Southern California Professional Spring 2017

www.SoCalProfessional.com

SPRING 2017

MAKING

Partner One Attorney’s Rapid Rise

Mistakes About

MILLENNIALS NAKED

Without A Network

SELLING?

Timing Is Everything

Investing: Too Much Of A

GOOD THING?

Value-Added

ACCOUNTING

10 The Path To Partner LAW

How this new partner at Greenberg & Bass parlayed a bad economy, hard work and philanthropy into a burgeoning practice and a happy life.

14

FINANCIAL PLANNING

Losing Your Concentration Using philanthropy to diversify and generate income is easier than you think.

BY JUAN C. ROS, CFP®

20

BUSINESS

Is Now The Time To Sell Your Business?

The economy is improving and business is up, but is now the time to sell? You might be surprised!

BY MATT COLETTA

26

FINANCIAL FORECAST 2017

Grey Matters One of Southern California’s leading financial advisor/CFO/CPA’s speaks out on current trends.

30

NETWORKING

6 Networking Myths & Mistakes An exclusive excerpt from the new book Naked Without A Network!

BY DAVIS BLAINE

36

EMPLOYEES

Taking Millennials Mainstream What one marketing professional and part-time university professor has learned about millennials may surprise you! They are not who mainstream media thinks they are!

BY BRIAN HEMSWORTH

2

14 HOW CAN YOU ELIMINATE NEGATIVITY AT WORK?

40

HAVE YOU CONSIDERED PHILANTHROPY?

ARE YOU IGNORING THESE 5 SOCIAL MEDIA PLATFORMS?

SOCIAL MEDIA

42

ARE YOU GUILTY OF THESE 6 MYTHS & MISTAKES?

work place

SELLING

30

YOUR BIZ

BLOGGING

MAKING

PARTNER

NETWORKING

10

FINANCIAL

PLANNING

MEET YI SUN KIM, NEWEST PARTNER AT GREENBERG & BASS

HIRING MILLENNIALS ARE THEY REALLY WHO YOU THINK THEY ARE?

INSIDE

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36 6

4

NEWS & VIEWS: MATTERS OF FACT

SOCIAL MEDIA

42 SOUTHERN CALIFORNIA PROFESSIONAL

IS NOW A GOOD TIME?

40

BUSINESS: PSYCHOLOGY SPRING 2017

3

INSIDE SOUTHERN CALIFORNIA PROFESSIONAL

BY BRIAN HEMSWORTH

Prospering In Times of Change

“C

Publisher Brian Hemsworth Editorial Director Jerri Hemsworth

hange is the law of life.”

Those words, spoken by then President John F. Kennedy, at the Assembly Hall of Paulskirche in

Frankfurt, Germany. The full quote reads, “Change is the law of life. And those who look only to the past or the present are certain to miss the future.”

In my more than 30 years in business in California, I can’t remember a time like this, and a time where JFK’s quote meant more.

November of 2016 saw a changing of the guard in Washington.

It was an election that surprised, or dare I say shocked much the country, and the world. It certainly shocked the media, who didn’t give Donald Trump a change to beat Hillary Clinton in the presidential election.

Regardless on what side of the aisle you sat, the world changed on that fateful evening. The stock markets tanked…then skyrocketed.

It was a classic jolt of American market resilience.

And now, in 2017, we’re still feeling the effects. Many thought business would slow, which it hasn’t.

Republicans are still busy shaking things up, like immigration and healthcare. Foreign policy is fluid in a changing international landscape.

There is talk of walls being built, and walls coming down.

The one and only constant is change.

Change is good for business, and that’s good for professionals. Now, nearly a decade after the onset of the Great Recession, deals are happen-

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California’s first online Dual Internet Platform™ publication written exclusively by leading business professionals that focuses on business, financial and legal matters affecting businesses, business owners, and their clientele.

ing. People are investing the cash that has been sitting on the sidelines. People can afford to invest, to divorce, to sue, and expand.

Money is moving, and when money moves, professionals are involved.

It’s in spirit we bring our latest

“Money is moving, and when money moves, professionals are involved.” issue of SoCalProfessional. Among our latest articles, we break down myths about accounting and networking. We share some interesting traits of millennials. We learn to share the wealth in new ways.

And we profile some of the people making a difference during this time of change, like Yi Sun Kim, Greenberg & Bass’ newest partner.

Brian Hemsworth Publisher

Editor William Colinas Assistant Editor Taryn Gray Art Direction/Production Jerri Hemsworth, Newman Grace Contributors Davis R. Blaine, The Mentor Group Matt Coletta, Business Team Stephen Frueh, PhD, Centrifugal Leadership Brian Hemsworth, Newman Grace Brenda Hill Juan C. Ros, Lamia Financial Editorial/Advertising Offices NGI Publishing Services 6133 Fallbrook Avenue Woodland Hills, CA 91367 P: 818.713.1678 www.ngipublishingservices.com Southern California Professional Magazine is published quarterly by NGI Publishing Services, a division of Newman Grace Inc., 6133 Fallbrook Avenue, Woodland Hills, CA 91367 Volume 2.01. SPRING 2017. Copyright ©2017 by NGI Publishing Services, A Division of Newman Grace Inc. (NGI). All rights reserved. Reproduction in whole or in part without written permission is prohibited. Advertising rates and information sent upon request. Acceptance of advertising in Southern California Professional in no way constitutes approval or endorsement by NGI Publishing Services or NGI of products or services advertised. Southern California Professional Magazine, NGI Publishing Services or NGI reserve the right to reject any advertising. Opinions expressed by authors are their own and not necessarily those of Southern California Professional, NGI Publishing Services or NGI. Southern California Professional Magazine reserves the right to edit all contributions for clarity and length, as well as to reject any material submitted. Not responsible for unsolicited manuscripts. This periodical’s name and logo along with the various titles and headings therein, are trademarks of NGI Publishing Services, A Division of NGI. PRODUCED IN U.S.A.

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MATTERS OF FACT

News & Views SBA Names Pot Economy Projected At More Than $7 Billion In California. But... So Cal Veteran

“California’s Small Business Person Of The Year”

T

T

he cannabis culture is quickly becoming the cannabis economy here in California. The November 2016 vote that legalized pot here is scratching the surface of popular knowledge, but those in the know are seeing huge investment in weed business.

The AP released a story earlier this year that projects more than $7 billion in value as an industry, and more than $1 billion in tax revenue locally. California’s appetite for pot reflects more than 10% of the country’s pot business.

But licensing, control,

6

and regulation as lagging behind the investment efforts.

State Senator Mike McGuire commented California is, “Building the airplane while it’s being flown.”

In large part the reason is that California is trying desperately to “get it right”.

Doing it wrong could result in loss of regulation, loss of tax revenue, and a huge black market.

The effort of California, and other pot-legal states, for that matter, appears to be part of the high stakes game playing out on a national stage. The federal government, under

President Obama, basically told states to vigorously control and regulate state operations, and the Feds would stay out. But under the new Trump administration, word of Federal crackdowns is growing.

In a recent Time Magazine article, University of the Pacific professor Mike Vitiello, a marijuana law expert , doubts the Feds can pull it off, saying, “It’s kind of like illegal immigration: You can’t build a wall high enough.”

Only time will tell if pot will be the second wall built

by President Trump. •

he U.S. Small Business Administration (SBA) named Lars Herman, CEO of Herman Construction Group, Inc., as the recipient of California’s Small Business 2017 Person of the Year Award this May. “It’s an incredible honor to be selected,” said Herman of being named. “This award is more about the people who work for the company.

We have a great team.”

Herman a U.S. Navy vet, heads the company and has worked renovating hospitals for the Department of Veterans Affairs, as well as other projects for the DOD and private sector. Herman Construction is a national company headquartered in San Diego County.

Established in 2009, they have offices in Southern and Northern California, Arizona, and Washington, DC. • www.socalprofessional.com

A

RETIREMENT STRESS INCREASES

M

any California workers today are feeling stressed about retirement, and a new study indicated that many Amercians are not taking steps to prepare for it.

Those feeling stressed have lower levels of retirement confidence and are less likely to feel financially secure, according to the recent Retirement Confidence Survey by the Employee Benefit Research Institute (EBRI) and Greenwald and Associates.

The study revealed that finds that three in ten workers say they feel stressed about preparing for retirement. In addition, six in ten workers (61 percent) say they have saved for retirement, though just four in ten have tried to figure out how much money they will need in retirement (41 percent).

“I continue to be struck by the relatively small share of workers who do formal retirement planning,” said Lisa Greenwald, assistant vice president of Greenwald & Associates, and co-author of the report. “Use of a financial advisor increases with age and income, but just 23 percent of workers say that they have spoken with a professional advisor about retirement planning and only one in ten report they have prepared a formal plan for retirement.”•

“To say that people would cease to come to california if they would have to pay more taxes is to underestimate the advantages of being in california—mightily.”

WARREN BEATTY SOUTHERN CALIFORNIA PROFESSIONAL

SPRING 2017

mong the major findings in this year’s Retirement Confidence Survey: • Importance of a retirement plan: Workers who have a retirement plan, whether a defined contribution plan, defined benefit plan, or IRA, have saved more than those without a plan, have taken more steps to prepare for retirement and feel less stressed about retirement preparations.

• Saving incentives: Nearly 3 in 4 workers (73 percent) not currently saving for retirement say they would be at least somewhat likely to save for retirement if contributions are matched by their employer. Approximately twothirds of non-saving workers say they would be likely to save for retirement if automatic paycheck deductions with the option of changing or stopping them, at either 3 percent or 6 percent of salary, were used by their employer.

• Financial wellness: Stress about retirement preparations and worry over personal finances at work are causing some workers to be less productive. Among all workers, majorities feel retirement, financial and healthcare planning programs would be helpful in increasing productivity.

• Healthcare in retirement: Workers are far less confident than retirees about being able to afford healthcare in retirement.

Roughly half of workers (54 percent) say they’re very or somewhat confident about being able to afford medical expenses in retirement (vs. 77 percent of retirees). Workers are also less confident than retirees that Medicare will continue to provide the same level of benefits that retirees receive today (38 percent of workers vs.

52 percent of retirees).

Source: 2017 Retirement Confidence Survey

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MATTERS OF FACT

COMMUTING SURFERS NOW ACCEPTED!

Accounting For California Accounting Firms

H

ere’s a summary of data derived from the recently published AICPA PCPS/CPA.com National Management of an Accounting Practice:

B

eginning in May, Metrolink began letting surfers bring surfboards onto Metrolink trains to go surfing at local beaches. All designated Bike/Board cars now have the capacity to hold up to five surfboards in the surf netting carriers.

Metrolink has converted their “bike” cars to now be “bike and board” cars, to allow room for the surfboards.

“We feel it’s a nice

blend of two very Southern California-esque activities that would be of interest for a large scope of people,” Metrolink spokesman Scott Johnson said.

Metrolink began offering summer beach trains for weekend riders to the Orange County and San Diego coasts in 2012, and those connections have become part of the system’s year-round daily service. •

$905,000 = avg. net client fees +6% = change in net client fees from prior year $250/hr. = avg. equity partner/owner billing rate $115/hr. = avg. associate billing rate: 1175 = avg. equity partner/owner chargeable hours 1523 = avg. associate chargeable hours 67% = percent of firms accepting credit cards 72% = percent of firms that actively maintain a website

49%

= firms not promoting social media use for business development or recruitment •

“Management is doing things right; leadership is doing the right things.”

PETER F. DRUCKER

8

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LAW

THE PATH to

Partner How this new partner at Greenberg & Bass parlayed a bad economy,

hard work and philanthropy into a burgeoning practice and a happy life.

W

hen you have a conversation with Yi Sun Kim, you quickly get the idea of what she is truly passionate about: her family, her pro-bono work, helping people, and the law.

People who don’t know her would be mistaken to think she is a shy, demure, easily-swayed attorney that just sits at her desk pushing transactions and settling cases. Once you know her, she is anything but. She is outspoken, has a wicked sense of humor, works extremely hard at maintaining her relationships with friends, colleagues and family, and has just made partner at one of the San Fernando Valley’s premier law firms, Greenberg & Bass. She specializes in bankruptcy, business litigation, business formations and transactions.

In case her law practice is not keeping her busy enough, she volunteers at the Self Help Desk at the San Fernando Valley Bankruptcy Court. She helps individuals who need to file Chapter 7 by giving them free assistance on what the procedure is like and how to fill out their paperwork. This particular Self Help Desk is coordinated

by Neighborhood Legal Services of Los Angeles. In 2015, she was the recipient of Public Counsel’s prestigious Lasarow Award for this pro bono service.

Her current involvement as Secretary on the Board of Directors for the San Fernando Valley Bar Association has SOUTHERN CALIFORNIA PROFESSIONAL

SPRING 2017

her on track for what could be the first Asian American President of the SFVBA. On the eve of her partnership celebration at the firm, we asked her some questions about her path to becoming partner.

You got out of law school just at the beginning of the great recession. Did this have any impact on your choosing bankruptcy as a primary practice area?

Absolutely. While I was awaiting my bar results, Greenberg & Bass hired me as a law clerk to assist with a new, large case in the litigation department. It required reviewing something like 50 boxes of documents, so it initially took up all of my time. Then the economy turned so quickly that the firm’s existing robust bankruptcy department suddenly needed even more assistance. Although I continued to work on business litigation matters, I spent an increasing amount of time focusing on bankruptcy matters, both from the debtor and creditor perspectives.

Although the firm handled many business related filings, it was the individual or personal bankruptcy cases that really pulled me in. Helping people go through such a scary process, and seeing how relieved they are afterwards knowing they can move forward with a fresh start for themselves and their families, made me feel like I was actually doing something worthwhile. Therefore,

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THE PATH TO Partner although it started out by necessity, I found that I really enjoyed bankruptcy law and proactively inserted myself into more bankruptcy cases as they came in.

You have been recognized as a Rising Star by several organizations and publications. What do you attribute your success?

The number of people who have helped me and continue to mentor and support me. My family has been my biggest inspiration when it comes to hard work and integ-

rity, which keeps me on the right path. And since Day One, fellow partners James Felton and David Adelman along with everyone at Greenberg & Bass, staff and attorneys, have taught, mentored and pushed me. Law school taught me about the written laws and procedures, but G&B is where I was trained on the practice of law, as well as how to communicate with people. They are also generous when it comes to highlighting me and my practice, making sure that I am seen, so much so that it is hard for people not to notice.

How are the bankruptcy cases you deal with today different from those during the worst of the recession years?

The bulk of the bankruptcy cases I handled during the recession was, understandably, related to real estate: Individuals who could not pay their mortgage, investors whose collateral rapidly depreciated, or vendors in related industries who suddenly lost their client base.

There are significantly fewer bankruptcy filings today. The personal filings are usually persons who have experienced an unfortunate change in circumstances, such as a sudden injury or illness resulting in loss of employment and substantial medical bills. The trend in business filings is with retail stores, especially in the apparel industry.

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You do business litigation, primarily in the areas of disputes arising from bankruptcy actions. What are some of the typical cases like that go to litigation in this area?

When an individual files for bankruptcy relief, his or her intention in doing so is to eliminate their liability or obligation to pay their existing debts (i.e. have their debts “discharged”). Not all debts can be discharged, and the individual will remain liable to pay those debts even after the bankruptcy case is completed. For example, if the debt was incurred by fraud (e.g. knowingly providing a false financial statement to obtain a loan), then the creditor can file a litigation case within the bankruptcy case to obtain judgment saying the debt cannot be discharged. Therefore, many of the bankruptcy litigation cases I have handled center on fraud.

In addition, if the debtor transfers money or property to a third party just before the debtor filed the bankruptcy case, the debtor or trustee may try to get that money or property back from the third party. In some circumstances, the trustee can lawfully unwind those transfers of money or property by filing a litigation action in the bankruptcy case.

You also work at the opposite end of the business spectrum from bankruptcy.

You work on formations and startups.

What words of advice do you have for today’s startup companies?

Today there are numerous lenders and investors who are willing to help fund exciting new ventures, especially in the technology field. However, having seen the downturn of the economy before, I would caution against being too overzealous with borrowing and to pay special attention to the penalties or personal exposure that can result if the business proves unsuccessful. One should always have an attorney draft or review an agreement before it is signed—even if (or actually, especially if) the agreement or business venture is amongst friends. There are many deficiencies in the form agreements that are floating around online. If the agreement is not complete, then formerly friendly business parties can face protracted and expensive litigation fighting over what the parties intended the contract to mean or say. If a contract is complete, then the parties cannot dispute what is written there and they can come to a quicker, less costly resolution. And even if a person is handed a well written agreement by a lender or investor, he or she should have an attorney review it since it may have provisions that put the ­person or his or her personal assets at more risk than the person realizes. www.socalprofessional.com

Yi Sun Kim, Esq.

AT-A-GLANCE PRACTICE AREAS n Bankruptcy, representing individual and corporate debtors, creditors and trustees n Business Litigation, including breach of contract and fraud actions n Business Transactions, including forming companies, registering and protecting intellectual property, drafting business contracts, and facilitating sale of businesses

As someone who has risen quickly in the legal ranks, now as a partner of your firm and a trustee of the Bar Association, what advice do you have law school students and young attorneys just beginning their careers?

Generally I find that in your first couple of years, you make mistakes or take a long time trying to figure out what you are even doing. As frustrating as it may be, you remind yourself that you are a brand new attorney so it is expected.

But in your third year, and forever after, you will continue to make mistakes or face issues or fact patterns that you do not know how to resolve. You no longer have the “excuse” that you are brand new, and it can be a humbling and stress-

EDUCATION B.A., Wellesley College, 2002 J.D., Loyola Law School, 2007 Articles Editor, Loyola of Los Angeles Law Review, 2006-07 Study Abroad Program, Hong Kong University (law school) Study Abroad Program, University College London (undergraduate) ADMISSIONS State of California US District Courts, Central District of California Ninth Circuit Court of Appeals RECOGNITIONS n 2015 Lasarow Award for outstanding pro bono service, Neighborhood Legal Services n 2015 President’s Award, San Fernando Valley Bar Association n 2013 Women In Business Rising Star Award, San Fernando Valley Business Journal n 2013 – 2016 Recognized in Southern California Rising Stars, Southern California Super Lawyers Magazine PROFESSIONAL AND COMMUNITY ACTIVITIES n San Fernando Valley Bar Association—Secretary, Board of Trustees n The Exchange – Encino Chapter—Leadership Circle / Host n Women to Women LA—Member n Valley Bar Network—Member n Valley Bar Mediation Clinic—Board of Directors n ProVisors – Woodland Hills I—Executive Committee n ProVisors – Valley Distributors and Manufacturers Affinity Group—Executive Committee / Host n California Bar Association—Member

SOUTHERN CALIFORNIA PROFESSIONAL

SPRING 2017

ful experience. You have to remind yourself that it’s okay, you’re going to make mistakes or come across challenging issues throughout your career. What makes you a good lawyer is knowing what to do next—how to fix the problem, or what resources to access to get the solution. You’re not meant to be perfect, let alone a walking encyclopedia.

You’re expected to be resourceful and a problem solver.

I would encourage new lawyers to be social and open minded. Meet as many lawyers as they can in different fields. For years, I had no idea how many types of law or practices were available, or that each firm has its own unique culture and way of functioning. You may discover a field that you can be passionate about, or a type of firm that is compatible with your working style and particular skills. And even if you are already exactly where you want to be, you can find great mentors who will help you grow that practice or adjust as you progress. The San Fernando Valley Bar Association offers a number of opportunities for new lawyers, including sections that highlight different areas of law, networking and social activities with attorneys of various backgrounds and expertise, and community outreach programs where you can test out your skills while helping people in the community. •

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FINANCIAL PLANNING

Losing Your Using philanthropy to diversify and generate income is easier than you think.

BY JUAN C. ROS, CFP®

D

o you own too much of a good thing? One of the keys to successful long-term investing is diversification—owning enough of different kinds of

investments so that your entire portfolio doesn’t move in the same direction (up or down) at the same time.

Sometimes, whether through inheritance, a long-ago purchase, or sale of a business, you may find yourself holding a single stock that makes up a substantial portion of your overall portfolio— known as a concentrated position.

Generally, holding a concentrated position is not wise.

If that stock is held in a taxable account, and it has appreciated significantly since first acquired, the tax alone might be enough to keep you from selling the stock, even though selling and diversifying would be in your best interest and would reduce the risk in the portfolio.

Another objection to selling: you may be relying on the dividends from that stock for income.

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Fortunately, charitable strategies can be employed to allow an investor to sell a concentrated position, defer the capital gains tax that would otherwise be due on the sale, generate income, and receive a charitable deduction, all in one fell swoop.

First up: the charitable gift annuity.

What is a Charitable Gift Annuity?

A charitable gift annuity (“CGA” for short) is a contractual arrangement between a donor and a charity whereby the donor gives cash, securities, or other assets to the charity in exchange for the payment of income for life.

The amount of annuity income paid by the charity is dependent on

the age of the donor—the older the donor, the more income gets paid.

Most charities use a standard table of annuity rates published by the American Council on Gift Annuities and updated regularly.

Case Study— Charitable Gift Annuity Illustration A shows how the CGA can be used to diversify a concentrated position: Assume Jane Donor, age 75, owns 1,000 shares of Company X that she bought at $10 per share many years ago. Shares are now selling for $200—a $190/ share profit. Jane’s portfolio, valued at $2 million, consists of a broad range of mutual funds, but she holds Company X because she doesn’t want to pay the tax on the gain.

Company X makes up 10% of her portfolio—a concentrated position.

Company X’s dividend yield is 2%.

Jane decides to establish a charitable gift annuity with her alma

Concentration

SOUTHERN CALIFORNIA PROFESSIONAL

SPRING 2017

15

Losing Your Concentration Charitable

Jane Donor: Age 75

Gift Annuity

5.80% Annuity

Case Study

Property $200,000

Principal $200,000 One Life

Fixed Payments Income Tax Deduction

mater, and fund the annuity with her Company X shares. She delivers the shares electronically to her alma mater’s brokerage account—her portfolio is now worth just $1.8 million, but she no longer has a concentrated position.

At age 75, Jane’s published gift annuity rate is 5.8%, meaning her alma mater will pay her $200,000 x 5.8% = $11,600 per year income for life—more than she was receiving from the Company X dividend.

With a CGA, capital gains that would normally have been due upon the sale of a security are paid out in installments over the life expectancy of the donor. In this case, roughly $8,300 of each annual payment is taxed at favored capital gains rates for the next 12 years. The remainder of the income payment is part ordinary income and part taxfree return of principal.

Jane also gets a charitable deduction of $91,543 (assumes 2.4% AFR) which she can use to offset her income this year. To the extent that she can’t absorb the entire deduction, the unused amount gets carried forward for up to five additional years.

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ibility (at a price) is the charitable remainder trust.

Gift Annuity

Illustration A:

Charity $200,000 Approximate Value

Annuity $11,600

Gift To Charity

And, Jane gets to make a major gift to her alma mater, which keeps whatever amount remains from the original gift after Jane passes away.

This is the only drawback to the CGA, from the donor’s perspective: if the donor passes away early during the annuity period, the annuity ends and the charity “wins.” CGAs can be established to benefit a husband and wife for their joint life expectancy, but the joint annuity rates will be lower than those for a single individual.

Summary of CGAs Consider a charitable gift annuity to help diversify a concentrated position if: n You are charitably inclined; n You are at least 60 years old (most charities who offer CGAs have minimum age requirements); n You want a simple, hassle-free way of achieving greater diversification in your portfolio; n You are relying on income from the concentrated position.

An alternative to the charitable gift annuity that offers more flex-

What is a Charitable Remainder Trust?

A charitable remainder trust (“CRT”) is an arrangement that provides for a specific amount of income to be paid to one or more income beneficiaries. The trust is funded using cash, securities, real estate, or other assets. After the income period ends, the trust terminates and the assets remaining in the trust are distributed to one or more charities.

The CRT allows for much greater design flexibility than the gift annuity: the donor can choose the percentage of the trust assets to be paid as income; the donor can choose, within certain limits, how long the trust will last; the donor can choose the charities receiving the remaining assets and can even reserve the right to change the charitable recipients of the trust.

The CRT requires greater expense and administration than the gift annuity (which doesn’t cost the donor anything). An attorney is needed to draft the CRT document, and a CPA / third-party administrator who specializes in charitable trusts is needed to ensure all tax forms are filed properly. An investment advisor is needed to manage the trust assets and ensure the income beneficiaries are paid as dictated by the trust.

Despite the added effort, a CRT can work effectively to diversity a single stock position or several concentrated positions in an investor’s portfolio.

Case Study—Charitable Remainder Trust Illustration B shows how the CRT www.socalprofessional.com

can be used to diversify a concentrated position: Assume John Donor, age 75, owns 5,000 shares of Company Y that he bought at $10 per share many years ago. Shares are now selling for $200—a $190/share profit. John’s portfolio, valued at $5 million, otherwise consists of a broad range of mutual funds, but he holds Company Y because he doesn’t want to pay the tax on the gain. Company Y makes up 20% of his portfolio—a highly concentrated position. Company Y’s dividend yield is 2%.

John decides to establish a charitable remainder trust and fund the CRT with his Company Y shares.

He hires an attorney to draft the trust and delivers the shares electronically to a brokerage account registered to the trust. John serves as trustee of the CRT. Once inside the CRT, the concentrated position is sold without incurring capital gains and reinvested in a diversified portfolio of stocks and bonds. Once that happens, John no longer has a concentrated position.

John decides to have the CRT pay 7% of the trust’s value, as revalued each year, annually to him and his wife, age 73, for their joint lives. John and his wife will receive $1,000,000 x 7% = $70,000 in the first year, and a varying amount in subsequent years (depending on the trust’s investment performance), as long as either is alive—more than he was receiving from the Company Y dividend.

With a CRT, capital gains that would normally have been due upon the sale of a security are deferred and instead are paid out in installments with each trust payment until the entire gain has been

Charitable Unitrust John Donor: Age 75 Jane Donor: Age 73

7% Unitrust Property $1,000,000

Principal $1,000,000 Two Lives

Tax-Free Sale Income Tax Deduction

Income $70,000

distributed. CRTs have a complex taxation structure, but suffice to say that the annual income will be taxed partly as ordinary income, to the extent the trust investments generate income, and partly as capital gains—including the gains from the sale of the concentrated position.

John also gets a charitable deduction of $358,560 (assumes 2.4% AFR) which he can use to offset his income this year. To the extent that he can’t absorb the entire deduction, the unused amount gets carried forward for up to five additional years.

And, John and his wife choose to divide the remainder interest among three charities—a local animal shelter, the area hospital on whose board John sits, and their church as the third.

The end result is similar to that of the gift annuity: the removal of the concentrated stock position, increased income, deferred capital gains, a charitable deduction, and a major gift to charity.

Summary of CRTs Consider a charitable remainder trust to help diversify a concentrated position if:

SOUTHERN CALIFORNIA PROFESSIONAL

SPRING 2017

Illustration B: Charitable Remainder Trust Case Study

Charity $807,299 Trust To Charity

n You

are charitably inclined; desire flexibility in the design of the diversification strategy; n Your stock position is significant enough to justify the additional expense necessary to establish and administer a CRT; n You are relying on income from the concentrated position.

Whether a gift annuity or a remainder trust—for those who are philanthropic, there is no excuse for keeping a concentrated stock position in your investment portfolio. • n You

Juan C. Ros, CFP® has a passion for working with clients who are charitably inclined while making sure their wealth is being properly managed. As vice president of Lamia Financial Group, he brings over a decade of prior experience working in charitable giving and estate planning on the non-profit side. Juan is completely committed to helping clients achieve their financial goals by creating wealth preservation and transfer strategies to meet those goals. You can read more about Juan here at Lamia Financial.

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The economy is improving and business is up, but is now the time to sell?

You might be surprised!

BY MATT COLETTA

K

nowing that you want to sell is easy. You decide that. Knowing when to sell, well now that’s a bit tougher. Will the market go up, or down? Is your business packaged properly for sale? Can you demonstrate real value and cash flow?

This all brings us back to the core question, is now the time to sell?

What You Need To Know Before You Sell Your Business Today’s business buyers are much more sophisticated.

There is a lot of information out there (internet, books, magazines) that can be good or bad advice on how to buy a business. What is important to understand is that buyers are looking for stable, quality businesses that can demonstrate the success of the business will continue. Buyers put the most weight on “cash flow.” This is also known as Seller’s Discretionary Earnings (SDE) or adjusted net income. It is crucial that cash flow is cal-

20

www.socalprofessional.com

culated correctly and that the process of how cash flow was determined can be supported by documentation.

Most sellers focus on the multiple, which is important.

However, I pose the question, “A multiple of what?” If the historical cash flow is not calculated correctly, then the value may be under estimated. Buyers need to feel 100% comfortable with the historical cash flow figures or trends since this is what will determine what is available to cover debt service, salary and expansion or growth.

The multiple of cash flow used is a function of many things. There are more than 15 characteristics that affect the multiple. Some of these increase the multiple and some of them can decrease the multiple. It is the multiple that takes the good, the bad and the ugly into consideration. Some of the factors that affect the multiple are consistent historical cash flow, type of industry, years in business, the condition of the facility and the furniture, fixtures and equipment (FF&E), key employees in place, terms of the lease, the type of financing available plus SOUTHERN CALIFORNIA PROFESSIONAL

SPRING 2017

many other factors. An experienced Certified Business Broker can discuss this further and assist in establishing the correct cash flow and multiple for your business.

Pricing Your Business For Activity Pricing a business is part science and part art. It is no secret that sellers aim high and typically overprice their business. What sellers underestimate is when a buyer is looking at multiple businesses for sale and he or she sees that the multiple is out of the normal range, the buyer will then assume the seller is unrealistic and will most likely pass. This means you may have lost an excellent, qualified buyer that would have been interested if the business was priced correctly. Pricing your business should be taken seriously and be treated in a professional manner that can be supported, otherwise everyone’s time is wasted.

It pays to be realistic. Many sellers assume that the amount of money they need to retire or need for their next venture is somehow related to what their business

21

is worth. That is wishful thinking and obviously not how the value of a business is determined. Studies show that there is usually a 10–15% difference between what a seller wants and what the market will bear. A Certified Business Broker has considerably expertise when it comes time to calculate a reasonable asking price for a business. They know that it is essential that they come up with a price that is fair. As a result, a Certified Business Broker will take many diverse issues into consideration.

Being Prepared Pays Dividends Down The Road The time spent at the beginning of the process of selling a business can pay big dividends down the road. It is

important to prepare your business for sale. What does that mean? Don’t be reactive—get your house in order before you put the business up for sale! Spend time to review your overall business. Review your processes, your policies and procedures, company financial statements/tax returns, inventory, accounts receivables and payables, review the condition of your equipment, the condition of your facility, review your lease agreement, your employee records and compensation, etc. Think of what you would want to see if you were purchasing a business and act accordingly. The more you can address upfront the better position you will be in when a buyer is at the table. One common statement I hear from business sellers is how they underestimated the time needed

ON THE MARKET:

Baby Boomers Are Poised To Buy!

I

t is estimated that approximately 12 million baby boomers will be selling their businesses in the next decade. Here are some facts:

n Retiring

baby boomer business owners will transfer approximately $10 trillion worth of assets over the next 7–15 years. n These assets are held in more than 12 million privately owned businesses. n More than 70% of these businesses are expected to change hands. n The sale of almost 12 million businesses over the next 7–15 years represents a significant increase in the annual number of privately owned business that will be sold. n These owners of these privately-owned businesses need to understand what buyers are looking for when purchasing a business and consult with a Certified Business Broker. n Planning ahead, mapping out a strategy and working with a Certified Business Broker will enable the business owner to achieve the best transaction possible during the upcoming wave of business sales. n The 12 million businesses likely to change hands over the next 7–15 years may involve older baby boomers selling to younger baby boomers.

22

n The

largest group of buyers currently in the marketplace are younger baby boomers between 45–55 looking to leave corporate America to purchase a quality business. n Many of these younger baby boomers are too young to retire. They typically have ample capital through saving, investments or use their retirement funds as a source of down payment which is becoming more and more popular. n A large percentage of these younger baby boomers find themselves unhinged from their traditional corporate jobs and fear of company layoffs or restructuring. This has fueled a desire and need to control their destiny by owning their own business. n Keep in mind these younger baby boomers are highly sophisticated and knowledgeable.

They are looking for quality businesses with consistent cash flow, good books, records and measurable “Transferable Value.”

So in the coming years, not only will we see millions of older baby boomers looking to sell their businesses, we will also see millions of younger baby boomers looking to purchase business. It is important to understand all the dynamics involved in this process.—M.C. www.socalprofessional.com

and overall what was involved with the sale of their business. On average, it can take 6–12 months to sell a business. Selling a business is a group effort that will involve you, key executives, and your financial and legal advisors all working in a coordinated manner with your Business Broker. Beginning with the gathering of information, through the transaction closing, you need input about all aspects of the sale. Being prepared up front will help this process go smother and more efficient for everyone involved.

In conclusion, selling a business is a time consuming and complex process. It involves knowledge and expertise in a wide range of fields and topics. It is important to understand the dynamics and the many factors that are involved in the sale or purchase of a business. No two businesses or deals are alike. Working with an experienced Certified Business Broker will help in dramatically increasing the probability of selling your business.

An experienced Certified Business Broker will assist the business owner in the proper “confidential” way to prepare the business for sale. In addition, a Certified Business Broker will prepare a financial analysis and opinion of value, professionally package the business, put a pro-

A

fessional confidential marketing plan in place to reach a wide audience, negotiate and structure a fair deal for all involved, prepare and manage the due diligence process, prepare certain contracts, handle the transfer or creation of a new lease, assist in financing the transaction and manage the entire process from beginning to end to assure confidentiality and so that the seller can focus on successfully running their business. •

Matt Coletta is a Certified Business Intermediary (CBI) issued by the IBBA and a Certified Business Broker (CBB) issued by the California Association of Business Broker (CABB). Matt currently serves on the Board of Directors for CABB and was the 2016 President. In addition, Matt is the Managing Partner / Co-Founder of M&A Business Advisors, The Leader in Business Sales & Acquisitions. Matt has been representing sellers and buyers of privately owned businesses for over 25 years in a wide range of industries including manufacturing, distribution, service, e-commerce, technology, health care as well as many others. Matt can be reached at (818) 999-9621 or info@certifiedbizbroker.com

The Importance Of A Lease Agreement And Timing

husband and wife owned and operated a highly successful 27-year-old garment manufacturing and wholesale distribution business.

The couple discussed several times the possibility of retiring and selling the business since the business was doing well.

As the saying goes, time is your enemy. Unfortunately, the couple had personal problems and eventually filed for divorce. In addition, shortly after filing for divorce, the wife was diagnosed with cancer. The business owners were fortunate that they had strong, long terms employees who stepped up and ran the business effectively. The husband checked out and left the wife and employees to run the company. The wife was now

SOUTHERN CALIFORNIA PROFESSIONAL

dealing with running the business, going through a divorce and cancer treatment. The company was stable for the next couple of years. The ex-husband became difficult and uncooperative with the divorce. The ex-wife wanted to sell the business and went to court to receive a court order for the sale of the business. The courts agreed that this was in the best interest of both parties and ordered the business be sold through my firm.

After several meetings, we moved forward to represent the parties in the sale of the business. As we normally do in the course of our work, we analyzed the lease agreement SPRING 2017

that was in place. I mentioned to the owners that the lease agreement is going to be an important factor in this transaction. Since this was a divorce situation, the owners would not agree to seller finance. I informed the sellers that since the company tax returns were strong, I felt comfortable that the business would qualify for SBA finance once we had a

23

Lease Agreement And Timing, continued strong buyer in place. I pointed out that since a SBA loan is typically done on a ten year term and that their facility was crucial to the success of the business, the SBA lender would require the total term, including options for the lease agreement be no less than ten years.

The sellers were adamant that I not speak with the landlord until we had a buyer and that there should be no issues with the lease. I explained to them that this was risky and that we should contact the landlord to make sure we would not have any issues. They were insistent and we moved forward.

We spent the next month preparing the business and our package. We then put our marketing plan in place and started speaking with prospective buyers. We had numerous meetings over the next several months until we met with a charming husband and wife team that expressed enough interest for us to move forward. The husband and wife team were both looking to leave corporate America to purchase their own business. They were sophisticated and knowledgeable about the process of buying a business. We had several in person meetings and early on they asked about the lease for the facility. The owner commented that they were currently on a month to month lease and they did not want to contact the landlord until we were in escrow.

The buyer expressed concerned since this was an important factor in being able to determine a price and obtain SBA finance.

24

“This could have gone a lot smoother if they would have just contacted me upfront.”

I told the seller that my SBA lender will need to make sure we would not have any issues with the lease and that I should contact him sooner rather than later. If the lease is going to be an issue, then the buyer will need to factor in the cost to relocate the business into the offer and the SBA lender will also need to factor this in.

Once again, the seller was insistent that we should wait until we were in escrow. The conversation continued and eventually the buyer submitted an offer that was accepted.

The buyer started their due diligence and worked with the SBA lender on providing what they needed. The question on the lease came up several times and we had no choice but to respected the owners request to wait until we open escrow. The buyer approved the books and records, we moved to an asset purchase agreement and opened escrow almost a month later. The seller then gave me the thumbs up to contact the landlord. I contacted the landlord and to my surprise, the landlord said that he was doing the owners a favor by not increasing the rent and push-

ing them to sign a new lease. He informed me that this would not apply to a buyer or new owner.

The landlord was clear that he would want to bring the monthly rent up to market rent and that he would only consider a five year term. I explained to the landlord and the owners that this would be an issue. The buyer will now be faced with higher rent (an increase of $1,000/month) and this would decrease the cash flow and therefore decrease the value of the business. Furthermore, the SBA lender would not consider financing unless the terms of the lease (including the options) were the same as the term of the loan, 10 years.

To add insult to injury, the landlord said he was going out of the country, on a 14-day cruise and unreachable. We were now about 8 weeks into this transaction from the first time we met with this buyer. It took another 3 weeks to wait for the landlord to return, work out a 10 year lease (5 + 5 year option) and we unfortunately had to renegotiate the purchase price due to the increase in monthly rent. The buyers were extremely frustrated but in the end, we received a new lease, obtain the SBA financing and closed the transaction. The landlord asked why we did not contact him sooner and I replied the sellers were insistent that I not reach out to you until a buyer was in place because they were fearful of what you would say. His response was, “This could have gone a lot smoother if they would have just contacted me upfront.”

Of course I agreed!—M.C.

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Grey Matters

FINANCIAL FORECAST 2017

One of Southern California’s leading financial advisor/CFO/CPA’s speaks out on current trends.

D

on’t call Drew Grey an accountant. He hates that.

It’s not that he isn’t a CPA (he is), or that he is ashamed of it (he’s not).

Quite the contrary, Grey is proud of his financial service background. But being a certified public accountant only scratches the surface of what Grey does, and therein lies the rub.

His unique C-level business experience in conjunction with his BIG eight audit and tax training puts him in the unique position of really being a business advisor a step above the average CPA. Grey’s business experience as a CEO and CFO has helped companies grow from infancy through public offerings and ultimately generating large

profits or his companies and clients.

He has also developed an extensive audit and tax practice, specializing in tax minimization, financial statement optimization and sophisticated estate tax and asset protection planning for growing businesses and their owners.

This one-two punch, of highly level business experience, combined with very practical financial, tax and audit experience, makes Grey a highly sought after advisor, working primarily with companies either in or seeking rapid grow and significant profitability.

We recently caught up with him long enough to get his thoughts and feelings on the state of financial affairs in California’s business marketplace.

SOUTHERN CALIFORNIA PROFESSIONAL

SPRING 2017

SCP: How are income tax rate increases affecting your clients?

Grey: Successful clients are faced with paying more taxes on federal, state and local levels. We have assisted our clients with effective strategies to reduce or eliminate California taxation. Clients who have significant taxable income can use techniques such as captive insurance companies, which offer significant tax deductions and other benefits. Many clients are able to reduce their taxes from research and development credits and perform cost segregation studies on their real estate. Other tax minimization techniques include deferrals of taxable income by using cash basis distribution companies to avoid being taxed on accounts receivable,

27

Grey Matters disbursements to fiscal-year sales and marketing companies to defer income recognition, utilization of pension and profit sharing plans, and other techniques. Every client has unique characteristics. We study each client to determine the optimal strategy that meets specific goals. Paying less in federal, state and local taxes provides more cash flow for business or investment.

SCP: What are some of the top concerns of middle market CFOs today?

Grey: CFOs are concerned with many issues; however one of their primary issues is having sufficient debt or equity to fund their business.

We actively assist our clients in the preparation of detailed financial projections to plan for their needs. We have developed strategic relationships with conventional and non-conventional financing sources that can provide the debt needed to expand their businesses. We have strategies that separate the financial statements from the income tax returns thus enabling our clients to pay less tax while not impacting the financial statements. Commercial lenders make borrowing decisions based on the company’s compiled reviewed or audited financial statement. Therefore our clients are able to increase their cash flow through paying less in income taxes and are able to obtain the maximum amounts available from lending sources.

SCP: How do business owners and clients handle the challenge of increasing their credit facilities while minimizing the taxes?

Grey: Clients preparing financial

28

“At SRG, we use the GAAP and tax rules to our clients’ advantage, while maintaining integrity in all aspects of our reporting. This is another example of our creative, value-added approach to solving our clients’ problems.”

statements for financial institutions must find the balance between reducing federal and state taxes, and reporting strong earnings to the financial institutions that have provided credit facilities. Our strategies emancipate the clients’ financial statements from their tax reporting. How do we do this? Financial institutions require an accrual-based financial statement, while tax law differs significantly from accrual accounting. This difference can yield lower taxable income without impacting the accrual-based EBITDA of the company. We evaluate each company to identify areas where the financial statement and tax reporting can be separated by applying different year-ends and methods of accounting. At SRG, we use the GAAP and tax rules to our clients’ advantage, while maintaining integrity in all aspects of our reporting.

This is another example of our creative, value-added approach to solving our clients’ problems.

SCP: What is the biggest difference between the accounting profession today as opposed to 20 years ago?

Grey: The most significant change is the amount of new financial statement and income tax changes in the rules that impact the clients and our firm. Our services have evolved to meet the changing landscape of business operations today. We are active in strategic financial consulting, and act at a level of a Chief Financial Officer and, in some cases, as the Chief Executive Officer. Many

of our partners and professional staff have been controllers, CFOs, or CEOs. This level of seasoned experience gives our firm a unique ability to meet our clients’ needs. We are actively involved in the Merger and Acquisition activities from the buy and sell side, selecting the appropriate investment banker, and assisting with long-term planning for tax minimization and succession planning. We have developed effective strategies to eliminate or substantially reduce estate taxes and regular taxes from the sale. Asset protection is another benefit that flows from an effective structure. Our firm has become global to meet the needs our clients who cover the world.

SCP: Is your firm offering more or different services than you have offered in the past?

Grey: Our firm has developed value-oriented services that increase our clients’ net after-tax cash flow.

We provide tax strategies that reduce taxable income and do not impact the financial statements that commercial banks rely upon to provide credit facilities. We separate tax planning from financial reporting in a responsibly creative manner. We are trusted advisors serving at top levels in management. Our expertise as Controllers, CFOs and CEOs offers our clients knowledge and experience, which other CPA firms do not possess. Our services have evolved to meet the changing landscape of business operations today. We are active in strategic financial consultwww.socalprofessional.com

ing, and act at a level of a Chief Financial Officer and, in some cases, as the Chief Executive Officer. Many of our partners and professional staff have been controllers, CFOs, or CEOs. This level of seasoned experience gives our firm a unique ability to meet our clients’ needs.

SCP: What are some of the biggest mistakes companies make in managing cash, taxes, and financing?

Grey: Companies need to better plan for their financing needs, and more effectively project their covenant performance. This planning helps to confirm and maintain compliance and the conditions required to increase their credit facilities. Companies also need to communicate more frequently with their lenders regarding both positive and negative situations.

The biggest mistake companies make is that they try to reduce their tax obligation in the same entity that they are using to borrow from the bank. Tax minimization and financial statement optimization are mutually exclusive, and cannot be achieved in the same entity. The SRG Advantage is the emancipation of the financial statements from the tax returns, yielding our clients optimal results. Lower income taxes are paid and the financial statements are fairly stated; this enables the company to obtain the maximum amount of available financing.

SCP: What do CPA firms need to do to help growing companies in business today?

Grey: The CPA firm needs to identify growth opportunities and help clients implement strategies to optimize their market share. Short term, mid-term and long-term planning contributes to achieving these goals. Once a comprehensive business plan is developed, our firm will introduce lending institutions, private equity firms or private sources to achieve the goals. The accounting

firm is an active partner with its clients in reaching their goals. Continual monitoring of results is a critical contribution of the accounting firm. The business plan and forecast should be monitored and revised regularly to properly plan for the company’s success.

SCP: What advice do you have for clients when it comes to future planning?

Grey: Clients need to adapt to continually changing circumstances.

We meet regularly with our clients to review their goals and desires, and ensure that we are providing them with the maximum value possible.

We recommend that our clients who own businesses plan their exit strategy well in advance, as they may need to transition family members or key employees into a succession plan. Exits can be costly; we have ways of reducing costs substantially. Our income tax and estate tax methods achieve the transfer while offering our clients maximum control and cash. Many clients want to maximize their entity value and then exit through a sale. We can assist with the sale. We recommend that

SOUTHERN CALIFORNIA PROFESSIONAL

SPRING 2017

exit-strategy planning be done many years before it is executed. Having a well-seasoned plan can ensure proper capital gains treatment, avoid inclusion in the client’s taxable estate, and often help avoid paying taxes to the state of California.

About Drew Grey Grey began his career at Ernst and Whinney where he became an audit and tax manager. He became the Controller and Senior Vice President of a real estate company that grew from $2M to $250M per year before joining SRG. A partner at Los Angeles-based SRG since 1988, he has helped grow the firm as well as many of their clients’ businesses.

He has been the Chief Financial Officer of two publically traded companies and the Chief Executive Officer of a consumer product Company with products in 27,000 store doors in 22 countries. Most recently Drew was named one of the top “Trusted Advisors” by the San Fernando Valley Business Journal and received their award for “Client Service.” He can be reached at www.srgcpas.com. •

29

6

Networking MYTHS &

Mistakes

An exclusive excerpt from the new book Naked Without A Network!

BY DAVIS BLAINE

“The ultimate result of shielding men from the effects of folly is to fill the world with fools.” HERBERT SPENCER

D

uring my many years of learning about networking and fostering relationships, I have probably heard every networking myth (i.e., excuse for not putting forth the effort to network). Let me dispel at least some of them.

One More Contact

“I have enough contacts. I do not need to establish one more.”

That may well be true for you, so you think. What a burden it is (he said, factiously) to spend the time to connect with another...(fill in the blank).

My answer is “You Never Know.”

That very next person may be your very best connection, friend, business client, etc. Why not be open to at least a phone contact, especially if you trust and respect the person

30

who is giving you the connection?

Do you have confidence that she knows you well enough to make the effort to connect you?

In our business and personal lives, there are obvious direct links, people with whom we can develop meaningful relationships. So what about the randomness of a next contact? Many network groups have copied the ProVisors troika concept; that is, arranging a meeting of three people outside of the large group meeting. This setting typically enhances the in-depth understanding of one another’s business and personal life.

If a relationship is meant to develop, the troika is a key ingredient.

Now, suppose that one person in the troika is not a direct link, referral source, or resource. Yet, that person has a family connection to a large

business, one which really needs your services. The randomness of making connections occurs more often than you might think. Besides, even if there were no direct link or the “random” family business, you can still show up and find out how you can help that person.

Many people resist that one more contact because they feel it is a burden or obligation. How can they befriend someone new, send them business, or serve as a resource to them? You can always find ways to give to someone else. That giving does not have to include a new client.

Don’t Like Small Talk

“I hate small talk. It is tedious and boring. So how do I avoid it?”

Most people want more than chitchat or small talk. But some of www.socalprofessional.com

NETWORKING

it is necessary as a way of greeting others or not being awkward in social settings. Small talk can lead to deeper conversations, or you can direct it there. The art of the segue is probably the most underrated personal communication skill. Often, humor is a good way to switch topics or focus in a conversation. Use it if it is a natural part of your personality. False or stilted attempts at humor are worse than not invoking humor. Be true to your self. The best way to improve your communication style and impact is to get help from a professional coach who can personally train you.

I do not consider myself the most inspirational or ideal public speaker. I am much better, and more comfortable, leading a group setting, whereby I can interact with

others and respond to their dialogue and comments. Prior to presenting to an audience, I have the natural or normal trepidations. I find it interesting that some people are perfectly comfortable giving a prepared speech, but very insecure in a first one-on-one meeting. Find your level of comfort and work to improve it.

It may be the difference between being average or successful. Like most speakers/presenters, the more I practice my delivery, the better the outcome. In Own the Room, the authors explain that good preparation does not mean memorization or reading from a teleprompter. It does mean knowing your materials, capturing a tone and rhythm, and then sharing yourself with your audience. To that end, I enjoy presenting at least a part of me in every talk.

SOUTHERN CALIFORNIA PROFESSIONAL

SPRING 2017

Networking is Beneath Me

“I am a senior professional/executive. I will likely never meet or connect with someone on my level.�

Maybe not, but why preclude the possibility of making that connection? EVERY HUMAN NEEDS AND WANTS TO BE CONNECTED TO A LIKE-MINDED COMMUNITY. I think even Henry David Thoreau left the wilderness to return to some societal connections; and, maybe to get his writings published!

Each of us knows or knows of high-powered, well-connected people who were born into privilege.

Some have been mentored by industry or political power brokers. Some have just insinuated themselves into and among high level connections that provide a continual flow of capital, opportunity, career moves,

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6

Networking MYTHS &

Mistakes

or access to the right resources. Still others have parlayed family members or legacies, or offspring of the wealthy, into situational success. At the same time, the above examples of apparent access to money, power, or higher levels of achievers were really accomplished by connections to the “right” people. The central tenet is still about relationships.

My supposition is merely that, at some time, everyone needs help from someone. Starting with clubs or sports as kids, people begin to belong and make friends. There are numerous types of loose or well-structured organizations that proliferate in our personal and business lives.

Margaret Wheatley, a consultant who studies organization behavior, concluded: Relationships are all there is. Everything in the Universe only exists because it is in relationship to everything else.

Nothing exists in isolation. We have to stop pretending we are individuals that can go it alone.

Author Mitch Albom (Tuesdays with Morrie), stated: “Build a little community of those you love and who love you. We all need that core community of love. Without it we are either lost, adrift, or without purpose and meaning in our life.” The stronger that love corridor, the easier it is to put yourself out there, and fail.

As a junior and senior in high school, I had been told by a local business person that I would receive a full scholarship to the University of Michigan for basketball and baseball. Looking back on that time, I was never in direct contact with the head coach for either sport. I was relying on the word of a local “scout,” since I did not understand

32

the recruiting process. How naïve of me, or maybe how relatively unimportant I was to Michigan.

The only other school to which I applied (and was accepted) was Dartmouth. My high school football coach and Athletic Director talked briefly to the Dartmouth coach when he visited our high school. Though I played football in high school, I was not planning to play that sport in college. He knew I also played basketball and baseball, so he emphasized the academics and the fact that I could play these other sports.

I made a recruiting trip to Dartmouth with my parents. What a stark difference in athletic emphasis and facilities between the two schools (Big 10 and Ivy League), to say nothing of the talent disparity.

When I was sent a letter by Michigan’s basketball coach and asked to walk-on (not granted an athletic scholarship), I was extremely disappointed. My entire life’s focus and athletic dreams had included playing at The University of Michigan. The Ivy League, which included Dartmouth, did not (nor does it today) provide athletic scholarships.

I was granted a student loan to Dartmouth, which allowed me to matriculate there.

How did that setback or failure turn out? It wasn’t all bad. I played both sports at Dartmouth, earning AllIvy honors for three years in basketball. And, I got an excellent education.

Whenever I have been forced to take a new or different path, I have made it work. But not without “falling down” on occasion, or struggling financially. Remember why I created the networking organization. I was forced to figure out how to survive and build a business, unlike any of my other past experiences.

Too Young To Network

“I lack the experience to talk with or share anything with most of the people I meet. They will not pay attention to me.”

As PNG was growing slowly throughout the 1990’s, there was some thought to attracting younger professionals with great upside potential. But the older pros were resistant, wanting to keep the community serving their needs. The strong younger ones persisted; a few even became group leaders. It is at this level, group leader (GL), that you are accorded an elevated level of respect. You not only decide which persons can join your group, but how the meetings will be conducted (given the basic framework within which all groups operate).

ProVisors has adapted well to accommodate all types of professionals, including many in their ’30s and even late ’20s. The pressure is on these younger members to deliver ideas, connections, and referrals.

So long as they share first or pay it forward, age differentials disappear. www.socalprofessional.com

In fact, many groups target younger people, attempting to create a more energetic, fresh communication.

Obviously, you are never too young or too old to begin networking. Parents should encourage their children to build relations and friendships very early and often in life. As you find your passion/ occupational path, you may want to reach back and out to these prior connections. When I left ADLV in 1987, I had no more than 6 names in my Rolodex. From that paltry number, I contacted a senior person at KPMG. He was kind enough to hire us for one of his clients, a valuation engagement that was large enough to carry our firm for several months. But no one should be in that desperate a strait. I was very fortunate for the great business jumpstart. I will never be in that dire position again, nor should you.

SOUTHERN CALIFORNIA PROFESSIONAL

Three Key Takeaways

1

Understand your excuses (myths) for not networking, and find a way to get beyond these roadblocks.

2

Even if you do not belong to a formal community, you probably have an informal way to pursue connections.

Why not arrange for your inner circle of contacts to meet together on a regular basis?

3

Networking takes time and effort. Develop a plan to devote the proper energy to building or participating in a community of your choice.

SPRING 2017

What else can you do as a younger professional or executive?

Most importantly, get out of the office. Even if your primary job is not to generate business, will anyone in your firm turn down a good assignment that you originate?

Here are a few ways to start branding yourself, even as a younger person: 1. True passion trumps all.

Express what you are passionate about, though in a matter-of-fact way. We are drawn to the person who can articulate why she enjoys her work. That makes us more curious about how we can help her.

2. Give. Give. Give. Find out what is meaningful to others, even seasoned veterans (old folks!), and reach out to offer something. Giving to others triggers the “human guilt switch.” When we receive something of value that we did not solicit, our brain receptors are wired to record

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6

Networking MYTHS &

Mistakes

that occurrence in our long term memory. Especially unforgettable are those key introductions you make that result in a new friendship or business relationship.

3. How many actors who “suddenly” become famous did not toil in some anonymity for years? Very few.

4. Arrange meetings with your elders and learn from them. Find out how they forged a career, and what can you do to best present yourself. People want to help eager younger people. So ask.

5. Organize a mastermind group of younger professionals. Develop a chemistry with those in the group most likely to be resources and referrers for you and your clients. While you should always be open to receiving, the best way to be a receiver is to start by being the giving quarterback.

6. Start your own firm or move to one where your value is better appreciated. There may be a time when you are ready to go on your own, or with a few partners. Choose those partners wisely, with clearly defined roles, compensation, life style, decision-making procedures, etc. The ultimate arbiter of a successful venture is the trust in one another. If complete trust is lacking, wait for a better opportunity.

I have experienced good to awful (painful, in fact) “partnerships.”

Spanning my business career, I have started five firms, bought one, and sold four. That leaves two companies that I continue to own and operate. Most of us need to work cooperatively with others, in our firm or outside. The least successful of my ventures were those whereby my reliance on others to deliver their promised output did not match my expectations.

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No Need to Network

“I have no desire or need to network. I am busy enough.”

I wonder how many people who said that before 2008 can say the same thing today. For the vast majority of professionals I know, there is a new normal of activity. The hectic pace of work from 2003 to 2008 has been replaced with periods of less demanding workloads, punctuated only periodically by high activity reminiscent of that five year period.

I also think that those who go to lengths to avoid meeting with others outside your firm are just more reclusive. If you never have to worry

the community at large. Reframing an old adage: “Never turn away a potential gift-horse in the anticipation that it is a Trojan horse.”

My Work Sells Itself

“The quality of my work sells itself.

I will always have clients come to me based on my professionalism.”

They may, and they may not.

Clients are more fickle these days, requiring more attention, positive reinforcement, and some fee concessions. Since 2008, in most professions there is increased scrutiny of our services and fees. The downward fee compression is particularly vexing, since the financial, accounting, and tax standards for quality and work product are much more stringent.

The best way to ensure a steady stream of prospects and repeat clients is to perform to the utmost of your ability and standards. That is axiomatic. However, without our at least highlighting the benefits of our work, some clients will never know how well we performed. You can be a major “megaphone” for other professionals simply by reinforcing the high quality of their service to common clients, prospects, or referral sources. A complement from a respected person usually carries more clout than self-proclamation. •

Naked Without A Network is Davis Blaine’s second book and is available on Amazon.com.

about your next engagement or where you need to spend your work time, you are blessed.

However, you are also missing the opportunities to learn vital and current information from others, often useful to your clients and/or other executives in your firm. And, you are not taking advantage of the personal growth which occurs each time you interact and refine your message or brand. These interactions are constructive in terms of furthering your career and your connections with key persons in your “space,” industry, or

Davis R. Blaine is the Chairman of both The Mentor Group, Inc. and Mentor Securities, LLC (FINRA registered) as well as the founder of ProVisors and CEO of The Legacy Forums.

He is an expert in accounting, tax and the financial aspects of acquisitions, recapitalizations, valuations and appraisal. He has frequently lectured and written on technical valuation issues.

Davis has counseled many clients on buying, selling, or raising capital. In addition, he has prepared companies for public and private investment, strategic partnership, and joint ventures. www.socalprofessional.com

ROI gets the Right People in the Right Seats.

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THE PROBLEM Middle Market boards, CEOs and business owners face many problems when finding and retaining “A” players for their executive management team. Perhaps they don’t know where to look for candidates, they may not be sure how to communicate with them or they’ve been disappointed with high fees and mediocre results from recruiters in the past.

OUR SOLUTION ROI creates and then differentiates our client’s “Employer Brand” to prospective employees. We then develop a meaningful “Employee Value Proposition” to attract only “Top Athletes.” Next, we not only identify and recruit high performing executives but we also help our clients retain them through ROI’s “Retention Regimen” process for the first year of service and beyond.

“Resource Options International is a conscientious provider of recruiting consulting services that are well thought out and executed. They emphasize an understanding of a client’s culture and adapt their search process to work with and meet

OUR SERVICES 60- to 90-day Retained Executive Search process including final candidate psychographic assessments.

Our Deep Dive™ process develops an understanding of our client’s job needs, company culture and competition.

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We help retain client placements through ROI’s Retention Regimen™ process after hiring.

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a client’s needs. I highly recommend ROI.” Peter Cazzolla, Retired Chairman, CEO and President Capital Insurance Group

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Taking T

hey are lazy. They are loners.

They are narcissistic.

That’s the millennial stereotype. Always on their smartphones, probably Snapchat or Instagram, or the social media du jour.

But is it true? Is that who the largest workforce in our world’s history really is? Is this group, more than 80 million strong in the U.S., who will really inherit the country? Are they really as lack luster as business articles and 24-hour new channels would lead us to believe?

I don’t think so. Here are five mistakes I have found in the way people are looking at millennials and how they are getting this generation wrong, in terms of understanding their habits as employees and catering to them as customers and clients.

Life In The Trenches Shortly before the 2008 Recession, I was asked to “cover” a class for a semester by a departing professor at

36

Pepperdine University. Somehow I must have done all right since I have now taught more than 30 classes at the university.

In my very first class as a professor, an advertising media class, students urged me to check out a website called MySpace. This was circa 2005/2006. I jumped in, got the lay of the land, and even executed a promotion for a client based on what my students had taught me about the new “social media.” That was a spring semester.

By fall, ­MySpace was over. “Facebook, Professor Hemsworth. You gotta get on the Facebook,” they all said, just months after telling me MySpace was “the best.” With my .edu email, I created an account, but found it to be a big waste of time.

But by 2007, something started to click, and social media took off.

I jumped on, and though double the age of most millennials, I had a front row seat, both physically in

my classes, and virtually, as an early adopter of social media.

I watched carefully as students fell away from books, and into iPads. They were less concerned about dating, but rather with Friday nights of “Netflix and chill.” Their phones became their most prized possessions. And in school, they believed that they were invincible, the most “wired” generation ever.

Myth #1: Millennials Are Lazy Here’s the one I think baby boomer managers (and sociologists) get totally wrong. I don’t believe they are lazy, I believe that millennials have generational ADHD. They are suffering from a tremendous saturation of information—immediately, constantly, and uncontrollably.

I teach the Senior Seminar each spring semester. It’s the capstone course in Integrated Marketing Communications. Students dutifully give www.socalprofessional.com

What one marketing professional and part-time university professor has learned about millennials may surprise you!

They are not who mainstream media thinks they are!

EMPLOYEES

BY BRIAN HEMSWORTH

Millennials m a e r t ns mai

me their attention up until about spring break, and the BAM! They check out. Gone. Sometimes physically. Always intellectually.

I’ve studied this, interviewed students, shared notes with other professors, and I have a few theories on this. It’s more than just senior-itis, which everyone of every generation gets in the last semester of undergrad. “I just want out.”

Well, millennials want out, but it’s more than that. They want also want “in.” They want out of school but they want in to work, to jobs, to society, and to wealth. I think they’re more like the young child attracted to the shiny object, and as seniors, there are lots of shiny objects out there.

I have learned the key to keeping them engaged in class is like a page out of John Wooden’s playbook… change of pace and change of direction. If I change pace or direction, they are curious and hang with me.

If I don’t, they move on. I also found

that the second half of the semester is less about traditional class time, and more about projects that can be done on their own time. During a recent semester, the time of the day most assignments were turned in online?

Between 1:00 a.m. and 3:00 a.m.

Myth #2: Millennials Don’t Know What Hard Work Is Another common misconception is that millennials aren’t hard workers.

They always look for the easy way out.

It might be true that they look for the easy way out, but that’s not such a bad thing. Their easy way out is probably a better way to do things.

Here’s a true example. In 2009, I had a college intern working on out team for the summer. He was the son of a client of ours. On his first day, we called him into a meeting. We were discussing social media strategies for a big sports equipment of ours.

About two minutes into the

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SPRING 2017

meeting, he took out his cell phone, and began typing away. I was pretty agitated, but thought I’d give him the benefit of the doubt, that maybe his dad was texting him or he got some kind of important message.

He occasionally looked up, but then kept typing.

I was baffled by the behavior (something that was relatively new at the time, but par for the course nowadays). I gave it about one minute, then I figured it was time to let him have it. I was going to give him a dose of “what for” about business meeting proprieties.

A millisecond before I opened my mouth, he said, “You know their competitors have a lot more friends and likes, but a lot of them are fake.”

“Huh?” “Yeah, I just checked their numbers, and spot checked a few of their followers, and they’re fake. They’re all from Eastern Europe, and they don’t even distribute there.”

37

Taking Millennials stream main

What I thought was rudeness was, in fact, market research being done in real time. This intern did more quality market research with his phone in 60 seconds than I had done in a week.

That’s when I learned that for millennials, it’s all about channeling the effort. Don’t stop their efforts, just change their efforts and trajectory slightly to align with your company’s.

Myth #3: Millennials Are More Socially Responsible This one is not entirely a myth, but it’s not exactly as it seems.

There are countless articles and studies out saying how important social responsibility is to millennials. The disconnect I have witnessed is in what millennials say versus what they do.

For example, millennials say they want greater transparency and higher ethical standards. I hear it all the time in my class. Yet they are the generation that has embraced companies like Uber, Chipotle, and Volkswagen. Millennials say they want fairness, yet Uber is the virtually unregulated and unlicensed arm of transportation that is putting licensed taxis out of business (not that I mind it). I think they want fast, affordable fares. Chipotle, having built a customer base of millennials with organic and locally grown ingredients, suffered heavy losses after well publicized E. Coli, sexual harassment, and drug scandals. Millennials dropped Chipotle like a hot burrito. How did Chipotle lure them back? Free food. Not exactly appealing to their sense of fairness, but definitely to their wallet. And Volkswagen, the environmental liars of the new millennium, were recently named one of the top

38

five auto brands of millennials by AutoGuide.com.

What do these have in common?

I believe millennials think they are more socially responsible, and maybe they are, but I don’t believe they are appreciably different in action than previous generations when it comes to spending. They want deals, they want to stretch their dollars, and they want more value.

I think the key is not to pander to millennials and then not deliver, but rather have social responsibility as a key component of your brand, but don’t overlook value. Millennials still have a lot of student debt to pay off!

Myth #4: Millennials Feel Overly Entitled Like #3, this may not be completely wrong, but I don’t think it’s the whole story.

The baby boom came of age in the ’60s. It was the pot smoking generation. The hippies. The war protests. Dropping out. If you asked the average parent during that time, the country, if not human civilization, was going downhill fast.

And now look at the results: Wealth, prosperity, trips to the moon, advances in medicine, and the Internet. Not bad for a bunch of slacker hippies, eh?

That’s the context with which I think we need to view millennials and their sense of entitlement. Gen X gave up, but millennials want what’s coming to them. They want success, they want wealth, and they want the accolades.

Some complain that millennials want to “get rich quick.” Does that make them any different than previous generations? Baby boomers climbed the corporate ladder, but we were just as likely to jump off and

make our own ladder. We wanted to create cable TV shows, build better mouse traps, and explore/exploit new markets as much as any generation, and maybe more. We didn’t want to wait, but we didn’t know any better.

Gen X, on the other hand, tossed in the towel, as a generation. They became baby boomers or millennials.

We didn’t hear of their yearning for opportunity, their creative business sense, or their entrepreneurial spirit.

Millennials have seen people create products, programs, technologies, and websites that have made millions and billions of dollars.

Why shouldn’t they want some of it? And for a lot of them, their parents worked hard and earned a lot, and the truth be told, the millennials are standing in line to inherit the whole shooting match. Economists believe we are on the verge of the largest generational shift of wealth the world has seen.

Dealing with entitlements is difficult. I have seen it in the classroom, with students feel they “deserve grades” for effort, despite lack of results. They are very protective of their time (don’t ask them to stay after class, that’s their time).

One tactic I have tried and appears to work is to be painfully explicit in communicating expectations. We, as employers and creators of products must communicate what our brands and companies are “all about.” We must let people know what we stand for, and what we don’t. Additionally, we must solicit the expectations of our customers and employees. What do they want? What are they willing to work for…pay for…fight for? The more we can articulate these expectations, the better we will all be.

Myth #5: Millennials Are Loners Every generation has its loners.

Some feel this generation has more than its share, but I don’t see that.

They appear to have more loners, www.socalprofessional.com

but that’s in large part because the baby boomer and Gen Xer’s sense of group is different.

We, the previous generations, hung out at the school yard, the soda shop, or the mall. Millennials hang out in the chat room online.

I recently told a group of students that as a guy growing up, it took all courage we could must to ask a girl out on a first date. Time was when it had to be in person. Then, thanks the technology of the telephone, we could at least partially hide our embarrassment on the phone line.

Today’s millennial swaps phone numbers (for texting) and social media handles in a much freer way that we did phone numbers.

They also have the ability to “stalk” online. We used to have to stand afar, out of view, wondering what someone was like. Today millennials can check out profiles, blogs, social media, and other online sources to know all about someone before ever texting, calling, or Heaven forbid, talking to someone.

A recent study indicated that heavy users of social media actually get small shots of dopamine when they receive likes, follows, shares, or comments on social media. It’s

become their drug of choice. When we look at millennial sons and daughters, students, and employees, and we see their faces in the smartphones, we think they are by themselves. In fact, they are hyper connected to one, several, or even many friends all at the same time.

Psychologists and sociologists can argue if it’s healthy or not, but the fact is that this is not just a tech fad, this is a way of life…the way of a generation.

Possibly the best way I have seen to harness this and channel it for the better, is to find ways to being inclusive. Millennials want to be a part of something. It may be a group chat, or a social movement. They may want to be one of the many going to Coachella, or they may want to be one of the many downloading a new app, but they want to be included.

So, as employers, or brand purveyors, I suggest you find ways of inviting millennials in. Let them join the club. Maybe it’s the “Let’s go to Starbucks at 9:30” club, or the “We’re working for Habitat for Humanity this weekend” club. Maybe it’s asking them to lunch, so that you can ask them what they care about, what’s on their mind. And it always

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needs to be about including them in a mission. Millennials want to get somewhere, accomplish something, so you can do a lot for yourself and your company or brand if you let people know where you’re going.

Conclusion Millennials do represent change, but it’s my experience that they are not really all that different from what we’ve all experienced with other generations in the past. Mary Tyler Moore threw her hat up in the air.

Michelob told us we can have it all.

Napoleon Hill told us to think and we would grow rich. Ford said they had a better idea.

Millennials want it all, too. And they are thinking about it, and they have a lot of great ideas. But like every generation, there are forging their metal during these formative years. The reality will continue to unravel as they move up the corporate ladder, the payscale, and the age ranks.

Success in working with or marketing to millennials is more about learning where their habits and our habits intersect, and knowing where our hopes, dreams, and values come together rather than clash. •

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MEDIA MATTERS SOCIAL MEDIA

BY BRENDA HILL

The 5 Social Media Platforms You Can’t Ignore With social media, there is no “one size” fits all.

In fact, it’s less important what you like, but rather what your customers and clients like, trust, and value.

Here are five social media platforms no business can leave behind!

“A

professional service firm without a website is one that will be out of business in a year…two tops,” said an accounting firm managing partner recently when discussing marketing online.

Five years ago it might have been an option, but not anymore. Not having that online presence is arguably like not having a phone, it just limits your communication with the rest of the world.

Social media, though, is not the same. Yes, social media is popular. Pew Research estimates about 70% of adult Americans use some type of social media. Broken down by age, nearly 90% of millennials use social media, with Gen X at about 80%, younger baby boomers about 65%, and the biggest fall off comes at those over 65, with just 35% using social media.

Using social media is not required marketing for professional service firms, but they are, as a group, moving

The Up And Comers

D

epending upon your marketing goals, your clients’ preference for social, and the type of information you put out, there are several other platforms to consider. These include:

PINTEREST

Pinterest is an online bulletin board. Users “pin” images and articles from the internet. These are saved onto the persons own “boards”, but can be shared with others, much like Facebook does with it’s newsfeed. Everything is keyword searchable.

Pinterest has been particularly successful in reaching women, as well as audiences where

40

visual elements are popular, such as food, travel, DIY, art, architecture, and photography.

SNAPCHAT

Snapchat is an image messaging and multimedia mobile app.

By design, images only live on snapchat for a limited period of time, which has caused it to be a frequently used medium.

Of interest to marketers are the new “geofilters” which are special graphical overlays users can access. The platform is a favorite of younger millenials and Gen Z (digital natives).

TUMBLR

Tumblr is microblog. It has

an interface that allows you to access and post different media, such as text, images, video, or even access songs and music, all done through your dashboard. Research indicates that there are more than 500 million monthly visits, and that some 40 million are active blog creators on Tumblr.

REDDIT

Reddit is a “social news aggregation.” This up and comer is a call by some a “discussion” website. If you can think of a topic, there is probably a group and chain of discussion happening on Reddit about it right now. •

www.socalprofessional.com

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SPRING 2017

Image courtesy Walter Lim

very rapidly in that direction.

But with so many social media options, where should businesses and service firms go in the social media universe?

We counsel a lot of clients, and we have found no two are alike. What social media works for one firm, might be totally different for others.

Even within the same practice area, or geography, it varies widely.

We have found that there are 5 primary social media platforms that professionals need to be aware of, monitoring, or active on, if they want to be seen as relevant with the marketplace.

These five what we have determined are the big five: n Facebook—Now nearing the 2 billion user mark; very popular, all purpose social media; accepts text, images, and video; rapidly growing marketing tools such as advertising and boosted posts n LinkedIn—Arguably the most respected professionally; excellent tool for pier to pier connections; used heavily in recruiting and job hunting; nearly half a billion users n Instagram—Originally “image” oriented, now using video, too; used by more than 25% of Americans; currently a favorite of millennials; used by half of all major U.S. brands n Twitter—More than 300 million active monthly users, but more than 700 million registered users; appeals to users when news or frequent updates are important n YouTube—Yes, YouTube is social media; more than 1 billion users; reaches more 18-49 year olds than cable TV network; generating billions of view of hundreds of millions of hours of content…daily!

Our experience is that each company, firm, or brand, typically has one social media that is used the most by their clients and customers, but that it takes some research to determine which. Additionally, firms are

well served by exploring what customers and clients are using social media for. Is it news, entertainment, images, videos, text, or interaction?

Typically we recommend that firms and brands create a presence on each, but focus on the one that proves most engaging with clients and customers. The reasons for being on the others, are that social media tastes change, and you don’t want someone social media “squatting”—opening an account in your name and treading on your reputation.

There are wildcards, too. For some industries and for some audiences, Pinterest has become a big player. For Digital Natives, the next generation after millennials, Snapchat is growing rapidly. Blogging is another often overlooked social media many firms are finding customer and client engagement with.

If being vibrant, relevant, and attractive to a variety of potential markets and demographics, think about social media platforms and which ones might work best for your firm. Start with those mentioned in this article, and you’ll be well on your way to social media success! •

41

BUSINESS PSYCHOLOGY

BY STEPHEN W. FRUEH, PhD

Eliminating Negativity At Work

B

Four hidden psychological factors that corrupt performance

usiness consulting often focuses on the most tangible challenges: cash flow, supply chain, work flow, job descriptions, salaries and bonuses.

In my work with companies and corporate teams, I often take an “inside out” approach. “Inside out” focuses on that which is not so easily seen and often can be a far more powerful inhibitor of successful operations. We see four (among many) factors that, once identified can create a pathway for improving personal performance of employees and managers.

1

The so-called negative employee.

We all know and recognize this person and it’s easy to demonize them. We have found numerous examples that may seem to you to be “counter intuitive.”

The negativity you see often hides a strong desire to positively impact a team through naming what’s wrong.

We call this employee the “truth teller” and he or she is easy to dismiss because what they are saying is not well said or is said with so much emotion we feel uncomfortable listening. As in ancient times this messenger of necessary information can be a victim of “kill the messenger.”

Solution: Find a leader who isn’t afraid to listen carefully to all the complaints this employee brings.

Honor each one and create a leadership meeting where the complaints or criticisms are seen in a non-emotional objective light, and then decide what’s valid.

2

The orphan. Within every organization there are insiders and outsiders. Like the school yards of our youth we all want to be part of the in crowd. The “orphan” will linger on the outskirts if not seen for their unique contributions, their work ethic, perhaps their shyness and their reluctance to speak up.

Solution: Empower this employee through intentionally welcoming their input, inviting them to small group gatherings, asking for their help with a project not necessarily in their domain. Offer a little training or coaching where they need it. Seeing it, naming it, acting on it will change the complexion of your team.

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3

The narcissist. This person creates more attention for themselves than is warranted and causes anxiety among team members. They may look good but their self referencing all successes of the team undermines loyalty, goodwill and focus.

Solution: A good muscular interview exploring their needs, their true contributions, their own exploration of their effect on the team—can open the way to coaching that focuses on building a realtime relationship with leadership. Remember: the narcissist wants to be seen, wants to be important. Give them a pathway where they can, in a healthy way, achieve that.

4

The addict. Addiction is not only about alcohol and drugs. It is a personality style as well. The addict can’t stop themselves from smoking/eating/drinking/working/gossiping, etc.

Solution: This employee needs help but it must be artfully offered. Intervention should be by design using leadership that is itself insightful, kind and proactively oriented. Acknowledge their contributions, probe (a little) around whether they self diagnose their own situation, offer outside the office help (if appropriate) and make a coach available to them. If successful this somewhat driven employee will become even more valuable to your organization as they gain some (inner) control over their demons.

Hidden factors, mostly psychological in nature, can when addressed, fuel real growth in team performance.

Work to identify them and then to turn them into positives for your company. •

Stephen Frueh PhD is the creator of business consulting firm Centrifugal Leadership. He has assisted small to medium sized companies in culture change, leadership development, and the creation of high performing teams. His is a frequent speaker and presenter on business topic, relationships, and productivity. His tag line says it well: “Leadership from the inside out.” www.centrifugalleadership.com. www.socalprofessional.com

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