Fall 2008 issue of Horizons

FA L L 2 0 0 8

A P u b l i c a t i o n b y R u b i n B r o w n L L P

Leadership: Nurturing Opportunity and Vision

INSIDE SETTING THE TONE FOR CHANGE

LEADERSHIP FROM AN INTERNATIONAL PERSPECTIVE Page 9 LEADING THROUGH CHANGE: FRONT-LINE LESSONS Page 13 MODIFYING YOUR LEADERSHIP APPROACH TO EFFECT CHANGE Page 19 LEADING THE FIGHT AGAINST HOMELESSNESS Page 23 AND MORE

horizons

knowledge. commitment. value. CERTIFIED PUBLIC ACCOUNTANTS AND BUSINESS CONSULTANTS

CONTENTS

ii

Welcome

1-4

RubinBrown New Hires & Promotions

5-6

Announcements

7-8 For Your Money 9-10 International News: Baker Tilly International 11-12 General Topics: Leadership In A Changing World 13-15 General Topics: Leading Through Change 17-18 General Topics: RubinBrown l LEAD Program 19-22 Guest Feature: Modifying Your Leadership Approach To Effect Change 23-26 Guest Article: Dan Buck, CEO, St. Patrick Center 27-30 Client Spotlight: The Sound Room

INDUSTRY NEWS

31-32 CONTRACTORS 33-34 HOME BUILDERS 35-36 HOSPITALITY AND GAMING 37-38 MANUFACTURING AND DISTRIBUTION

39-41 NOT-FOR-PROFIT 43-45 PUBLIC SECTOR 47-48 REAL ESTATE

INFORMATION Editor: Tim Shannon Graphic Design: Hughes Communications Specialist: Michelle Ward

Horizons, a publication of RubinBrown LLP, is designed to provide general information regarding the subject matters covered. Although prepared by professionals, its contents should not be construed as the rendering of advice regarding specific situations. If accounting, legal or other expert assistance is needed, consult with your professional business advisor. Please call RubinBrown with any questions. Located in St. Louis and Kansas City, RubinBrown has become one of the largest accounting and business consulting firms in the Midwest. www.rubinbrown.com

knowledge. commitment. value. CERTIFIED PUBLIC ACCOUNTANTS AND BUSINESS CONSULTANTS

John F. Herber Jr., CPA Managing Partner

Welcome

Leadership. Many times this word is reserved for veteran business owners, managers and entrepreneurs. We feel true leadership is something that can and should be displayed at all levels within an organization. As business owners, we are challenged with defining the future of our organization. We must position ourselves to remain competitive and successful. As a result, it is our responsibility to make certain our future leaders are prepared for the responsibilities that lie ahead. At RubinBrown we recognize the immediate need for genuine leaders. We devote time and resources to cultivating team members who display the desire and natural abilities to provide direction and guidance for our business community. We also encourage our team members to give of themselves and use their leadership skills to help build and grow our communities. In this issue, we look into how valuable leadership can be to any organization. Dan Buck shares his passion for empowering individuals and leading one of St. Louis’ largest charitable institutions. We learn from David Young, founder of The Sound Room, the importance of being on the leading edge of innovation and superior customer service. And finally, Ken Harrington shares his views on a leader’s role in effecting change. I invite you to read this publication and offer us your feedback. Our goal, as with everything we do, is to have totally satisfied team members and clients. We hope to hear from you – john.herber@rubinbrown.com.

St. Louis office RubinBrown

One North Brentwood St. Louis, MO 63105

Kansas City office 10975 Grandview Drive Suite 600 Overland Park, KS 66210

Pleasant reading.

RubinBrown New Hires & Promotions

NEW PARTNERS

Daniel Raskas joined RubinBrown as a partner to lead an expansion of RubinBrown’s business and technology consulting services. Raskas focuses on transaction consulting, including due diligence and post-merger integration, business performance analysis and management consulting. He also

tax consulting, state and local tax, tax incentives and tax planning. Prior to joining RubinBrown in 2005, he served as a senior manager in the property tax consulting practice of PricewaterhouseCoopers in St. Louis. He also has worked for KPMG, Arthur Andersen, McDonnell Douglas Corp. and Ex-Cell-O Corp. Hendrickson holds a bachelor’s degree in accounting fromCentral Michigan University. He is a Certified Member of the Institute for Professionals in Taxation and is a member of the Associated Industries of Missouri’s Tax Committee. Hendrickson is a licensed Property Tax Agent in Arizona and Tennessee. He also is a former member of the board of directors for the Francis Howell School District and Saints Joachim & Ann School Board.

oversees strategic planning and business process improvement in operations and information technology. Raskas brings more than 20 years of business and technology consulting experience, most recently serving as president of DBR Consulting. He also helped found and served as executive vice president of consulting services at Hitachi Consulting and was a principal at Grant Thornton. Raskas serves as vice president of the board of trustees and on multiple committees for the United Hebrew Congregation. He also serves on the regional council board for the Union for Reform Judaism. He holds a bachelor’s degree in computer information systems from Drake University.

Jay E. Power, CPA , has been promoted to partner in the Tax Consulting Services Group. Power has 18 years of tax accounting experience, specializing in tax return preparation and tax planning. He serves clients in the contracting, home building, manufacturing and distribution, and not-

for-profit sectors. Power joined RubinBrown in 2006 as a manager in the Tax Consulting Services Group. Prior to joining RubinBrown, Power served as a tax director for Employers Reinsurance Corp., headquartered in Overland Park, Kan. He is a member of the American Institute of Certified Public Accountants and the Missouri Society of Certified Public Accountants. Power holds a bachelor’s degree in accounting from Kansas State University.

PROMOTED TO PARTNER

ChelleF.Adams,CPA ,waspromotedtopartner in the Internal Audit Services Group. With her expertise in the gaming industry, she oversees adjusted gross receipts audits and operational audits, including currency transaction reporting, slot data systems and related construction projects for casino clients. Adams

concentrates her efforts on Sarbanes-Oxley compliance, risk assessments, business process improvements, franchise royalty audits and internal audit special projects. Adams has more than 13 years of experience in the accounting industry. Prior to joining RubinBrown in 2003, she gained extensive experience in the internal audit field with a focus on gaming at Deloitte & Touche LLP. Adams is a member of the American Institute of Certified Public Accountants and the Institute of Internal Auditors. Adams holds a bachelor’s degree in accounting from Truman State University.

Scott M. Quinn, CPA/PFS , has been promoted to partner in the Tax Consulting and Wealth Management Services Groups. Quinn provides financial planning, tax compliance and consulting, and estate planning services, specializing in high net worth individuals, corporate executives and professional

athletes. Quinn has more than 18 years of experience in the industry, having been employed as a senior manager at KPMG Peat Marwick and a senior analyst at Laclede Gas Co. prior to joining RubinBrown in 2002. Quinn is a member of the American Institute of Certified Public Accountants and the Missouri Society of Certified Public Accountants. He also is licensed as an investment advisor representative by the National Association of Securities Dealers and certified as a personal finance specialist by the AICPA. Quinn holds a master’s degree in accounting from the University of Missouri-St. Louis and a bachelor’s degree in business administration from the University of Missouri-Columbia.

Eugene C. Hendrickson, CMI , was promoted to partner in the State and Local Tax Services Group. With more than 30 years of experience in property taxation, Hendrickson has worked within private industry and as a consultant to property owners. During his career, he has represented property owners

and businesses before taxing officials and review boards in more than 20 states. Hendrickson specializes in property

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knowledge. commitment. value. CERTIFIED PUBLIC ACCOUNTANTS AND BUSINESS CONSULTANTS

NEW MANAGERS

PROMOTED TO MANAGER

Richard G. Heinrichs Jr., CTFA , joined RubinBrown as a manager in its Tax Consulting Services Group and services clients in the firm’s Wealth Management Group. He is responsible for overall client relationships, which includes developing investment objectives, analyzing performance

Sarah Colombo Casey, CPA , was promoted to manager in the Tax Consulting Services Group. Based in the Kansas City office, she provides services to a variety of clients, specifically in the areas of return preparation and tax planning for contractors, home builders and law firms. Casey is a member of

of investments and recommending actions as appropriate. He also is responsible for new client development. Prior to joining RubinBrown, Heinrichs worked at several other firms, including AG Edwards Trust Co., where he served as an associate vice president and handled the portfolio management for the company’s founding family. He is a member of American Bankers Association Institute of Certified Bankers and North American Securities Administrators Association. Heinrichs holds a bachelor’s degree in business administration from Rockhurst University in Kansas City.

the Missouri Society of Certified Public Accountants and the American Institute of Certified Public Accountants. She also serves as treasurer for St. John’s United Methodist Church. Casey holds a bachelor’s degree in accounting from the University of Missouri-Kansas City.

Greg Herbster was promoted to manager in the Internal Audit Services Group. He performs operational and financial internal audits, risk management and business process re-engineering. Herbster also serves in a leadership role within the Manufacturing and Distribution Services Group, with

Ted Williamson, CPA , joined RubinBrown as a manager in its Assurance Services Group. He manages financial statement audit and A-133 single audit engagements for RubinBrown, specializing in not-for-profit organizations, city and county governments, and colleges and universities. His duties

expertise in inventory management and lean manufacturing. He has more than 12 years of accounting and consulting experience, most recently serving as a senior business analyst for GKN Aerospace and senior consultant for Deloitte & Touche LLP. Herbster holds a master’s degree in strategy and finance from Washington University’s Olin School of Business in St. Louis, along with a bachelor’s degree in finance and economics from Spring Hill College in Mobile, Ala.

include audit, plan audits, risk-based audit planning and tax return preparation. Prior to this position, Williamson served as a senior manager for a national accounting firm, managing a variety of audit engagements for not-for-profits, city and county governments, colleges and universities and publicly traded companies. He is a member of the American Institute of Certified Public Accountants, the Missouri Society of Certified Public Accountants and the Government Finance Officers Association. Williamson also serves as a deacon at Riverside Church. Williamson holds a bachelor’s degree in accounting and political science from William Jewell College.

Christine Kahle, CPA , was promoted to manager in the Assurance Services Group. In this role, Kahle provides audit and attestation services, specializing in the areas of real estate, architecture and mortgage banking. She also provides plan audit services to a variety of clients. Kahle joined the Assurance

Services Group at RubinBrown in 2003 upon her completion of graduate school. Kahle is a member of the Missouri Society of Certified Public Accountants as well as the American Institute of Certified Public Accountants. She also participated in the Baker Tilly International Exchange Program in 2006, working for an affiliated member firm in London to gain an international perspective. Kahle holds both master’s and bachelor’s degrees in accounting from the University of Missouri-St. Louis.

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NEW MANAGERS (cont.)

Chester Moyer, CPA , was promoted to manager in the Assurance Services Group. As a manager in the Kansas City office, Moyer provides audit and attestation services, specializing in the manufacturing and distribution, home building and public sectors. Moyer is a member of the American

Jeff Sparks, CPA , was promoted to manager in the Assurance Services Group. In this role, Sparks serves mid-size public and privately held organizations, specializing in the technology, distribution and manufacturing industries. Sparks works in audit, accounting, income tax and SEC reporting matters. He

Institute of Certified Public Accountants and the Missouri Society of Certified Public Accountants. He has served as an adjunct instructor of accounting at the University of Missouri-Columbia and Rockhurst University. Moyer holds master’s and bachelor’s degrees in accountancy from the University of Missouri-Columbia.

is a member of the Missouri Society of Certified Public Accountants and the American Institute of Certified Public Accountants. Sparks participated in the Baker Tilly International Exchange Program in 2006, working for Staples Rodway in Auckland, New Zealand. Sparks holds a master’s degree in accountancy and a bachelor’s degree in accountancy with a minor in decision sciences from Miami University in Oxford, Ohio. He is involved with the Jewish Federation of St. Louis, sitting on the Israel & Overseas Allocation Subcommittee and serving as a member of the Montefiore Society and as vice president within the Young Professionals Division.

Mark Paradis, CPA , has been promoted to manager in the Plan Audit Group. In this role, Paradis is responsible for audit, employee benefit and qualified plan services. He has more than 13 years of experience and is a member of both the American Institute of Certified Public Accountants and the Missouri

Society of Certified Public Accountants. Paradis previously was a manager at MetLife and worked as a consultant for JeffersonWells International as a consultant. He also held a position in the Missouri State Auditors Office in Jefferson City. Paradis holds a bachelor’s degree in accounting from the University of Missouri-Columbia.

Jessica Ricke, CPA , was promoted to manager in the Assurance Services Group. Ricke specializes in assurance services for media and entertainment clients and contractors, as well as providing assurance and operational review services for home builders. Ricke is a member of the American

Institute of Certified Public Accountants and the Missouri Society of Certified Public Accountants. She also is actively involved in the Home Builders Association and Volunteer Lawyers & Accountants for the Arts. Prior to starting at RubinBrown in 2005, Ricke was a financial analyst at American Water Co. She holds a bachelor’s degree in accounting, business administration and management information systems from Westminster College in Fulton, Mo.

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OTHER NEW HIRES AND PROMOTIONS

knowledge. commitment. value. CERTIFIED PUBLIC ACCOUNTANTS AND BUSINESS CONSULTANTS

Jennifer Jones, CPA , joined RubinBrown as controller. She provides leadership and coordination of the firm’s internal financial accounting and reporting. Jones brings more than 15 years of experience to RubinBrown, having previously served as division controller for Compass Group’s Canteen Vending Sector

Tim Shannon was named director of marketing and client relations at RubinBrown. Shannon oversees marketing, client relations, practice development and public relations activities for the firm and its affiliates. Prior to this position, Shannon served as a marketing specialist with the firm. Before joining

and as controller for the Flex-O-Lite Division of Jackson Products. Prior roles include controller for Bellerive Country Club and senior accountant at PricewaterhouseCoopers. Jones serves on the finance committee and board of directors of Gateway Homeless Services and on the Christian Education Committee and Youth Ministry Team of First Congressional Church of Webster Groves. She holds a bachelor’s degree in accounting from the University of Missouri-Columbia.

RubinBrown, he worked as a market representative for the May Merchandising Co. and as regional sales and marketing manager for the Schwan Food Co. Shannon is chair of the Baker Tilly North America Communications Subcommittee, a member of the Association for Accounting Marketing, and serves on the east Missouri chapter and Missouri state boards of Bikers Against Child Abuse. He holds a bachelor’s degree in English literature and a master’s degree in marketing from Lindenwood University.

Awards

James G. Castellano, CPA , chairman of the board of RubinBrown LLP and chairman of Baker Tilly International Ltd., was named to the St. Louis Business Journal’s list of Most Influential St. Louisans. Featured in the Feb. 28, 2008, issue of the St. Louis Business Journal, Castellano was recognized among

Todd Pleimann, CPA , managing partner of RubinBrown’s Kansas City office, was named to Ingram’s 40 Under 40 Class of 2008. The honorees were featured in the April 2008 issue of Ingram’s. Pleimann has held several leadership roles since joining RubinBrown, including serving as a career development

area business leaders and decision-makers. He also served as chairman of the board of directors of the American Institute of Certified Public Accountants in 2002.

coordinator andmentor and as a key developer of RubinBrown University. The program now includes more than 150 continuing education courses offered to all team members.

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ANNOUNCEMENTS

RubinBrown Expands Service Groups Over the past six months, RubinBrown has greatly expanded and enhanced its services in three major areas. The firm launched the St. Louis area’s first Media and Entertainment Services Group, formed a Professional Services Group, and expanded the Hospitality Services Group to include gaming. “We’re proud to have longtime expertise in each of these areas,” said John F. Herber Jr., CPA, managing partner. “The media and entertainment and gaming industries represent rapidly growing segments of the market, and professional services firms are key players in so many industries. Our partners and team members have the experience and knowledge to guide their businesses’ growth and profitability.” Headed by Lawrence E. Rubin, CPA, the Media and Entertainment Services Group offers traditional accounting, auditing, tax and consulting, as well as wealth management, assurance and litigation support services. “RubinBrown has been working in this area for 50- plus years, and the growth has been explosive in the last three to five years,” explained Rubin. “St. Louis is home to several nationally known entertainers, authors, broadcasters, athletes and sports agents, plus we represent broadcast and cable groups across the country. We have approximately 15 team members working in this area now, so we wanted to formalize our focus on the media and entertainment industries.” Media and Entertainment Services Group

Lawrence E. Rubin, CPA, Partner-in-Charge, Media and Entertainment Services Group

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knowledge. commitment. value. CERTIFIED PUBLIC ACCOUNTANTS AND BUSINESS CONSULTANTS

Rubin added that he’s enjoyed working with the new category of clients because the work is always interesting and challenging. Among the firm’s clients are entertainer Nelly, basketball great Larry Hughes and The Pageant, just to name a few. Professional Services Group RubinBrown already has more than 300 clients in professional services, which encompass a wide range of companies. Clients include architects and engineers; law firms; physician and other health care practices; advertising agencies and public relations firms; insurance agencies; investment advisors; management, marketing, technology and other consultants; interior designers; staffing firms and travel agencies. “We previously had specific groups for some of these industries,” explained Kenneth L. Rubin, CPA, partner- in-charge of the new group. “However, we discovered that these organizations deal with many of the same practice management issues, such as controlling costs by engagement and billing issues, as well as succession planning. Many tax issues, including accounting methods and compensation-related issues, are also comparable. These similarities should provide insight across all professional services firms.” IncludingRubin, the Professional ServicesGroup includes five partners – Don Esstman, CPA, Mark Jansen, CPA, Theresa Lynch Ruzicka, CPA, and Ed Warren, CPA, CFP. Supported by a team of experienced managers, the group is well-trained in the accounting and tax requirements for service firms in specific industries. Hospitality and Gaming Services Group The newly expanded Hospitality and Gaming Services Group now offers a specialization in casinos and gaming enterprises. Jim Mather, CPA, continues as partner-in- charge of the group, which also serves hotels, restaurants, golf courses, private clubs, retailers, resorts, movie theaters, convenience stores and franchise operations.

“The gaming industry is growing in Missouri and other states,” said Mather. “There are numerous new casino developments in St. Louis and Kansas City, as well as other areas of the state. We have the experts on staff to provide excellent service in this industry.” There are more than 10 accountants currently assigned to the group, including partner Chelle F. Adams, CPA, who joined Rubin Brown five years ago with extensive gaming experience, both with commercial and tribal- owned casinos. With this expertise and a presence in both St. Louis and Kansas City, RubinBrown is well- positioned to be a key player in the gaming industry. Entrepreneurial Services Group Looking for the Small Business Group? We’ve renamed it the Entrepreneurial Services Group to reflect its focus on both small and mid-size companies. Theresa Lynch Ruzicka is the partner-in-charge of the group. The Entrepreneurial Services Group provides accounting, tax and business advisory services to emerging and established businesses. “The media and entertainment and gaming industries represent rapidly growing segments of the market, and

professional services firms are key players in so many industries.”

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FOR YOUR MONEY

The Importance of Portfolio Rebalancing The recent volatility in the equity markets presents a good opportunity to review your portfolio as it pertains to your original goals and objectives. It is likely that your portfolio is now over or under-weighted in the various asset classes originally selected, which could change your risk/return profile. When establishing your initial asset allocation strategy, you most likely went through a detailed discovery process with your advisor to identify your goals, objectives and investment time horizon; assess your risk tolerance; and evaluate your financial condition and tax situation. Your resulting initial asset allocation contained various percentages of stocks, bonds, cash and alternative investments. At that time, this portfolio represented the optimal combination of the various asset classes that you and your advisor believed would generate sufficient returns to meet your objectives at an acceptable level of risk. However, individual asset classes come in and out of favor at different times in the business cycle and, accordingly, the percentages of these various asset classes in your portfolio will change over time. Therefore, to stay on track, you should periodically review and rebalance your portfolio. Rebalancing your portfolio is an integral part of risk control. While rebalancing may sound logical, it can feel uncomfortable in practice. It requires selling high- performing assets and purchasing currently unfavorable assets – in other words, using the profits from your winning assets to buy others that are likely to rebound as the business cycle evolves. In rising stock markets, investors may become overconfident and take on more risk than they originally intended. A belief popular among many investors is By Mike Ferman, CPA

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knowledge. commitment. value. CERTIFIED PUBLIC ACCOUNTANTS AND BUSINESS CONSULTANTS

that if an investment has performed well in the past, it should perform well in the future. Unfortunately, past performance is not always a good indication of future results. Many investors, however, remain heavily invested in last year’s winners and diminish or drop last year’s losing asset classes. We saw this in the late ’90s, when a large number of investors focused on large growth stocks and did not rebalance with the shifting market. Therefore, they ended up with a larger percentage of large cap growth stocks than their risk parameters warranted, due to market actions alone. Several even presumed the trend of high performance would continue for an indefinite period and bought more, adding to their already over-weighted technology positions. As the business cycle evolved, the market fell sharply in 2000, causing their equity values to plummet much more than they would have had they rebalanced. Today the same holds true with the recent strong performance of bonds and commodities and real estate before them. Many times the investors’ first indication they have taken on too much risk is when they experience the negative effects of a market downturn. Fear leads either to a rush to sell or, even worse, hold on to losing assets and hope for a rebound. When the sale is finally made, it usually results in a significantly depleted investment value. Those who increased their stock positions during the rise countered conventional thinking by buying high and selling low. Large institutional investors, like pension plans and foundations that manage billions of dollars, have gained crucial insight into the need for regular rebalancing. Most have formal policies on the frequency of rebalancing and investment committees that regularly evaluate their portfolios’ current allocations and decide whether to rebalance. This practice is equally applicable to individual investors as a means to control risk. Regular rebalancinghelps tobringadisciplinedapproach to your investing process. The value of this discipline is demonstrated in a chart created by the Schwab Center for Financial Research, which looks at the risk and return of annually rebalanced portfolios versus portfolios that were stagnant. In most cases, a rebalanced portfolio had lower risk and similar to slightly higher returns. The chart to the right shows the results of a rebalanced portfolio with a moderate risk profile annually from 1970 through 2006.

Source: The Schwab Center for Financial Research with data from Ibbotson Associates Inc.

This practice is successful due to the contrarian nature of rebalancing. In rebalancing, you buy low and sell high. As the business cycle evolves, underperforming asset classes begin to outperform and vice versa. Another approach to rebalancing is from a tax-smart perspective, like using a tax-deferred account to avoid taxable gains. There also is the option of allocating any new savings to the asset class that has dropped. Another choice is to have dividend and capital gain distributions received in cash and reinvest them in under-weighted asset classes. All of these methods can assist you in regaining your target allocations without unwanted fees and/or taxes on your investments. As far as timing, we recommend a quarterly assessment of your portfolio, thinking about reducing any asset class that has surpassed its target by more than 5 percent. There is no set formula for rebalancing. Talk to your financial advisor for assistance with your rebalancing strategy.

Questions? Contact:

Mike Ferman, CPA Partner RubinBrown Advisors 314.290.3211 mike.ferman@rubinbrown.com

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Baker Tilly International

INTERNATIONAL NEWS ◆

Leadership from an International Perspective We are very proud that in just 20 years, Baker Tilly International has become the network of choice for the middle market. When one explores the world’s leading accounting networks, Baker Tilly International stands out prominently among the largest and most successful. Started 20 years ago as a collection of independent accounting firms in 20 countries around the world, today Baker Tilly International is one of the world’s 10 largest networks, with aggregate revenue of $2.5 billion and coverage in more than 100 countries. It is recognized as a global network of closely aligned, premier, independent accounting firms serving leading national and global organizations. Baker Tilly International has achieved this position of leadership by relentless pursuit of a number of strategic initiatives. • First and foremost, the unwavering commitment of its independent firms to provide services that meet the highest professional standards and a rigorous quality assurance program to monitor compliance. By James G. Castellano, CPA

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• Our network has aggressively recruited some of the finest, most successful independent accounting firms around the world, now providing worldwide coverage with high-quality professionals on every continent and in all major financial centers. • Economic development in China has impacted our global economy immensely, and Baker Tilly International continues to invest significant resources to build our capabilities to serve our clients doing business there. • Collaboration of our independent member firms, facilitated by Baker Tilly International, enables our members to bring the specialized talent of the entire network together to meet the needs of our clients. • Investment in world-class methodologies, training programs, technical practice aids and leadership development programs for our partners and staff have helped propel our network to leadership status. • Our exchange program, whereby professionals experience the opportunity to work and live in another country for extended periods, enables our members to attract and retain outstanding talent, as well as expand their knowledge of global business and social customs.

We are very proud that in just 20 years, Baker Tilly International has become the network of choice for the middle market. For a copy of the “Annual Review, Tax Guides or Guides to Doing Business” in many countries or access to the worldwide directory to find a firm in a region important to you, please refer to our Web site at www.bakertillyinternational.com. Of course, we also invite you to contact us directly to learn more about our “Great firms, outstanding network.”

Questions? Contact:

James G. Castellano, CPA Chairman, Board of Directors Baker Tilly International Ltd. 314.290.3300 james.castellano@rubinbrown.com or Geoff Barnes Chief Executive Officer Baker Tilly International Ltd. 44 (0) 20.7314.6875 geoff.barnes@bakertillyinternational.com

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10 ◆ fall 2008 issue

GENERAL TOPICS

Leadership in a Changing World “There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things.” The Prince, Niccolo Machiavelli – 1532 Change is one idea that by nature instills automatic resistance within most of us. However, change is as necessary today as it was centuries ago because of the economic and cultural influences that require us to be better, faster and smarter than our competition. Those organizations that do not successfully embrace change not only find themselves in a position where healthy growth and profitability is a figment of the past, but oftentimes find themselves on a path to certain failure in the future. RubinBrown Internal Audit has partnered with many organizations to successfully transform their businesses. These changes range from re-engineering individual business processes to a complete reorganization of the people, processes and systems of the organization. These companies have set the tone to drive change into the very fabric of their organization. They have turned a negative situation into positive action that is embodied from the highest executive to the most entry-level position. As a result, we would like to share with you the five best practices used by those leaders of change. By Kristin Parshay

1. Define the Vision Themost meaningful changes that move an organization forwardare not those that aremade individually but those that are made as a team. The success of the team lies in the ability of the team’s leader to inspire every member to bring his or her best each day. A leader will not be successful in inspiring his/her team if the team is not focused on a defined vision. A defined vision becomes the center of the team’s ability to make the decisions necessary in the execution of meaningful change. 2. Establish Clear and Honest Communication It is human nature to fear the unknown, and the responsibility of the organization’s leadership is to eliminate the unknown by establishing an environment that supports clear and honest communication. Communication must be a two-way process in which ideas and concerns communicated from the bottom up are addressed with the same vigor as the expected response to the top-down communication from the organization’s leadership. 3. Set Meaningful Milestones To achieve sustained change, it must become part of the organization’s culture. Sustained change, by definition, requires continuous focus; however, employees must have meaningful milestones to work toward; otherwise they will lose sight of the end goal. Make the achievements visual by continually posting the metrics to show the continuous improvements. 4. Align Incentives One of the most successful tools to inspire your team into action is to give an employee a meaningful stake through defined incentives in the successful execution of established milestones. 5. Provide Continuous Guidance and Support Meaningful change is not achieved without the team facing a series of barriers in its execution. A successful leader is a vital resource in assisting his/ her team in remaining focused on the goals and not on the problems by providing continuous guidance and support in identifying the solutions to break through those barriers.

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knowledge. commitment. value. CERTIFIED PUBLIC ACCOUNTANTS AND BUSINESS CONSULTANTS

RubinBrown has been working with the Penn Traffic Co. as it has embarked on a turn-around venture. Penn Traffic is a billion-dollar grocery retailer and distributor. Its CFO summarizes his leadership methodology in the following comments:

The tone of an organization starts with its leadership. Those leaders who embrace the idea that change is not an option but an opportunity drive focused organizations that make the most of those opportunities and, as a result, ensure success in the future. RubinBrown Internal Audit’s business process transformation methodology assists dynamic organizational leaders in their efforts to successfully lead their teams to achieve strategic objectives of the organization.

“In my mind, there are three key ingredients for driving change effectively. First, a leader must lead change through example by embracing the change, not defending the status quo, while also allowing their team to experience learning from failure as well

Questions? Contact:

Steve Newstead, CPA, FLMI Partner-in-Charge Internal Audit Services Group 314.290.3325 steve.newstead@rubinbrown.com or Cathy Behnen, CPA, CIA Partner Internal Audit Services Group 314.290.3204 cathy.behnen@rubinbrown.com

as success. Second, it is absolutely critical to have complete honesty and integrity in your communication of change. That does not mean you make promises you cannot keep, but rather make sure people clearly understand why change is needed, what the expected benefit will be and how long it might take. Third, a leader of change must be willing to challenge and manage resistance to change. If you head into change thinking people will simply change because of your title or authority, you are sadly mistaken. Head into change knowing there will be pockets of resistance, and it is your job as a leader to knock down those barriers in the most efficient manner possible - some easy, some difficult. At the end of the day, change should drive improvement. If that is not a pillar for driving the change you are contemplating, it is probably not worth the effort or resources.” Tod Nestor Senior Vice President and Chief Financial Officer The Penn Traffic Co.

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GENERAL TOPICS

Leading Through Change – Lessons from the Front Lines For leaders in any organization, it often is difficult to accurately forecast the future. We spend a significant amount of time building strategies based upon assumptions, market intelligence, forecasts and historical data, all with the hope that our prediction will at least be close to what actually occurs. There is one thing, however, of which we can be sure, and that is change. Planned or unplanned, change can teach valuable lessons that help leaders to not only manage, but take advantage of the opportunities they present. Some specific examples include taking over the leadership of an organization after the departure of existing leadership, selling a major division of a company, leading a new entity, acquiring and integrating companies into an organization, growing a company in a down market, or shifting an organization’s focus through personnel changes and acquisitions. No matter what the circumstance, each change can teach lessons along the way that help not only in successfully managing the change, but also serving as a catalyst to dramatically improve the organization. While there are many leadership skills that are required to lead an organization and lead significant change, there are three that have proven beneficial in succeeding in a range of unique situations. Lesson 1 – Lead, don’t do Many leaders have a tendency to try to take over when significant change occurs. They feel a need to demonstrate that they are “in total control” of the situation, hoping to portray the image that the changes By Dan Raskas

that are occurring will have minimal, if any, impact. While it is important to establish a sense of stability and order, too much control and dominance can suppress the potential opportunity for improvement. For example, one company recognized that the only way to truly grow one of its divisions was to sell the group to a buyer who viewed it as strategic and was willing to invest in the business. Company leaders could have simply made the decision, obtained approval from the board, and made it happen. Instead, they carefully orchestrated the process to involve key people within the group at various points so that they felt involved in the process as a whole. While the board needed to approve the concept up front, these key people were able to dictate much of the transaction, like attributes of the buyer and execution of the transaction. Toward the end of the process, everyone in the group was completely energized. People on staff even created a logo that represented the quest for the new company and distributed shirts to all employees. Productivity and sales significantly increased during the time they were looking for a buyer. As a leader, setting the vision and reaching out to people in the organization to make them part of the solution results in the maximum benefit. The negative impact of the changes in every scenario gets minimized, shifting the focus from the change to the opportunity to make a difference and be part of the new future. By employing this skill, leaders will find they have a group of highly motivated individuals who play a large part in executing the solution because they had ownership in the plan to get there. Lesson 2 – Communicate One of the most critical aspects of managing significant change is a leader’s ability to effectively communicate to the various stakeholders. These stakeholders include not only people within the organization, but also people outside the organization, such as customers, suppliers and investors. The communications must be timely and contain relevant information; avoid communicating for the sake of communicating. Communications should take many forms, the most effective of which is face-to-face interaction with people. Direct contact is the best way to share information and, more importantly, listen to what people have to say.

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knowledge. commitment. value. CERTIFIED PUBLIC ACCOUNTANTS AND BUSINESS CONSULTANTS

One executive recalls a time when he was chosen to take over a division that had suddenly lost its leader. His first priority was to meet with people, talk with them and listen to their concerns and ideas on where they could take the business. This led the staff to rally behind its new leader, taking the business from a non-profitable unit to the fastest-growing, most profitable unit in the entire company in just one year. Lesson 3 – Be human A leader during dramatic change often is expected to have all the answers. Most of the time there are not answers to everything, so there is no need to pretend to have them. It is important, however, to portray confidence when admitting to not having all of the answers. A leader must send the message that they will provide solutions that will result in a better situation, which would not have been possible had the change never occurred.

This attitude will counter any perceptions of loftiness and shows the team a willingness to work with them. A leader’s position will grow even stronger based on the renewed trust and respect from the team. In one situation, an executive was leading a company with 350 professional staff and acquiring a company that would add an additional 125 members, including several senior leaders. Many questions were raised, both within the company and within the group being acquired. Naturally, the leader proactively communicated the answers that he did have, but there were some questions he could not answer. It would have been easy for him to avoid the questions or mislead people by telling them what he thought they wanted to hear. Instead, he chose to be very candid and let them know that there were still some unanswered questions. He quickly followed that up by disclosing to them the process company leadership was going through to get the answers and the timeframes

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GENERAL TOPICS Lessons from the Front Lines (cont.)

they were following. He also shared with them who was leading the team to make the determinations and provided them an avenue to submit any input they had that could help the process. The team knew that they could ask anything and would get a candid answer. They also respected the fact that if he did not have an answer, he would admit it and take the time to explain how they would get there. The leading executive gained respect by thanking employees for pointing out things that may have been overlooked and quickly addressing those things. By listening to his staff, the leader showed them that people at every level had the opportunity to be part of the process. Change is one of the most difficult events that a leader will face in any organization. It also is one that can be counted on to occur whether unexpected or planned. An organization that can effectively manage change and capitalize on it will be in a tremendous position to perform in any market. There is no magic formula for successfully leading an organization through change, as there are many moving parts, personnel concerns and unique circumstances that come with any situation. The three lessons described above can help provide some guidance on how to take a step back and strategize the most successful approach to your particular situation.

Questions? Contact:

Dan Raskas Partner Corporate Finance and Forensic Services Group 314.678.3530 dan.raskas@rubinbrown.com

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You’ve gained the knowledge. Do you have the commitment?

Commitment. It’s a special value here at RubinBrown. It describes the professional pride in the work we do. It also defines the personal care we take in the relationships we build – with our clients, with our partners and, of course, with one another. For the career minded individual looking to grow and advance in the accounting profession, it means an unparalleled opportunity to work alongside a team of leading experts. To grow your knowledge by drawing upon the global resources of Baker Tilly International. And ultimately to realize the rewards that come from a firm-wide commitment to being the very best. We invite you to explore the RubinBrown difference.

www.Rubin Brown.com Certified Public Accountants and Business Consultants

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GENERAL TOPICS

RubinBrown Develops Future LEADers ...LEAD participants have gained a tremendous perspective on their personal abilities and the firm as a whole... By Jeff Sparks, CPA

Leadership skills are a valuable attribute of a team member in any organization. From working with other team members, to clients, to professionals in the community at large, strong leadership skills are invaluable to being successful at RubinBrown. For this reason, the RubinBrown | LEAD (Leadership, Education and Development) program was created several years ago to help further develop and retain high performers in the firm. Team members are selected for this program after a rigorous application process based on work experience, involvement in the firm, community activities and professional achievements. In short, each applicant has to have demonstrated the potential to be a future leader of RubinBrown. Through the application and interview process, the Governing Board, made up of three partners, recommends participants on an annual basis, with the program lasting for a two-year period. Monthly meetings, quarterly events and activities, and a required reading list are all key elements to the program. While the program is partially self-directed by the participants,

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knowledge. commitment. value. CERTIFIED PUBLIC ACCOUNTANTS AND BUSINESS CONSULTANTS

an advisory board of past participants helps guide the group. Recently, the group selected and focused on the following topics: • Performance management, feedback and motivation • Engagement management and team building • Work/life balance • Negotiation skills and proposals For each of these topics, the LEAD program participants have selected partners and managers in the firm to be in the “hot seat” and answer personal and professional questions on the subject matter. Questions have ranged from the roles mentors have played in their development to techniques used to pull their work team back together, to the most difficult feedback they have given and how they delivered it. While the “hot seat” participant is put on the spot with some personal questions, the group finds it beneficial to hear the challenges the participant has overcome and the best practices that have helped him or her achieve success. Required reading has included books such as “Classic Drucker” by Peter F. Drucker and “The Power of Feedback” by Joseph R. Folkman and John H. Zenger. A lively group discussion on how elements from the books can be integrated into our personal and professional lives always follows. Claire Keeling, with Sort It Out Organization Consultants, recently gave a presentation on work-life balance, providing information and education focused on integrating work and personal life, including prioritizing, time management, action systems and calendar management, followed by a Q&A session. Chris Jehle, founder and director of Kansas City’s Hope Center, an organization focused on developing urban youth into leaders, spoke on his experiences of building the organization, the leadership lessons incurred, and the leadership qualities they are working to instill within the urban youth. One of the highlights of this year’s program was the opportunity for the group to travel to our Kansas City office for a two-day retreat focused on engagement management and team building. The group heard from Todd Pleimann, Kansas City office managing partner, on the expansion of RubinBrown into the Kansas City market, challenges associated with the expansion, and

the many opportunities to come as the firm continues to expand regionally. Jim Castellano, chairman, John Herber, managing partner, and Fred Kostecki, partner- in-charge of the Assurance Services Group, shared with the group how they have grown as firm leaders and the key metrics associated with firm growth and profitability in today’s market. Participants found the information that was shared to be invaluable in understanding the key role that each team member plays in the overall firm mission and grasping where the firm is heading. Outside of the formal sessions, this retreat gave the group time to bond with each other, tour the Kansas City office and experience some of the great KC barbecue and nightlife we had all heard about. Participants always agree that while the speakers and books provide excellent perspective and information on the topics, the real value in the program is achieved by the interactions with others involved in the program. This interaction ranges from the questions asked and discussions with presenters, informal conversation after the meetings on various topics, to overall relationships formed in the group. Through taking the time to personally assess one’s strengths and weaknesses and then draw from what has been learned in the LEAD program, participants are provided with excellent insight on ways to enhance their personal leadership abilities. Friendships that are developed further enhance this benefit and help to bridge gaps between service lines and industry groups, allowing participants to ultimately serve clients with a one-firm approach. It is safe to say that the current LEAD participants have gained a tremendous perspective on their personal abilities and the firm as a whole, which will no doubt serve as a great tool to becoming a future leader in the firm and community.

Questions? Contact:

Fred Kostecki, CPA Partner-in-Charge Assurance Services Group 314.290.3398 fred.kostecki@rubinbrown.com

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