront. It’s a good thing! It will return this loan program to its intended use — those that can afford it. Lending guidelines still change daily. Finding what we call expanded criteria loan programs like stated income and 100% financing is much more difficult. They both require higher credit scores, and stated income requires lower loan-to-value ratios. But they do exist. Now more than ever, you need an expert who is approved with multiple lending sources and who is also a fiduciary to help structure any real estate financing. Experts say 50% of mortgage originators will likely leave the business. That should leave more seasoned professionals to advise you without personal financial gain as the primary motivating factor. There are proposals for legislation requiring everyone originating a mortgage loan — whether a broker or bank employee — to be licensed and obligated to adhere to business standards and continuing education requirements. Currently, a bank loan officer has no licensing or experience requirements. Some states have no licensing requirements for mortgage brokers. The public deserves better. Raising the threshold of entry into the mortgage business is certainly a necessary step. Next, professional standards of conduct and educational requirements need to be implemented. A slowing economy and declining consumer confidence make an economic downturn a greater possibility. That should keep rates low moving into next year. The real estate market continues to slow. There

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are some areas and property types declining faster than others. It is not an even, across-the-board correction. The credit crunch in August really accelerated softening prices because it took buyers without viable financing out of the market. With the return of good financing options, albeit tougher guidelines, buying opportunities galore now exist for well-qualified buyers and investors. A growing number of foreclosures and bank owned (REO) properties coupled with desperate, motivated sellers will create a big win for those with the capacity to buy. The logic is simple. When is the best time to buy good stocks? When everyone is selling. When is the best time to purchase good real estate? When no one wants to buy. I’ve seen it many times. The last substantial real estate market correction ended at the beginning of 1998. Prices bottomed out, bounced back and then increased $50,000 within a few months. And it only took 18 months for prices to surpass the 30–40% decline we experienced. The only way you knew the market hit bottom was after you already missed it! This downturn will end and values, as always, will increase over time. If I were contemplating a real estate purchase in the near future, I would get preapproved, have money in hand and be patient. Just the right property at just the right price is the right recipe for long-term gain. Excuse me! I think I hear someone knocking. I think it’s Mr. Opportunity! Ken Roberts is a mortgage planner with nearly 30 years experience in the South Bay real estate market. Ken can be reached at (310) 792-7090.

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BY LORI BURZMINSKI

Guiding a company’s most valuable assets to reach its potential creates a platform for long-term success

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HILE SOME MANAGERS DREAD giving a performance appraisal, others see the process as one more opportunity to ensure a company’s success. It empowers employees to stretch beyond their comfort zones and realize their full potential. A formal performance appraisal is a platform from which to summarize the informal evaluations that have occurred during the past year, praise the employee for a job well done and discuss areas for improvement. Feedback on employee performance, both positive and negative, is most effective by continuing throughout the entire year as needed. Waiting for the annual performance appraisal to provide feedback is a disservice to the employee and to the entire organization. Bringing performance problems to an employee’s attention as they arise also prevents unnecessary surprises during the appraisal meeting as tend to happen when such problems are “saved up” over the course of the year. An evaluation system functions as a valuable tool providing constructive comments and suggestions for positive change. A good evaluation system represents an important investment in an organization’s most important asset: Its employees!

The Appraisal Process Keeping a written “memory file” is an effective way to track and refer back to information about an employee’s performance during the past 12 months. Reviewing the memory file for positive or negative performance that occurred during the year allows that information to be objectively incorporated into the performance appraisal. This could be in the form of notes on specific behavior. Copies of exceptional documents such as letters of appreciation or warnings should also go into the memory file. As a tool to prepare for the performance appraisal, the memory file provides evidence to support ratings, increases the accu4

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racy of the performance appraisal by basing the information on documentation rather than memory, and ensures the manager will look at an employee’s performance during the entire appraisal period rather than just the most recent events. As important as this information is to the process, having a record of behaviors to back up ratings generally helps a manager feel more confident going into the performance appraisal meeting. Be Truthful. When conducting evaluations, it is critical to present an objective and accurate analysis of the employee’s performance and resist the temptation to give false praise. On the other hand, evaluations should never contain insulting, defamatory or inflammatory language either. Never sugarcoat the review, but at the same time be diplomatic and tactful. Managers should choose their words carefully! Be Fair and Consistent. This may require some soul-searching on the manager’s part to make sure employees are treated equally in the review process. Imposing stricter requirements on one employee because of personal feelings, be they positive or negative, limits the ability for that employee to grow and contribute to the company’s success. Likewise, ignoring problems because a person is well-liked or the manager is afraid to upset them creates similar problems. Set realistic goals. Unrealistic objectives are surefire ways to set up employees for failure. If additional training or guidance is necessary, make sure that arrangements are made to provide employees with the opportunity to expand their skills. Give employees every reasonable tool to ensure their success.

Common Rating Mistakes Halo and Horns. The tendency here is to generalize ratings based only on one or two specific traits. The shortcomings of an employee who is especially cooperative may be overlooked as continued on page 18 B

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PERFORMANCE APPRAISALS continued from page 17 may the strengths of an employee who frequently argues. Clones. The manager thinks that by extremes they will avoid problems by rating all employees high or low. The manager justifies the high rating because “they’re all good” or the low ratings because “they really need to be challenged.” Similar-to-Me. The tendency to give slightly higher ratings to employees who are similar to you in attitude, work habits, etc. than to employees who are different from you. Contrast. A manager rates an employee high (or low) because an extremely high (or low) rating is given to another employee. This tendency completely misses the mark of focusing on the requirements of the job. Most Recent Events. A manager gives an undue amount of weight to what the employee has done in the last few weeks rather than what the employee has done over the entire appraisal period.

review past performance, the manager also needs to give an employee a vision for future performance. Establishing goals gives the employee something to strive for in the long-term. Reviewing these goals helps end the appraisal meeting on a positive note. Performance targets should be clear and specific. Some examples are illustrated in the figure above.

Suggestions

Before, During & After the Appraisal Meeting

Use Examples. Specific examples provide the backup to support an employee’s performance rating, make the appraisal more objective and give the employee clear examples of both positive and negative performance. There should be a balance in the use of examples to support both positive and negative behaviors. Outline Future Goals. Although a performance appraisal is designed to

The manager needs to spend time thinking about and planning the items to cover in the discussion. Sufficient time and privacy should be allowed to conduct the meeting and interruptions kept to a minimum. To give the meeting and each other the attention deserved, the door should be closed, cell phones turned off and the office phone not answered unless absolutely necessary. Once the date and time are estab-

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lished for the meeting, try not to postpone or reschedule. The performance appraisal is an important meeting and needs to be treated as such. At the meeting, the manager should explain the purpose of the discussion. Putting the employee at ease by explaining that the purpose of the evaluation is to look at overall performance, assist the employee to develop and grow and not just to find fault sets a positive and constructive tone for the meeting. A manager may want to give a copy of the appraisal to the employee to read immediately before the meeting starts. This gives the employee some private time to digest the information before sitting face-to-face with the manager. Remarks should be based strictly on performance that is relevant to the job. Anything else is inappropriate. Being a good listener, trying not to get defensive if the employee gets argumentative or emotional and asking clarifying questions will help defuse a potentially emotional situation. Remain calm! In discussing each of the evaluation factors, the manager should point out positive skills and accomplishments whenever possible before addressing the areas requiring improvement. Clearly understanding how the ratings work and effectively explaining those to the employee helps create an objective environment. In closing the meeting, the manager should summarize the evaluation, review specific goals and standards of performance and offer training opportunities 4

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for the next review period. It is critical to have the employee participate in the goal setting and have a clear understanding of the expected results and ramifications if no improvement occurs.

After the Appraisal Meeting The manager must make time to followup on what has been agreed upon by both parties. This demonstrates that both the manager and the company are serious about empowering employees to improve and reach maximum potential. Both the manager and employee should schedule a follow up meeting within 30 days or even sooner to review the employee’s progress. Any required training should be set up quickly to ensure the employee is getting the appropriate training and skills to get the job done. If any interpersonal problems are discovered involving other employees, the manager should set up a meeting with both employees to address these issues, getting HR involved if necessary. When employees continue to perform poorly, they must be made aware that consequences may include further disciplinary action up to and including termination. When improvements in performance are seen, the manager needs to provide positive feedback and make note in the memory file. Additionally, as part of a supervisor’s or manager’s growth, counseling and coaching from the HR department, or from a seasoned human resources advisor, helps a manager become more effective and ensure a positive outcome in the performance review process. When properly structured, the performance review process is a valuable tool for supervisors and managers to create a positive work environment, foster career growth and development and continue to build a successful company. Lori Burzminski operates South Bay HR, providing outsourced Human Resources services, expertise and recruiting for companies that do not have an HR department or those that wish to supplement their current HR team with an outside advisor. Visit www.southbayhr.com or call (310) 921-3805. 4

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BY PAT BYRNES

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OES YOUR COMPANY FIND IT CHALLENGING to recruit and retain quality personnel? Recruiting, retaining and rewarding the right people are challenges employers face in every economic climate. Management usually knows who the right people are. They are the ones producing, and sometimes pushing, more than anyone else, and keeping the company on track. Here are five steps to developing a retention strategy that works. The first place to start is with an honest evaluation of your organization.

Step 1: Define Your Values System What are your organization’s behavioral value standards and vision? Where do you want your company to be in five years and 10 years from now? What behaviors do you tolerate? What shouldn’t you tolerate? Identifying and writing down these values, serves as the foundation for determining whom you hire, whom you keep, and whom you reward. To maintain consistency in the organization, it’s important for these values to guide your company. Your vision helps identify the employees who desire to move in the same direction as your business.

Step 2: Establish Trust Within All Areas of the Business We all seek security in our jobs. However, most of us recognize this is something we must create ourselves. Security comes from trust, and trust comes from honesty and communication. The bottom line is that employees want to know their employer will be straightforward with them. Employees want to know when things are going well and when things aren’t. To help build trust within your organization, establish a process for sharing important information related to your busi-

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ness with your employees. This can be as simple as a quarterly letter from the president or a weekly e-mail from department heads. The goal is to keep people apprised of the health of the company and aware of vital issues. In addition to building trust among your workforce, it will also help employees make positive decisions that are supportive of your organization’s vision.

Step 3: Assess Employee Priorities Once you know who the real keepers are, survey them to determine their priorities, both work- and life- related. Is your workforce comprised of risk-takers? Do they have long-term goals or do they value short-term incentives? The answers to these questions will help you structure effective reward programs that satisfy these employees’ needs.

Step 4: Do Your Homework in Your Industry Now that you have an idea of your internal value system and what is important to your employees, it’s essential to find out what compensation and benefit programs are being implemented throughout your industry, especially by your primary competitors. This gives you a clearer view of what is commonly accepted in the industry and gives you a comparison of what’s important to your employees vs. the rest of the industry.

Step 5: Create Compensation and Benefits Packages that Support Company Values and Employees Needs Your research should pinpoint the key areas that are important to your employees in terms of compensation and benefits packages. Map this information to your overall plans and budget so that your program adds value to employees.

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Key Areas to Include in Your Compensation and Benefits program: The foundation for any compensation package is cash compensation. Most employees receive two forms of cash compensation: Base salary and a periodic bonus. Your competitive analysis should help you determine ranges for cash compensation. Taking into consideration employee expectations, as well as organizational goals and budgets, you can determine a “target” quartile for base compensation for your employees. Bonus and incentive systems tend to be more effective if they are based mostly on objective criteria; although each system normally incorporates some subjectivity as well.

b. Retirement Plans Many companies offer employees longterm incentives, including qualified retirement plans for all employees, and non-qualified deferred compensation plans for selected highly compensated employees. Qualified plans, such as 401(k), profit sharing, and defined benefit pension plans, offer tax advantages. Employer contributions are tax-deductible, and employee contributions are made on a pre-tax basis. Participant accounts grow on a tax-deferred basis and are exempt from creditors. Qualified plans can be structured to focus contributions on the basis of performance, age, and/or tenure. Non-qualified plans permit significantly higher contributions, but do not enjoy the same tax treatment as qualified plans. These types of plans are generally targeted towards senior executives and have earned the nickname “Golden Handcuffs” due to the large payoffs that accompany longterm service. Like short-term cash incentives, these programs are successful if they contain the right mix of objective and subjective criteria.

c. Health and Welfare Plans Benefit plans may be critical to your employees and these kinds of benefits generally fall into two categories: Health continued on page 29 4

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ORKPLACE STRESS IS HIGH on the worry list of every

Human Resources manager. The negative impact of workplace stress on business is tremendous in terms of profits lost. Studies show that employee illness, absenteeism and turnover, customer dissatisfaction, lost productivity and creativity, and sometimes even workplace violence are very often the result of workplace stress (see figure 1). To understand how to best utilize stress to advantage, it is helpful to understand the energy exchanges at work within the enterprise. Stress affects the energy level of the company and the individual.

What is Energy? Energy is the “ability to do work.” This definition comes from the physics definition of work as “force moving through a distance.” If time is specified, energy becomes power, as in “horsepower.” Workplace energy is usually different as it is based on a sharing of the human life force. Think of it as the “electricity” we bring to each moment by our connection with the immaterial cosmic life forces. It is the essence of being alive! It is what gets sapped out of us when we feel exhausted! Every business enterprise, when abstracted from its unique products, its distinctive services, its mission statement, its logo, its workforce … all of its unique flavor and color, is an energy converter. It converts the potential energy of a customer’s money into the chemical and/or kinetic energy of products and services for its customers. The company does this by employing workers in another energy exchange. The employment contract is an agreement for a continuing set of energy exchange transactions between employee and employer.

Employment Energy Exchange The employment contract involves energy exchange transactions from both sides. Employees provide energy in manual labor, teamwork, intuition, social interaction with colleagues and customers, mutual support, attitude, demeanor, creativity, mental skills and laughter, among other areas. Employers exchange their energy in money, health care, future security (retirement), work environment, praise, recognition, companionship, meaningful tasks, respect, and more. The ideal is for each party to see the employment arrangement as a beneficial and balanced energy exchange. In such an environment, energy flows freely like conversion of potential energy into kinetic energy in a well-oiled machine. When either side perceives an imbalance, dissatisfaction drains energy in the form of friction. Friction is energy waste. If not remedied, friction leads to eventual breakdown (employee termination or resignation).

STRESS = Energy-Wasting Friction What can a company do about this problem? The answer, just like for an engine, is to minimize the effects of friction. Friction in the workplace is called STRESS. Although a minimum of stress is necessary for growth and strength, too much stress for any organism becomes debilitating. Stress is another name for the emotionally “triggered” state known as the “fright-flight-fight” survival response. We are triggered when we become fearful; we sense that we are in danger. 22 S

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Where does this threat come from? It arises from a real or perceived imbalance in our energy transactions. For example, we sense that a manager, colleague or customer wants to suck out our energy and give little or nothing in return; we think our workload grows to exceed our energy capacity; we believe management is unilaterally reducing its energy contribution, etc. Of itself, the survival response is a good thing for our preservation. However, when triggered in the workplace, the response interferes with the desired energy exchange (except in response to fire alarms and similar dangerous situations). Our blood pressure rises, adrenaline (epinephrine and norepinephrine) is massively dumped into our bloodstream, and resources are diverted from the digestive and immune systems to our muscles. Sometimes workplace-unacceptable flight or fight behavior erupts. Most often, that type of response is stifled, but our emotions and our energy transactions with others are still affected. If these chemicals stay in our body too long, they cause illness. High workplace stress levels often lead HR to use outside consultants to identify stress-reducing policy changes or employee motivational programs. Both of these approaches are like polishing the parts of an engine that interface to one another — good first steps, but the real answer is the OIL!

Where’s the OIL? What is the OIL that will reduce friction in the employment trans-

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actions and who has it? The oil is found within each employee and is triggered by each stressful event. The oil is adrenaline, converted under direction of the mind! The energy exchange transactions of the workplace can be lubricated and optimized by an alchemist-like conversion of adrenaline, resulting in stellar performance.

Use Your MIND The best solution to stress is to direct the mind to use the adrenaline to boost positive performance. Although science is still advancing in its understanding of the mind, there is a useful distinction between the conscious and sub-conscious mind. The conscious, or rational, mind we utilize in most of our waking hours. It is the mind that we use for thinking, speaking, reading, computing, evaluating, writing, etc. The sub-conscious mind is responsible for intuition, habits, autonomic body functions, total memory, self-image, emotions, aspirations, dreams, and limiting beliefs. Although our rational mind may believe it is in control of everything about us, our life is greatly affected by our subconscious mind. Since our sub-conscious mind runs our bodily processes and chemical reactions, it has the power to convert the adrenaline and direct it toward a positive outcome. Directing the sub-conscious to do this is not difficult, but it does take technique and practice. The conscious mind has developed a protective screen around our sub-conscious that filters incoming information and rejects ideas that do not match our core beliefs. Because of this filter, easy conversation with the subconscious mind requires distraction of the conscious mind from its filtering task. Since deep relaxation alters the brainwave pattern and distracts the conscious mind, it is the preliminary step. Then conversation with the sub-conscious consists of three parts: intention, imagination and affirmations.

Intention We have up to 60,000 thoughts each day. Without a specific focus, these are like a light bulb sending energy in all directions. As a society, we generally work with intention-deficit-disorder. By contrast, a thoughtfully considered intention for our continued on page 24 4

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STRESS continued from page 23 actions focuses our mind and harnesses our energy into a narrow laser-like beam. Clarifying our intention is a requirement for harnessing our adrenaline response.

Imagination We can use our imagination to direct our sub-conscious. This works because the subconscious cannot tell any difference between information fed to it from immediate sensory input (what is happening in real time) versus what is coming from our imagination. Successful athletes know this and use it before every competition. They imagine themselves performing flawlessly; they use all their senses to perceive themselves winning. Similarly, employees can imagine themselves succeeding, dealing with a difficult customer, completing a challenging work assignment, or being energized and invigorated. Once an event is accepted by our sub-conscious mind as reality (coming from senses or imagination), it directs all activity to achieve the envisioned outcome!

Affirmations Affirmations are short declarative sentences to confirm to our sub-conscious our desired self-image. These affirmations must be in the present tense (as if they are true NOW) and positively stated (no negative word allowed). The more descriptive and emotion-charged, the more effective they are. Examples are: “I am calm and competent.” “I can do this!”

“I love this customer.” “I am healthy and well.” “I am trustworthy.” “I have fun working smart.” “I relish challenges.” “I accomplish this challenging task perfectly.” “Keeping my work area neat and safe gives me pleasure.” “Kind words are all I speak about everyone.” “I respect others.” “I enjoy and have fun at my work.” The sub-conscious accepts these statements and puts them into effect.

Alchemist Process The alchemists sought to convert lead into gold. The workplace Alchemist Process converts stress into success. It involves four steps: 1) Take several deep breaths for a total body relaxation. 2) Set a positive intention as the desired outcome of the process. 3) Imagine calm and complete success in the next tasks. 4) Recite a few key affirmations (aloud or internally). It is quick, taking only 30 to 90 seconds. It is the true alchemist process because it transforms adrenaline into the focused positive energy to perform the triggering transaction perfectly. It is the OIL that lubricates the business energy exchanges! The employee using this process both performs better on the job and goes home happier because all adrenaline is consumed in well-performed tasks. A significant secondary benefit is that the employee who learns this technique will also use it for converting stresses outside the workplace, resulting in fewer offthe-job problems. continued on page 31 24 S

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A Healthy Workforce is Worth Your Investment BY BOB VOLKEL

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HE SOUTH BAY IS WIDELY KNOWN for its healthy lifestyle. Walk down the Strand on any given day and it’s obvious how we got that reputation — perfectly tanned and toned people participating in a variety of activities from biking and blading to surfing and swimming. But take a moment to look around your office. Is your workforce “healthy?” We all know the importance of leading a healthy lifestyle; one based on exercising regularly, eating a well-balanced diet and living in a tobacco-free environment. Unfortunately, statistics show that the majority of Americans do not lead healthy lifestyles, and more importantly, do not know the simple steps to become healthier individuals.

“Current smokers missed more days of work and experienced more unproductive time at work overall across 11 health conditions compared with former smokers and non-smokers.” — Journal of Occupational and Environmental Medicine, 2006 As an employer, you can be an active participant in helping your employees adopt more healthy lifestyles. Imagine the value of a program that increases productivity, reduces absenteeism, lowers workers’ compensation costs, lowers healthcare costs and reduces employee turnover. It may surprise you that a corporate wellness program can help you achieve all these goals. In addition, it can bring employees together, creating a culture of belonging and achievement — a bond that cannot be easily replicated by contending employers.

What is a corporate wellness program? A corporate wellness program is an integrated strategy developed to improve the health behaviors of employees. Relying on initiatives designed to drive and motivate employees, corporate wellness programs are a main staple for Fortune 1,000 companies because of the economic value they deliver in a multitude of areas. “For every $1 invested, employers can expect a return of up to $10 through lower medical claims, reduced absenteeism, improved productivity and other factors, according to a survey published in the American Journal of Health Promotions.” Small and mid-sized employers can yield similar returns and create a competitive employment advantage using scalable strategies. There are seven key components to engaging employees in a corporate wellness program. Executive Support — Any corporate wellness program must be embraced by company executives. Design — A properly designed plan encourages, equitably measures, and rewards all employees regardless of where they currently fall in the health spectrum. Inspiration — Employees need to understand the motivation behind the employer’s investment into the corporate wellness program and the rewards for employees if they are successful. Education — While access to health information is readily continued on page 26

Top 5 Myths of a Corporate Wellness Program #1 Why bother? National Health Care will be implemented shortly. Should a national healthcare program be enacted, it will not affect productivity, absenteeism, team building or employee engagement — all of which are positively affected by the implementation of a Corporate Wellness Program. #2 Our company is too small. Small companies are generally at a disadvantage as big companies usually offer higher salaries, better benefits and more opportunities for promotion. However, programs like this can actually even out the playing field. Corporate Wellness Programs usually have a huge effect on employee retention as they foster employees bonding with other employees, thereby helping to retain key workers. #3 It takes too long to see ROI. While it can take two or three years to see a meaningful return on healthcare expenses, 80% of the benefits to an employee’s

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health occurs in the first 20% of their progress! In a good program, employers see impressive productivity gains/ absenteeism results (47.5% drop in absenteeism over a six-year period for participants in the DuPont wellness program). #4 We already have a disease management component in our health insurance program. A disease management program is not the same as a wellness program. A wellness program is a proactive and preventive initiative to improve the health of all employees. A disease management program is a defensive program that manages chronic claimants who are already ill. #5 I don’t want to spend any money on a corporate wellness program. The dynamic of individual or team achievement is oftentimes more than the tangible dollar value of the rewards that drive results. Done right, bragging rights and a movie ticket or Starbucks® gift card can go a long way.

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HEALTHY WORKFORCE continued from page 25 available, employers may want to increase motivation to use available resources by bringing in health care coaches who help employees build a customized exercise and nutrition plan. Partnership — It is most effective to create an environment that allows employees to improve their health without the risk of being judged and embarrassed. A good wellness program

Wellness Facts “Smokers take an average of almost 11 days more of sick leave every year than their non-smoking colleagues.” — Tobacco Control Journal “Chronic diseases such as heart disease, stroke, cancer and diabetes are among the most prevalent, costly and preventable of all health problems and account for more than 75% of the nation’s medical care costs.” — Centers for Disease Control “55% of adults in California are overweight or obese.” — California Health Interview Survey, 2006 “40% of all cancers are caused by the typical American diet, lack of exercise and obesity.” — Harvard Report on Cancer Prevention, 1996 “78% of Americans do not meet basic activity level recommendations.” — Wellness International Network Ltd., 2006 “A Duke University study comparing the costs of the heaviest to those of recommended weight found the number of lost workdays was almost 13 times higher, medical claims costs were 7 times higher, and indemnity claims cost were 11 times higher.” — Archives of Internal Medicine, 2007

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will create partnerships that allow workers to retain a degree of anonymity while still providing personalized services. Accountability — Employee accountability and reinforcement with milestones keep progress on track and solidify the results of the new healthy behaviors. Rewards — The most effective corporate wellness programs include rewards to motivate healthy behaviors. Rewards vary greatly and need not be extensive or expensive to generate results. Conversely, it is not uncommon to see disincentives built into a corporate wellness program for those who choose not to participate.

What type of investment will a corporate wellness program require? No Cost. Moderate Cost. High Cost. The chart below shows sample solutions at various cost levels. The fact of the matter is that corporate wellness programs are fully-customizable to your budget, corporate culture, history and values. Furthermore, it enables you to start small and expand the program over time. Those that have and maintain a corporate wellness program will tell you that it is simply the right thing to do. The comfort of a do-nothing strategy is far outweighed by the economic benefits and cultural advantages of a well-built corporate wellness program. To learn more about developing a new, or enhancing an existing, wellness program, please feel free to contact Bob Volkel at ABD Insurance & Financial Services ([email protected]) or 310/543-9995). Mr. Volkel is Executive Vice President, Employee Benefits, for ABD Insurance & Financial Services, a Wells Fargo Company located in Torrance. Widely recognized for its collaborative, client-focused culture and unparalleled customer support, ABD provides innovative employee benefits consulting and risk management solutions to its diverse, nationwide client partners.

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Understand the Distinction Between a Broker and an Advisor

Fiduciary Responsibility of Managing My Company’s 401(k) Plan

Do I Need to Hire an Independent Investment Advisor? BY KATHLEEN M. BRANCONIER, AIF ® (ACCREDITED INVESTMENT FIDUCIARY TM)

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HE RECENT SIGNING OF THE LARGEST REFORM of America’s pension laws in 30 years has caused many plan sponsors to be rightly concerned about their role as a fiduciary of their company’s 401(k) plan. The Pension Protection Act of 2006 is causing the world of retirement plans to drastically change due to focus on fee disclosure, participant education and fiduciary responsibility. It is raising awareness of situations in which employers have little or no idea that their company (and sometimes personal) liability is increasingly exposed. Now is the time for all employers to revisit how their 401(k) plan is being managed. The good news is that employers can meet the government’s requirements while reducing costs and increasing employee satisfaction.

AS A PLAN SPONSOR, WHAT DO I NEED TO DO TO MANAGE MY FIDUCIARY RISK? Plan fiduciaries (which include all decision makers and liaisons for a 401(k) plan) are held to extremely high standards of care. ERISA (Employee Retirement Income Security Act) requires fiduciaries of retirement plans to administer and manage their plans prudently and in the best interest of the plan’s participants and beneficiaries. There is only one way to manage this risk and that is to engage in a prudent, well-documented process for gathering information, making decisions and communicating regularly and effectively. In essence, employers must “prove” that they are doing the right things for their people. 4

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A 401(k) plan broker represents prepackaged offerings from an insurance company or mutual fund family. The investment selections are typically limited and many times there is no assigned responsibility for determining the appropriateness of the investment choices on a regular basis. Brokers are paid commissions, and sometimes additional fees, that are taken from the participant’s account and are not required to be explicitly disclosed. After the product is put in place and everyone goes back to what they were doing (i.e. running a business), it is often implicitly assumed that things will run on “automatic pilot.” By contrast, an advisor acts as a consultant to the plan sponsor, facilitating a process that considers the consultant to be a co-fiduciary on an ongoing basis. This presents a greater opportunity (but does not guarantee it) for the plan sponsor to receive objective information and advice, independent of any obligation or incentive toward a particular investment offering. Fees may be a flat dollar amount or a percentage tied to assets. They can be paid directly by the plan sponsor or charged to the participants, or a combination. It should not be assumed that having an investment advisor is automatically a “better” way to go. Whether you use a broker or an independent advisor, plan sponsors must not forget that they need to manage the process and hold all other parties accountable to deliver on the services that were promised. Likewise, it is equally imperative to recognize and negotiate the compensation being paid. This does not have to be complicated or overwhelming — plan sponsors can become equipped to determine an advisor’s qualifications with confidence.

Evaluate and Understand Plan Expenses The Department of Labor (DOL) explains that fiduciaries are required to know and evaluate the fees paid for services provided to their plan. “Plan fiduciaries must assure that the compensation paid directly or indirectly by the plan …is reasonable, taking into account the…services provided (DOL Advisory Opinion 9715A).” A cost analysis of your plan that includes a comparison of other providers would be needed to properly evaluate and make an informed decision on the reasonableness of the plan costs. Plan expenses include advisory fees, investment management fees, administration, participant education, investment custody and recordkeeping. In most cases these can be negotiated separately or as a bundle. In all cases the fees are knowable when the fiduciary makes it a point to demand the information.

Employ a Defined Investment Management Process A sound investment management process is also necessary for a fiduciary to prudently oversee the 401(k) plan and stay out of trouble. A process that includes the use of a formal investment policy statement, careful evaluation and selection of investments and ongoing monitoring of investment performance is essential in controlling fiduciary risk. The key to this process is the documentation of the evaluation and basis for the decicontinued on page 28 B

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FIDUCIARY RESPONSIBILITY continued from page 27 sions made. It is very common (but dangerous and unacceptable) for employers to look the other way simply because this may be intimidating and distractive. Yet with competent advice it need not be so. And there are certain “default” strategies that include layers of fiduciary protection identified by the Pension Protection Act of 2006.

Communicate With and Educate Plan Participants Government wants employers to help issue a wake up call — According to the 16th annual Retirement Confidence Survey published by the Employee Benefit Research Institute in April 2006, many American workers aren’t ready to undertake the task of financial planning for their own retirement and face the prospect of having to work much longer than they expect. Government pressure is mounting, and will continue to increase, on employers to encourage and make it easier for employees to take responsibility for themselves. Higher participation rates provide the owners and key executives the opportunity to increase the tax favored contributions to their own accounts — The Pension Protection Act of 2006 promotes automatic enrollment for 401(k) plans, which is being embraced by many large companies, setting the trend for medium and small companies to follow. Hewitt Associates, a global human resources consulting firm, believes that over half of the largest plans will be automatically enrolling their employees by the end of 2007. On average, automatic enrollment produces participation rates of about 90%, which is about 33% higher than plans who do not use automatic enrollment. Enhanced employee participation creates more “room” in the testing formulas for highly compensated employees to add to their own accounts. Investment education meetings should be offered to employees at least once a year — Participants need help with how to choose the proper investment allocation that is appropriate for their specific investment style and risk tolerance. Retirement planning questionnaires and asset allocation models can be used to educate participants on appropriate allocation of their investments and to help them determine if they are saving enough for retirement. With regular education opportunities, they will become more comfortable and appreciative of their employer. Fiduciary responsibility for participant investing is also increasing — Some employees have no objection to saving, but still feel helpless when it comes to investment decisions. The use of a QDIA (Qualified Default Investment Alternative) provides fiduciary relief to plan sponsors who meet certain conditions and use target maturity or lifestyle funds as a default investment for “paralyzed” employees. 28 S

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SHOULD I HIRE AN INDEPENDENT INVESTMENT ADVISOR? Recent lawsuits against plan sponsors have prompted many companies to rely on the services of an independent consultant who can help fulfill their very important role as a plan fiduciary. Due to changes in legislation and the high level of prudence required by plan sponsors along with their personal liability, it is easy to understand how the services of an independent consultant can be of critical value. Typical consulting services include: Helping establish an investment committee as appropriate. Identifying the costs of the current plan and their impact on results. Evaluating current plans in light of the employer’s circumstances and objectives. Drafting an investment policy statement (very important!). Providing a process for the selection and monitoring of a quality menu of investment options. Offering a program for participant education. Regular monitoring against stated objectives. Demonstrating evidence of fiduciary accountability. Some investment advisors offer education and assistance with fiduciary responsibilities; certain advisors will even accept their co-fiduciary role in writing. An independent consultant can also help with evaluating the reasonableness of the plan costs and should be knowledgeable about how to uncover all fees including undisclosed revenue sharing arrangements. Revenue sharing, or “soft cost reimbursements,” is a component of the mutual fund expense (12b-1 fees, subtransfer agent fees and shareholder servicing fees) that is paid by the mutual fund company to a broker or other provider of 401(k) services for offering their mutual fund. The complexity of proper fee dis-

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closure can be overwhelming for most plan sponsors. The use of an advisor who has knowledge of the retirement plan industry can assist in uncovering fees and benchmarking plan costs, investments and service providers. Retirement plan investment advisors should disclose their compensation schedule. Payments made directly to advisors from mutual funds could create conflicts of interest, and may cause the plan to pay more than it should in consulting fees. To eliminate conflicts of interest and to ensure that your retirement plan consultant is working for you and in the best interest of the plan participants, it is recommended that your investment advisor be paid independent of the investments offered in the plan. The world of retirement plans continues to evolve, making it increasingly difficult to monitor your 401(k) plan effectively. Given the heightened sensitivity to a plan sponsor’s fiduciary responsibilities, it’s never been more important to partner with a retirement plan investment advisor.

EMPLOYEE RETENTION STRATEGIES continued from page 21 and welfare plans and work/life programs. Health plans include medical, dental, and vision-care insurance. Welfare plans include disability, long-term care and life insurance programs. One way to reduce employee costs associated with these programs is to implement a ‘cafeteria’ plan which enables participants to pay for many of these costs with pre-tax dollars. Work/life programs include ways to foster flexibility, personal and professional growth. Examples of work/life programs include telecommuting, flexible scheduling, health and fitness programs and subsidies for personal and professional development courses. Developing strategy around the right culture, the right processes and the right rewards system can lead to the retention of the right employees. By rewarding the desired behaviors that help grow a business, you can habituate those behaviors and not only retain existing employees but also help you make better hiring decisions. Pat Byrnes is founder and president of Actuarial Consultants, Inc. in Torrance and is recognized as one of the finest technicians in the pension plan arena today. He is a past president of the American Society of Pension Professionals & Actuaries (ASPPA). He is also the founding director of the College of Pension Actuaries (COPA). In November 2005, Pat was awarded The Harry T. Eidson Founders Award which recognizes exceptional accomplishments and contributions to organizations or the pension industry. Recipients of this award are chosen for their contribution over time and have delivered “above and beyond reasonable expectations.” This award is ASPPA’s most prestigious honor. He is also co-chair of the Los Angeles Benefits Conference, which is held annually and is sponsored by ASPA, the IRS and more than 20 employee benefits-oriented organizations. Pat can be reached at (310) 212-2600 or for more information go to www.acibenefits.com.

Securities Kathleen Branconier is Managing Director of Retirement Plans and a retirement plan consultant of Torrance, Calif. based M Advisory Group. You may reach her at 310-530-5525 or [email protected]. Securities and investment advisory services offered through M Holdings Securities, Inc., a registered Broker/Dealer and Investment Advisor, Member FINRA/SIPC. M Advisory Group is independently owned and operated.

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Community Announcements Lancaster Wins LAEDC Business-Friendly Award Northrop Grumman, Jack Kyser Also Honored at Annual Eddy Event BY BRIAN SIMON

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HE 10TH FASTEST GROWING CITY in the country, Lancaster,

a major presence at the event despite LAEDC regulations prohibiting past winners from competing for three years. “Lancaster deserves the Eddy — no question,” said El Segundo Mayor Kelly McDowell, who posed for photos with Lancaster Mayor Henry Hearns. “From its innovative Mayor’s Roundtables to its fasttracked permitting process, Lancaster has created a thriving pro-business environment. And, like our city, it does so and still maintains its hometown feel.” McDowell added that being businessfriendly is not just fiscally prudent on a local level, but is also a regional responsibility. “We feel that it is our imperative as a city to be a leader and inspire other cities in the region to up the ante in terms of their commitment to business growth

came away with 2007 honors for Most Business Friendly City in Los Angeles County at the Los Angeles County Economic Development Corporation’s 12th annual Eddy awards dinner at the Beverly Hilton Hotel on November 6. More than 700 business, government and education leaders attended the gala event. Situated at the north tip of the county, Lancaster outlasted five other finalists — Burbank, Cerritos, Long Beach, Palmdale and Santa Clarita — to win the Eddy, which recognizes municipalities for their commitment to business attraction and retention. Last year’s inaugural winner of the Business-Friendly award, El Segundo, had

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and economic development,” he said. “Lancaster gets the message and we hope to partner with that great community to advance the LAEDC’s mission to create more quality jobs countywide.” In determining the Eddy winner, a blue ribbon panel of judges consisting of economic experts from both the LAEDC and prominent outside agencies scored contestants based on the following criteria: • Demonstrated commitment to economic excellence as a priority • Excellence in programs and services designed to facilitate business entry, expansion and retention • Economic development activity over the past three years • Competitive business tax rates and fee structures • Availability of economic incentives • Effective communication with and about business clients The LAEDC also recognized a global corporation with a major South Bay presence for its Business Leadership Eddy. Northrop Grumman, a $30 billion company with 125,000 employees (30,000 of those in Southern California), was recognized both for its significant contribution to the job market as well as its commitment to educational, human service and cultural programs. Headquartered in Century City, Northrop Grumman’s Integrated Systems and Space Technology divisions are based in El Segundo and Redondo Beach respectively. The third Eddy of the evening went to one of the LAEDC’s own — Chief Economist Jack Kyser, who is commonly referred to as the “Godfather” of the Los Angeles economy. The chief interpreter of the regional economy for the past 25 years, Kyser’s annual Economic Forecast is rated tops by the Wall Street Journal. His most recent report, released at the end of October, concluded that that the region is not heading into recession. 4

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Save the Date!

Calendar of Events Redondo Beach Chamber of Commerce & Visitors Bureau

Manhattan Beach Chamber of Commerce

For more information on events listed, please call 310-376-6911 or go to www.RedondoChamber.org.

For more information on events listed, please call 310-545-5315 or go to www.mb-chamber.com.

Business After Hours Mixer Wednesday, January 16, 2008, 5:30–7:30 P.M., Joe’s Crab Shack, 230 Portofino Way, Redondo Beach. Admission: $5.00 chamber members, $10.00 guests.

Upcoming Mixers: Admission: No charge for members, $10.00 for guests Holiday Mixer: Wednesday, December 12, 5:30–7:30:00 P.M., Ayres Hotel, 14400 Hindry Ave., Hawthorne.

Palos Verdes Peninsula Chamber of Commerce

Every Monday: South Bay Co-ed, 12:15 P.M., Billy’s Café, Torrance. Every Tuesday: Torrance Women, 7:15 A.M., Mimi’s Café, 25343 Crenshaw Blvd., Torrance. Riviera Village Co-ed, 12:15 P.M. Chicago for Ribs, 6300 S. Pacific Coast Hwy., Torrance. Every Wednesday: Del Amo Co-ed, 7:15 A.M., Mimi’s Café, 25343 Crenshaw Blvd., Torrance.

Wednesday, January, 16, 2008, 6:00–7:30 P.M., Kinecta Federal Credit Union, Every Thursday Pacific Coast Co-ed, 7:15 A.M., 1440 Rosecrans Blvd., Lisa’s Bon Appetít, 3511 Pacific Coast Hwy. # G, Torrance. February 20, 2008, Mattel Toy Store, 333 Continental Blvd., El Segundo Regional Holiday Mixer WRS South Bay Exclusive Chapter, Thursday, December 13, 5:30–7:30 P.M., Worthwhile Referral Sources. 11:30 Los Verdes Golf Club, 7000 W. Los Verdes El Segundo Chamber of A.M.–1:30 P.M. at H.T. Grill, 1701 South Drive, Rancho Palos Verdes Commerce Catalina Ave., Redondo Beach. Only one (Hawthorne Blvd. and Los Verdes Dr.). For more information on events listed, profession per category. For 30 years, WRS Hosted by the Palos Verdes Peninsula please call 310-322-1220 or go to has hosted networking events utilizing Chamber of Commerce. Build business www.elsegundochamber.org. highly effective methods. RSVP required. referrals with members from South Bay No walk-ins. Non-Members: $39. chambers of commerce, including Business Mixer For Information or to RSVP, Manhattan Beach, Torrance, Redondo Beach, Thursday, December 6: 5:30–7:30 P.M., please call 818-995-6646. Hermosa Beach, Lomita, San Pedro, Palos Citizens Business Bank, 275 Main St., El Verdes Peninsula and more! Includes hors Segundo. BNI — Business Networking International, d’oeuvres, beer, wine, and soft drinks. Music meets Tuesdays mornings at 21143 by Matt Beaumont of Celebrations Mobile Ongoing Events Hawthorne Blvd, #323 in Torrance. DJ. Optional: Bring an unwrapped toy for Ali Lassen Leads Club Chapters Toys for Tots. $5 Admission includes Drink The purpose of Ali Lassen’s Leads Club is to assist For information call OCBNI at 888-476-5350, ext. 1. Ticket. RSVP is a must by December 10. Call you in getting good business referrals that will 310-377-8111 or email expand your business success. Each business [email protected] category gets an exclusive in each chapter.

For more information on events listed, please call 310-377-8111 or go to www.palosverdeschamber.com.

STRESS continued from page 24

El Segundo Chamber Hires Former Board President as New Exec

The well-oiled company

Upon the September departure of Karen Carr, the El Segundo Chamber of Commerce Board of Directors quickly filled the organization’s Executive Director slot with the hiring of Chamber veteran Marsha Hansen last month. An Indiana native and Purdue University graduate, Hansen first became involved with the El Segundo Chamber in 1992 while working at the Doubletree Hotel in that community. She served as a Chamber Board member from 1994 to 1999 and was President in 1996-97. During her tenure in El Segundo, Hansen also chaired or co-chaired on numerous committees and was recognized for her volunteer contributions. Since 1999, Hansen has worked in the hotel industry in Orange County and also took time off to raise four children. “I am eager to meet with the business and community members to learn how the Chamber can best meet their diverse needs and I look forward to implementing a menu of services and programs that will exceed their expectations,” she said.

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Imagine your business enterprise where the Alchemist Process is used by every member of your workforce. The energy from each employee radiates to everyone they encounter. There is an intangible magnetic force attracting customers to your products and services. The enterprise has become the finely-tuned, well-oiled, super-charged profit machine that it is meant to be. This is how you use STRESS for Strategic Advantage! Make it so! Duncan Tooley is the CEO and founder of Tooley Transformation Training of Palos Verdes. He provides transformational business coaching for executives and entrepreneurs. His transformational programs train the enterprise workforce to use the mind to work smarter. More information can be found at www.TooleyTraining.com. He can be contacted at 310-832-0830 or [email protected]

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BY TOM FUSZARD

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SHORTAGE OF

CERTIFIED PUBLIC ACCOUNTANTS

has created a candidates’ market for CPAs on the move. The U.S. Department of Labor’s Bureau of Labor Statistics reports that employment of accountants and auditors is expected to grow faster than the average for all occupations through the year 2014. James Halyard, an experienced recruiter, was interviewed on this subject recently. He is Recruiting Manager of Strategic Sourcing, LLC, a Torrance firm that specializes in securing accounting and auditing professionals for Southern California accounting firms and their clients.

Q: What factors are responsible for the shortage of accountants? Jim Halyard: There are several: Growth in the number of businesses, the increasing complexity of financial laws and regulations, and greater need for security and governance of finances are a few of them. The Sarbanes-Oxley Act, which established a set of corporate governance guidelines five years ago, requires more disclosure and careful vigilance in the way financial records are kept. That raised demand for accounting talents and added some upward pressure on salaries. In addition, the dot-com boom of the ‘90s and the growth of high-tech businesses drew away many bright people who preferred fast-paced jobs there to the long hours and career burnouts that were rumored about the accounting profession.

Q: How would you describe the most sought-after candidate? Halyard: Today, it’s a man or woman with a CPA certificate and five or six years experience — an audit manager with a dynamic, broad understanding of the latest trends in accounting and taxation. He or she reads industry publications and has an innate sense of technology. Communications skills are important, too; he or she is easily able to explain accounting principles and express a confident professional attitude. Q: Why does someone leave one accounting firm for another? Is it mostly a question of money? Halyard: No, the money is actually down the line in importance. As in many other businesses, a prime reason is a lack of upward mobility — just not enough room for promotion in one’s firm. Another is friction with one’s immediate supervisor. Still another is an office atmosphere that may be politically charged, unfriendly or downright hostile. Very few professionals are comfortable in a firm where there is a lot of noise, commotion or bickering, or where they hear associates berated publicly. Then there is the matter of work/life balance, which can become a reason for seeking a job change. Some firms still aren’t flexible about a professional’s schedule or worksite. A remarkable number of accounting professionals in Southern California are eager to trade two hours of daily commuting time for the chance to live and work in the same zip code. Q: How do accounting firms deal with that? Halyard: In several ways. Some offer flex hours that help to deal with rush hour commuting. In many others you’ll find a distributed workforce, with professionals working from home. This opens up a huge pool of candidates, including those with young children at home, or those who are physically challenged, or some who can’t put together a carpool — really, anyone who wants to work in accounting but is unable or unwilling to commute. Some firms meet this need by opening satellite offices to bring together small groups of associates.

Q: What effect has the shortage had on salaries? Halyard: They are way up, as you might expect. Nationally, the increase was 30-plus percent over the past three years, and in Southern California we estimate the increase at 45 to 50 percent over five years.

Q: How do you find the people who are interested in changing firms? Halyard: We do a lot of networking. We never stop adding names and resumes of potential candidates who are referred or recommended to us. We find that our present clients and the people we’ve placed are our best sources for these. I also like using MySpace.com and LinkedIn.com, which are great networking resources. Service clubs and volunteer organizations provide some networking opportunities, but they are less popular than they used to be, especially with the younger people in the profession.

Q: That’s a candidates’ market. Halyard: No question about it. Good candidates are becoming much harder to find.

Q: Are retirees a recruiting market? Halyard: Absolutely. There are thousands of highly trained and well experienced accountants out there who would like to work a cou-

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ple of days a week, or pitch in at tax time and other times of peak workload. They are particularly good candidates for working at home or in small satellite offices. Q: What is the role of the recruiter, other than finding the professionals who are willing to move? Halyard: We’re responsible for the search, the background review and the testing.

ing the benefits package… awarding more responsibility to those who can handle it. I’d take a good look at the whole work/life area, and try to provide flexible hours and some easing of the commuting burden. And finally, I’d be very watchful for the development of tensions or frictions between staff members, separating those who could find it difficult to work with one another. Harmony is a very valuable commodity in a professional firm.

Jim Halyard and Strategic Sourcing, LLC, can be reached at: Strategic Sourcing, LLC 3424 Carson Street, Suite 600 Torrance, CA 90503 310-542-1841 [email protected] website: socalsourcing.com Tom Fuszard is a communications consultant and writer in Palos Verdes and Chico, California.

Q: You actually test experienced accountants? Halyard: Oh, yes. Employers need to be assured that the skill sets they are looking for are exactly those being offered. The background checks and testing help to establish the level of competency and the level and variety of experience in various accounting areas. Candidates don’t object when they realize that the process is the same for everyone. We have one other serious responsibility: It’s finding a sort of personality match between the candidate and the employer. Each accounting firm has its own style — its own DNA. Some accountants are looking for fast-paced, high-energy situations where they believe the promotion opportunities are greatest. Others prefer a more steady, measured work pace. Some others may be uninterested in promotion, and are seeking a firm where they can serve the last 10 years of their careers. We study client firms carefully and try to place the hard-chargers in firms that welcome this attitude. Those who are less interested in fast-tracking can be recruited for a different kind of firm. Both the candidate and the employer have a lot at stake in this match-up, and it’s essential that we get it right. It is a responsibility that we take very seriously. Q: What is the best advice you can offer employers about professional staffing? Halyard: This may be obvious, but the best way to keep your firm fully staffed is to take care of the people you already have. Make sure you’re providing for your present staff the kind of situation you’re prepared to offer new candidates. That means maintaining a high level of technological support… carefully manag4

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BY KARL SCHMIDT, ATTORNEY AT LAW

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HE DEPARTMENT OF HOMELAND SECURITY hopes to implement

“constructive knowledge.” This would make employers responsible for knowingly hiring undocumented workers in situations where they otherwise could profess ignorance. According to Answers.com, “constructive knowledge is notice of a fact that a person is presumed by law to have, regardless of whether he or she actually does, since such knowledge is obtainable by the exercise of reasonable care.” The DHS is pressing to have this standard applied to employers suspected of hiring undocumented workers.

tougher regulations for employers hiring undocumented workers that could leave the latter exposed to legal action that was easily avoided in the past. The issue revolves around fake Social Security numbers undocumented workers routinely give employers and the DHS’s attempt to eliminate legal loopholes that insulate the employers who hire them. The loophole that currently protects employers from hefty fines is their current exemption from a legal standard called

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“No-Match” Letters and “Constructive Knowledge” For nearly a decade, the Social Security Administration has been sending out letters to alert employers when it discovers that one or more employee names do not match with the Social Security numbers given. Currently, many employees simply leave when they learned their employer received a “no-match” letter. This often causes an inconvenient mass exodus of employees, but any legal problems for the employer often leave as well. Others, however, routinely come back with new Social Security numbers and sometimes even new names. Under current regulations, immigration attorneys typically advise employers to go ahead and hire a returning employee as long as the documentation appears to be valid. Until recently, there was no fear the employer could be held to have “constructive knowledge” that it was employing a person who did not have proper authority to work in this country. The proposed Department of Homeland Security regulations provide examples of what may be deemed “constructive knowledge” that an employee is an unauthorized alien, and “safe harbor” procedures for employers to follow in order to avoid “constructive knowledge” allegations after receiving a “no-match” letter. If proposed regulations take effect, employers will be required to take affirmative steps to communicate with the agency that issued the correspondence. Currently, these issues can be resolved solely between the employer and employee. The legislation proposes new time limits for employer compliance with the protocols, allowing 30 days for initial steps and up to 90 days to complete additional steps, which may be required. Plus, there are an 4

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additional three days for completion of new I-9 forms. If the new law passes, employers will have to follow uniform procedures for each employee who becomes the subject of an SSA “no-match” or DHS invalid document notice, in order to avoid exposure to discrimination claims from the employee. Under the proposed regulations, employees who typically left and didn’t return when notified of their “no-match” status will now have 90 days in which to resolve the discrepancy. This may defer the mass departure some employers have experienced, as may the information that the employer can accept new identity and authorization documents in a replacement Form I-9 process. But it also will require the employer to follow complex bureaucratic procedures previously avoided. Additionally, the “constructive knowledge” standard is ambiguous and leaves many questions to be answered. For example, employers need to be aware that other circumstances, which confer actual or constructive knowledge of invalid documentation, may be taken into account by immigration enforcement authorities. If, for example, 30 out of 33 “no-match” letter subjects produce new documentation for the replacement Form I9 process, will the sheer numbers and statistics of the matter constitute constructive knowledge? Employers faced with this or any other kind of suspicious circumstances may want to take into account the exposures that can result. Non-compliance can result in fines in the $250–$5,000 range per worker (often $500 to $600 in a first offense) but with exposure much more on the high end of the scale if Immigration Customs and Enforcement examiners feel the circumstances warrant a “custom and practice” allegation. Thus, employers must be much more cautious in handling “no-match” letters which they receive from the IRS.

Department of Homeland Security and the Social Security Administration from implementing the Final Rule entitled “Safe-Harbor Procedures for Employers Who Receive a No-Match Letter.” Then the government withdrew the regulations in late November 2007 in order to revise and reissue them in spring 2008. Thus, employers need to follow the status of this case in order to determine if and when the regulations are implemented. Karl Schmidt has practiced labor and employment law for over 30 years and currently is the Chairman of the Labor & Employment Department of the Los Angeles law firm of Parker, Milliken. While representing a wide variety of public and private clients, Mr. Schmidt is also General Counsel to the Torrance Area Chamber of Commerce. He is listed among L.A. Magazine’s annual “Super Lawyers” and is included in the 2007 edition of Best Lawyers in America. He can be reached at (213) 683-6518 and [email protected].

Judicial Challenge to Regulations On October 10, 2007, the U.S. District Court for the Northern District of California issued a preliminary injunction in AFLCIO, et al. v. Chertoff, et al. (N.D. Cal. Case No. 07-CV-4472 CRB). The preliminary injunction enjoins and restrains the 4

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Health Care Solutions for Small Business Owners

employees without offering competitive health benefits. However, small-business owners also acknowledged that providing benefits presented certain financial issues as well. The survey found: Nearly half reported that increasing health care costs have negatively impacted their employees’ wages. Six in 10 respondents agreed that it is important to financially help employees with health challenges and medical emergencies. Forty-two percent of those surveyed agreed that annual increases in health benefits have made them decrease their offerings. Small business owners wear many hats, including the responsibility of making quality insurance benefits available to their employees. However, rising health care expenses can negatively impact the bottom line as small companies may often struggle to afford the cost of insurance while maintaining and recruiting a quality workforce. The success of any organization resides within its people, so attracting and keeping good employees is vital to the growth of small organizations. Because small businesses are more susceptible to premium increases, it is important that they are wellinformed of the numerous health benefit options available in order to help them recruit and maintain top talent. Because AFLAC recognizes and respects the contribution small businesses make to the growth of our economy, it wanted to offer resources relevant to these emerging companies. As a result, the insurer launched a nationwide campaign in 2006 focused on letting growing companies know that AFLAC may provide an affordable solution to enhancing employee benefit offerings to help attract and retain key employees. The campaign provided free resources that helped address small business owner needs, including an “Attracting and Retaining Excellent Employees,” booklet offering insightful background information, research and tips on health benefits. The booklet can be downloaded from AFLAC’s small business-focused website, www.aflacsb.com in the “Tips and Resources” section. The company designed the initiative to proactively engage and address the specific challenges, concerns and needs of small business owners.

BY DAVID HOLPER

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EALTH CARE BENEFITS have become more expensive in recent years, which put them out of reach for many Americans. Of the more than 45 million Americans who are uninsured, nearly 60 percent are employed by small businesses. According to a 2006 survey commissioned by AFLAC of 501 small-business owners, many understand the role of a good benefits package in the hiring process. Nearly two-thirds of respondents reported they are concerned about their company’s ability to provide a benefits package that will attract and retain employees. Half of those surveyed agreed that they cannot attract and retain top-quality

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Here are a few tips to for small business owners that may help address some of their cost concerns in providing quality benefits that will help attract and retain employees: Consider making voluntary benefits available to employees. Because many small businesses can’t afford a rich benefits package, voluntary benefits can be a way for growing companies to enhance their health insurance offerings and provide additional coverage for employees without any direct cost to their business. A Health Savings Account (HSA) is another way for small companies to control their health care costs. With an HSA, health care options can be expanded, decisionmakers can control costs, and employees get to manage their health care expenses; however, few business decision-makers have implemented an HSA. Offering a Flexible Spending Account (FSA) may also have a positive impact on your ability to attract employees. As workers increasingly look for ways to develop a healthy work-life balance, employers will have to provide workplace offerings that support this growing employee need. An FSA benefit can be a good first step in helping to accomplish this. FSAs may help save your employees money by reducing their taxable income. There are two types of flexible spending accounts: un-reimbursed medical and dependent day care. At the beginning of each year, an FSA allows an elected portion of an employee’s salary to be redirected to provide reimbursement for certain types of medical and day care expenses not reimbursed by other sources. There is a delicate balance between profitability and the competition for quality employees. An informed employer is a smart one. David Holper is a district sales coordinator of Los Angeles Area East for American Family Life Assurance Company of Columbus (AFLAC). He’s responsible for recruiting, field training for independent agents and sales coordinators, and new account development. He began working with AFLAC in 1999 as an associate and quickly rose through the ranks. David has earned many awards with AFLAC, including Triple Crown and the Founders’ Award for Management Excellence (FAME). For more information about AFLAC, visit aflac.com or contact David at 310-977-8922. 4

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CORPORATE COMPLIANCE continued from page 13 • Set security levels for access control depending on a user’s demonstrated need to view, add, change or delete data. • Review and confirm access rights periodically. • Minimize the need for individuals to use multiple log-ins. • Control and access for remote connection to networks and/or applications is in place. • Require adequate passwords as well as periodic password changes. • Establish procedures to ensure timely action relating to requesting, establishing, issuing, suspending and closing user accounts. • Log all security activity and immediately report and quickly act upon any indication of a security violation. • Perform a periodic re-accreditation of security. • Determine logical access to computer resources based upon the principle of least privilege.

priately manages IT-related risks and opportunities. Implementing the COBIT guidelines defined above in any organization can help ensure that their IT systems work for the benefit of the organization and that the data that is so valuable to the company is properly secured and protected. Frequently, privately held organizations become frustrated with their IT and their IT systems. The IT enterprise simply does not deliver the systems and solutions that the company requires, or does not provide the level of service needed. This often occurs because the IT department evolves without structure or guidelines over time. Expectations are not set both on the business and the IT side of the equation. Systems do not perform at the level of the enterprise and are often riddled with bugs, workarounds and shortcomings. When this is the case, companies should look to outside consulting or development firms to assist in getting their IT on track. A well established software development company should have pro-

cedures and practices in place that will fit into the COBIT guidelines for change control and security measures. When considering the position and actions to be taken with corporate IT in light of the SOX world we live in, business owners should always look to what is best for the organization. Whether upgrading existing systems, auditing your change management process or reviewing internal IT procedures, or outsourcing these functions, seeking expertise in the area will save time, money. Understanding the IT requirements for corporate compliance can be a daunting task for even the most astute businesses. R. Boyd Zack is the President of R.B. Zack & Associates Inc., a Torrance, Californiabased company with 26 years of experience in development, implementation, maintenance and support of custom business software and IT services. “Building Business Applications that Work Since 1981.” He can be contacted at [email protected] or via the web site at www.rbza.com

What are the penalties for noncompliance to SOX? Corporate non-compliance to earlier government regulations, such as occupational health and safety rules in the work place (OSHA requirements) and the pollution controls monitored by the EPA, resulted in corporate fines, lawsuits and negative publicity. Non-compliance to SOX regulations is harsher. And it gets personal. A CEO or CFO who submits a wrong certification is subject to a fine up to $1 million and imprisonment for up to 10 years. If the wrong certification was submitted “willfully,” the fine can be increased up to $5 million and the prison term can be increased up to 20 years.

Should private US companies concern their IT with SOX? While private companies do not have to comply with SOX regulations, many of the guidelines established by COBIT are very beneficial. Effective IT governance helps ensure that IT supports business goals, optimizes business investment in IT and appro4

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T E LCU H C O M N N O I NLSO I DGE YR TECHNO-IGNORANCE continued from page 8

Remember, you’re the one with the knowledge and experience to run a business. The techno wiz kids may understand computers better than you do, but they don’t have the same depth of understanding about business. In fact, this disconnect has done the most damage to business over the last decade. For example, the dot-com disaster happened because the venture capitalists didn’t understand the Internet in a way that allowed them to make smart investment decisions, and the young people who created the first generation of dot-com companies didn’t understand basic business economics. They actually thought funding a company with massive venture capitalist money while having no plan for producing profits was a viable business model. I’m sure their investors didn’t see it that way, but they paid a high price for their own ignorance. People with the foresight to see this coming thought Wall Street investors had lost their minds, but they were powerless to stop it. The rest is history.

If you’re one of those people with a computer on your desk you rarely use and an adding machine in your desk you pull out when no one is looking, you need help. If you think a spreadsheet is something you buy for a kingsized bed and a browser is someone who shops but never buys, you really need to get a grip and get some basic computer training. QuickBooks is not a drive-through window at the library and a router is not the receptionist who screens your calls. If you just learn enough so these mysterious terms your employees and co-workers use regularly start to have some meaning in your own work life, you will feel better, you will be in the loop and you will really know how to create a more productive office with the best tools available. Plus, even if you think you’ve done a good job of covering up these deficits for two decades, trust me when I say this — you’re not fooling anyone!

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The best way to turn this situation around is to find methods and systems to decipher the techno speak in a way you can begin to understand it and gain some meaningful knowledge. You could start by taking some computer classes, either with a private coach or at your local community college. Make sure you focus on basic office software like word processing and spreadsheets before moving to more complex applications. The first time this dropped in your lap years ago, PC users needed to learn cryptic commands and every application had different procedures for basic file handling and printing. Some people gave up early on and never went back. Or if they did go back, they developed strong prejudices against technology in the workplace. In the point-and-click world of today, Microsoft Windows has common protocols for basic computer functions, so the process is really much easier now and just about anyone can do it. If you want to self-educate, I suggest browsing through books at your local bookstore and buy the ones written intuitively for non-technical people. The manuals that came with your computer and software are often the toughest to understand, but they are much better now than they used to be. Don’t bother with advanced system and networking information because you can call in an IT pro to handle the big stuff. It’s kind of like dealing with your mechanic. You don’t have to know how to do the actual work, but you will be at a big disadvantage negotiating with your mechanic if you don’t know the difference in labor and cost between changing your oil and fixing a blown head gasket. So with the computer, it is important to learn the basic structure of the system and only go into detail with the applications people use in the workplace to do their jobs. That way, you won’t be overwhelmed. The key is it to understand it is just as essential to be techno-literate as it is to be able to read and write. No matter how well-educated you might be otherwise, you can’t manage effectively if you don’t understand the tools of modern business. 4

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BUSINESS MEETING, EVENT, & BANQUET RESOURCES 310-791-9100 19800 S. Vermont Torrance, CA 90502 www.holidayinn/torranceca

Catering Lisa’s Bon Appetit Banquet & Meeting Rooms DoubleTree Hotel LAX-El Segundo

Lisa’s Bon Appetit provides catering for corporate, large scale and charity events. Once you place a catering order with us, you have several options:

delivery, pick-up and full service catering. Our banquet room will comfortably accommodate as few as 30 to 50 seated in the back room and up to 100 seated when the room is open to its full capacity. We can accommodate up to 150 people for cocktail receptions. 310-784-1070 3711 Pacific Coast Hwy. Torrance, CA 90505 www.LisasBonAppetit.com

Our six conference and banquet rooms and 4,500 sq. ft. of modern meeting space can gracefully accommodate 10 to 150 guests. Whether your meeting calls for state-of-the-art audio-visual equipment or an elegant dinner party, our experienced staff is dedicated to providing flawless service for every event. If you have attendees coming in from out of town, we have 215 newly renovated rooms and free 24-hour complimentary shuttle service to and from LAX. 310-322-0999 1985 E. Grand Ave. El Segundo, CA 90245 www.DoubletreeLAX.com

Banquet & Meeting Rooms Holiday Inn Torrance Hotel The Holiday Inn Torrance Hotel is the perfect location for your next meeting or event. With 8,000 SF of flexible meeting space and the ability to accommodate up to 400 people theater style we are ready and waiting to create the perfect experience for your guests. Full-service catering staff on hand to assist with every catering need and make planning your event a breeze. Wireless Internet access is available in all meeting rooms. Look again at Holiday Inn Torrance!

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