Service organizations are trusted with some of their customers’ most sensitive information. In order to thrive, these organizations need their stakeholders’ full faith that their internal controls safeguard both financial and nonfinancial information, and are designed and operating effectively. How can service organizations demonstrate that their control systems are protecting their customers? According to the American Institute of Certified Public Accountants (AICPA), Service Organization Control (SOC) reports are the answer.
Smart Business spoke with Jeff Stark, audit partner at Sensiba San Filippo LLP, about SOC reporting and how it helps service organizations provide the broad spectrum of assurance their stakeholders require.
What are SOC reports?
SOC reports are standards created by the AICPA to allow for reporting on controls at service organizations. There are three types of SOC reports: SOC 1, SOC 2 and SOC 3. Together, they both replace and expand on Statements on Auditing Standards (SAS) 70 reports, giving service organizations the tools they need to provide the assurance their stakeholders require.
Though not widely known, SOC reports are becoming essential to the ongoing growth of the technology service sector as more businesses are outsourcing tasks and functions to outside service providers. Since the risk of the service provider becomes the risk of their stakeholders and customers, SOC reports provide much needed assurance, empowering service organizations to gain trust, while helping to protect their stakeholders from outside risk.
Why was SAS 70 replaced?
Since 1992, SAS 70 has provided service organizations with a vehicle to disclose control objectives and activities related to financial reporting. As the market changed, service organizations had a growing need to report on many nonfinancial control objectives. SAS 70, with its limited intended focus, was too often being used for purposes outside of financial controls.
In order to solve this problem, the AICPA issued Statements on Standards for Attestation Engagements (SSAE) 16, which replaced audit standards with attestation standards for internal controls over financial reporting. SSAE 16 standards became the basis for SOC 1 reporting, replacing SAS 70.
Additionally, the AICPA issued guidance related to attestation on controls relevant to the Trust Service Principles and Criteria including security, availability, processing integrity, confidentiality and privacy. This guidance became the basis for SOC 2 reporting, bridging the gap between market need for broad assurance reporting and the previously narrow financial focus of SAS 70.
How can an organization know whether a SOC 1 or SOC 2 report is right for them?
Whether an organization should obtain a SOC 1 or SOC 2 report depends entirely on the controls in question. Controls relating to information that could affect financial statements are covered by SOC 1 reports. SOC 2 covers controls related to nonfinancial information.
Payroll processors, employee benefit plan managers and banks commonly use SOC 1 reports. Data centers, Software as a Service providers and companies subject to industry-specific regulatory standards frequently benefit from SOC 2 reports.
Why should companies consider SOC reporting?
Service organizations that want to remain competitive need internal control attestation in a variety of areas. Many companies will not even consider working with an organization without assurance that relevant controls are well designed and operating effectively. In a highly risk-averse business climate, organizations can demonstrate effective controls with the appropriate SOC report.
Jeff Stark is an audit partner at Sensiba San Filippo LLP. Reach him at (480) 286-7780 or firstname.lastname@example.org.
Insights Accounting is brought to you by Sensiba San Filippo LLP
One law small businesses frequently underestimate is the misclassification of employees as being exempt from Fair Labor Standards Act (FLSA) overtime rules, an oversight that could cost millions in employee misclassification lawsuits.
Minimum wage rates also pose problems because there may be different standards at federal, state and local levels.
“Companies need to know the basics of the FLSA in order to determine if they’re in compliance,” says Tracy Baskin, payroll compliance analyst in Wage and Hour Compliance at TriNet, Inc.
Smart Business spoke with Baskin about FLSA issues and how to stay compliant.
What are typical FLSA compliance issues?
Many businesses have problems keeping in step with minimum wage rates. An employee, having worked a year or so at a given rate of pay, may be due retroactive payments because of an increase in state or local minimum wage rates. Employees paid at the lower rate of the previous calendar year could file a complaint with the Department of Labor (DOL), which could lead to an audit.
It can be even more of a problem with exempt employees — many companies aren’t even aware there is a minimum salary basis. Exempt employees paid at a rate less than minimum wage would need to be increased to at least $16 an hour to be in compliance with California’s requirement for executive, administrative and professional (exempt) employees. For example, computer professionals are employees who typically write or modify programming have their own minimum, which is $39.90 per hour.
The most impactful item is overtime compensation. Companies are not accurately calculating overtime pay because they aren’t including additional earnings such as bonuses or commissions, which need to be included to comply with the FLSA.
How do you determine if an employee should be classified as exempt and nonexempt?
The FLSA provides general guidelines. You’ll need to concentrate first on the employee’s primary duties. Are they managers who customarily and regularly direct the work of two or more employees? Do they set company policies, or authorize, suggest or recommend the hiring and firing of others?
Employees who have advanced knowledge in a field of science, whether college or beyond, may qualify for certain professional exemptions. However, college graduates are not necessarily exempt. In California, the professional exemption is reserved for those licensed or certified by the state, generally in the fields of law, medicine, dentistry, architecture, engineering, teaching and accounting. Typically, exempt employees must also be paid at least $455 per week on a salary or fee basis.
Nonexempt employees have to be paid a certain amount per hour. If they’re tipped, they must earn enough in tips to bring them up to minimum wage. They’re the average employee and are paid time and a half if they work in excess of 40 hours in a workweek.
While most exempt employees are required to receive salaries, not all salaried workers are necessarily exempt. As a rule of thumb, you can say that an employee whose duties include supervising two or more employees; authority to hire, fire and promote; and giving job assignments to others are usually exempt. But it’s not the job title that matters, it’s the actual job duties that determine whether an employee is exempt or not.
What are the penalties for noncompliance?
Penalties vary depending on what the employee has presented to the DOL, whether it’s an overtime violation, he or she wasn’t paid the minimum wage or a simple miscalculation. If the DOL considers the violation to be willful because a business has had this offense before and not corrected it, fines can be doubled or tripled.
Our recommendation is to pay employees what they are due. If you don’t, you should expect someone will eventually reach out to the DOL, which will open the company up to a much larger audit. The DOL will examine the status of all employees and ask for the documentation to see the criteria the business used to determine their status as exempt or nonexempt. So it’s best for everyone to make sure employees are classified properly and paid what they are owed.
Tracy Baskin is a payroll compliance analyst, Wage and Hour Compliance, at TriNet, Inc. Reach her at email@example.com
Insights Human Resources Outsourcing is brought to you by TriNet, Inc.
A global company that started out as a provider of telecommunications equipment, TelStrat was founded in 1993 in Plano, Texas to take advantage of the Dallas-Fort Worth Metroplex’s Telecom Corridor.
“Being in the middle of the telecom industry is very important to us because of the engineering and product development talent that is available,” says Jennifer Slack, CFO of TelStrat.
When the company sold off a division a couple years ago to focus solely on software, the Plano site was leased to another business and TelStrat needed to find a new location. TelStrat celebrated its 20th anniversary this past February and is focused on providing call recording and workforce optimization solutions.
Smart Business spoke with Slack about the decision to move the company’s headquarters to nearby Allen, Texas.
What were the key factors favoring Allen?
It was the location and the local talent pool. We knew we wanted to stay in the same general vicinity. Employees love the Allen area because of the good schools and housing that is available. The quality of life that’s in Allen makes it very easy to find employees.
How has the Allen Economic Development Corporation assisted TelStrat?
They helped with incentives that made it more affordable to change locations. Moving can be very disruptive, as well as expensive, and the financial incentives they provided definitely helped.
The city of Allen and the economic development corporation also sponsor many programs for businesses. They provide many opportunities for networking and encourage businesses within Allen to build on the synergies available, or just talk to each other for advice. They certainly promote that spirit of cooperation.
At one of their events, I met a representative from a local company that was able to help with our recruiting efforts. We’ve probably not taken full advantage of what Allen and the economic development corporation offer, but it did help with recruiting.
What is the nature of TelStrat’s operations in Allen?
It’s a complete headquarters facility; we have about 50 employees working in departments from sales order entry to engineers for software development and support and maintenance of our product with customers. There are also some sales staff, accounting and HR personnel.
The landlord was very helpful in remodeling the site. We predominately needed office and lab space and the building had served as a call center or back office. We’re in a five-year lease and it’s a very convenient location right off of the North Central Expressway.
What’s the best thing about your new location?
It’s the convenience — it’s very easy to get around for meetings, or if we have clients or partners visiting us. There are plenty of nearby options for lunches and shopping, which employees enjoy because it saves them a lot of time and helps with developing a good work/life balance. It‘s great when you have children and you need some flexibility if they have something special going on or are sick. You can pick them up for a dental appointment and get back fairly quickly. It helps a lot to have your place of employment near your neighborhood.
We’re a pretty simple company with simple needs. The city of Allen and economic development board have made it easy for us to do business here.
Jennifer Slack is the CFO at TelStrat. Reach her at (972) 633-4512 or firstname.lastname@example.org.
Reach the Allen Economic Development Corporation at www.allentx.com or call (972) 727-0250.
When you go to the dictionary to look for the definition of focus, you will see such lofty things as:
“the point where the geometrical lines or their prolongations conforming to the rays diverging from or converging toward another point intersect and give rise to an image after reflection by a mirror or refraction by a lens or optical system.”
“a point at which rays (as of light, heat, or sound) converge or from which they diverge or appear to diverge.”
Luckily, for those of us that are not physicists, I did find one definition that makes sense when trying to understand the meaning of focus:
“a point of concentration or directed attention.”
What do you concentrate on the most with your business? Where do you direct your attention? These are the questions of focus. Over the years in my coaching and speaking, I have found them to be of utmost importance to the success of those in the workplace.
Let's look at 5 tips for improving your focus as a busy professional.
1. Stop doing what you are doing.
If you struggle with focus on a daily basis and you continue to think and act in the same manner – you need to stop and stop right now.
The quote that is often attributed to Albert Einstein speaks to us here: “Insanity is doing the same thing over and over again and expecting different results.”
Stop. Breathe. Assess. Evaluate.
This leads us to our second tip.
2. Determine what needs your concentration and attention.
In the workplace, too many people “fly by the seat of their pants” when it comes to what needs to get done. In most instances, it is pure laziness that sustains this way of doing things. It takes work to stay focused and be successful.
As I said above, you will need to assess and evaluate in order to determine what needs your directed attention. Hopefully you have goals in place for yourself and your team. Let those goals be the defining line for your focus.
This leads us to our third tip for improving your focus as a busy professional.
3. Clear all unnecessary distractions.
Once you have determined the areas and actions that need your concentration, it is time to laser target your focus. In order to do this, you must clear away anything that would disrupt, distract or lessen your laser focus.
- Cell phones
- Social Media
- Instant Messaging
- Tasks that could be delegated
Make a list of all the things that you must stop doing in order to stay focused. This is the opposite of the normal to-do list. It will make clear what needs to be cut out from your daily routine.
Some distractions are going to be hard to give up because they have imbedded themselves as habits – and habits take time to change. Development of laser-targeted focus does not happen overnight, but it must be practiced daily in order to achieve its mastery.
4. Work in 60- to 90-minute blocks of time and provide yourself a reward.
Do not expect too much from your focus. Saying that you are going “to work until it's done” is an overload for most of us. It is also too vague and not goal-oriented.
Set aside a specific amount of time for a designated task. Studies have shown that we do well when we block off 60- or 90- minute time frames. This allows you to see the light at the end of the tunnel and know that a break is coming.
As we work, our alertness drops off, increasing the lure of distractions. Set a timer and take a break at the end of each cycle.
How about a reward? We all like rewards in one form or another – even if we are the one giving the reward. Say to yourself, “After this 90 minute session of work I am going to take a 10 minute break and walk around the building.”
Other possible rewards are:
- A snack (be careful not to overindulge and get sleepy)
- Text messaging
- Fresh air
5. Learn to say no.
I mentioned delegated tasks earlier. Many busy professionals struggle with delegation. We tend to hold the old attitude of“if you want something done right, do it yourself.”This might be true in the here and now, but in the long run it will lead to lack of focus and, ultimately, exhaustion.
Learning to delegate is a form of learning to say no. “No, not me, not now.” When we learn to say no, we are truly saying yes to our focus.
There are many other tips that one can use to stay focused. These are the five that I have found to be the most useful. Take the time today to try one, two or all of them. Your goals deserve your focus. Your team deserves your focus. You deserve it as well.
DeLores Pressley, motivational speaker and personal power expert, is one of the most respected and sought-after experts on success, motivation, confidence and personal power. She is an international keynote speaker, author, life coach and the founder of the Born Successful Institute and DeLores Pressley Worldwide. She is the author of “Oh Yes You Can,” “Clean Out the Closet of Your Life” and “Believe in the Power of You.” Contact her via email at email@example.com or visit her website at www.delorespressley.com.
The ultimate endgame in any marketing strategy is conversion.
While conversion means different things to different industry sectors, the actions of reaching conversion are universal. In retail, for example, it means searching for and buying a specific product online or in a store. In business-to-business, conversion could be when a prospective client reaches out with their contact information or and requests more information to engage with your services.
Conversion is a multitiered journey that consists of navigating through three steps — awareness, interest and engagement.
Awareness, essentially developing a brand message that resonates across all channels (such as Web, offline, print, mobile and video) is relatively straightforward if you have the proper brand strategy. You must define two things: who you are and what it is you’re trying to say.
However, converting awareness into interest, and eventually engagement, is where organizations most often lose their way.
I personally see this problem regularly manifest itself during a review of an organization’s website. Often, there are too many words and screens of text to sift through, and those words are either clichés or don’t really mean anything to the organization’s prospective — or current — clients.
The bottom line: The organization gained my awareness but lost my interest. Conversion is less likely a potential outcome.
This, however, is easily solvable.
One way to turn awareness into interest is by creating more consumable content, which is defined as providing, in a simple and nonoverwhelming way, the key points that will grab someone’s attention to learn more about what you do and what you offer.
Think of it this way: Develop clean, concise copy that clearly defines what you do and why you’re different from the competition and that articulates your value proposition, without being wordy. You should not have to scroll down more than one time on a Web page to accomplish this goal.
When you look at traditional advertising, the same problem exists. Review your current ads and ask yourself these questions: Are you running an ad that truly reflects your brand? Does it articulate your intended message and your brand through a series of a few choice words? And is there a defined call to action?
Now consider how you’re messaging to your prospects live, such as through your organization’s presence at trade shows.
At your booth, are you presenting a video reel that drones on for five or 10 minutes and includes every aspect of your company? Why waste a lot of money producing a corporate video that is too long, boring and that no one will watch? You will never see an ROI for your efforts.
Instead, determine whether you can develop a short experience at your booth that captures your desired audience’s attention. For example, combine a simple one-page handout with a brief video — no more than a minute long — that uses powerful imagery, focused messaging on your differentiators and a series of client icons that demonstrate who you work with.
You can always expand upon that brief overview video through a series of short complementary videos that are focused and highlight different segments of what your organization does and how it does it.
Let your prospect choose which area of your business he or she is interested in and wants to learn more about — whether it’s through your website, in print or in person. When someone chooses to learn more, it’s a safe bet that he or she is engaged.
The initial goal of all of this should be to generate interest rather than make a sale. The time for conversion is later, but you’ll never get there if you don’t generate interest and engagement first.
Dave Fazekas is vice president of digital marketing for Smart Business Network. Reach him at firstname.lastname@example.org or (440) 250-7056.
What if the leaders at IBM had stuck to making punch card equipment? What if after making the transition to the personal computer market, they had stayed entrenched there?
Punch card equipment is long gone, and with recent PC sales numbers significantly in decline, the leaders of IBM have stayed ahead of monumental changes in the market and kept the company moving forward for decades.
An open mind.
Too often, CEOs place self-imposed limitations on themselves, both in business and personally. The status quo becomes acceptable and new ideas become verboten. When this happens, growth is stifled — a dangerous situation. Many business gurus will tell you that you are either growing or dying. A stagnant company sees itself as not losing ground, but as its competitors move forward, its relative position in the market fades, even though it views itself as standing firm.
The only way to avoid this is to keep an open mind. CEOs need to constantly grow and learn from a personal perspective — so they constantly improve their leadership and people skills — and also from a business perspective — so new ideas are allowed to push the organization forward.
While there are many approaches to keeping an open mind, here are three ways to get started.
- Embrace trial-and-error. Finding success might require experiencing a dozen failures. Whether it’s a new way of running a meeting or trying to find the next innovative product, accept the fact that success has a cost. Don’t eliminate an idea because it goes against what the company has always done.
- Seek knowledge. As a professional, a CEO should never stop learning. There should always be a curiosity about your industry that drives you to seek an understanding of the latest trends and strategies, but you should be constantly looking at other industries as well. Often, best practices in one industry can be applied to another. If you are the first to make the move, it will give you an advantage over the competition.
- Find a mentor. The right mentor can make you aware of your blind spots. Without someone to offer a different perspective, it is easy to fall into familiar ways of thinking, thus stifling the chance of new ideas taking root.
The longer a CEO runs a business, the easier it is to fall into the trap of doing what worked yesterday or last week. When this goes on long enough, the business ends up with an overall strategy that is several years old.
You would never say, “Let’s use the same strategy we developed five years ago,” but because of a closed mind, that’s what ends up happening by default.
Be vigilant about your search for knowledge. In the end, it will make you a better leader and improve your company’s chances for success.
Fred Koury is president and CEO of Smart Business Network Inc. Reach him with your comments at (800) 988-4726 or email@example.com.
When you flip a light switch, turn on the water or start your car, you expect reliability every time. For employees, it’s just as mandatory that they be reliable, by showing up on time, completing the tasks at hand and basically doing their jobs time and time again.
By the same token, your employees expect you, as their leader, to be reliable. This means when you say you’ll do something, you do it, when they need direction, you provide it, and when the chips are down, you’ll be there for them.
Being reliable is good, but being too predictable — not always. In fact, being too conventional can make your company a “me, too” organization that only reacts to what the competition does, rather than taking the lead. It can be a bit more daring to set the trend, but if managed and controlled correctly, the rewards dramatically outweigh the risks.
Warning signs that your leadership has become too predictable occur when your subordinates begin finishing your sentences and know what you will think and say before you utter that first word on just about every topic. Compounding the problem is when your employees begin to perpetuate the negative effect of you being so darn predicable by believing it themselves and telling others, “Don’t even think about that; there’s no point bringing up your idea about X, Y or Z because the boss will shoot you down before you take your next breath.” This bridles creativity and stifles people’s thinking and stretching for new ideas.
It’s human nature for subordinates to want to please the chief. Under the right circumstances, that can be good, particularly if you are the chief. But it can be a very bad thing if you are looking for fresh concepts that have never before been run up the flagpole.
Uniqueness is the foundation of innovation and the catalyst for breaking new ground. George Bernard Shaw, the noted Irish playwright and co-founder of the London School of Economics, characterized innovation best when he wrote: “Some look at things that are and ask why. I dream of things that never were and ask why not?”
The “why not” portion of this quote is the lifeblood of every organization. A status quo attitude can ultimately do a company in, as it will just be a matter of time until somebody finds a better way.
As a leader, the first step in motivating people to reach higher is to dispel the image that you’re exclusively a predictable, same-old, same-old type of executive who wants things a certain way every time. There are dozens of signals that a boss can give to alter a long-standing image and dispel entrenched mindsets. You can always have a midlife crisis and show up at work in a Porsche or Ferrari instead of your unremarkable Buick. This flash of flamboyance will certainly get people questioning what they thought was sacrosanct about you. The cool car might also be a lot of fun; however, the theatrics might be a bit over the top for some, not to mention a costly stage prop just to send a message.
A better solution is to begin modifying how you interface with your team, how you answer inquiries from them and, most importantly, how to ask open-ended questions that are not your typical, “How do we do this or that?”
Another technique is when somebody begins to answer your question, before you’ve finished asking, particularly in a meeting, abruptly interrupt the person. Next, throw him off guard by stating, “don’t tell us what we already know.” Instead, assert that you’re looking for ideas about how to reinvent whatever it is you want reinvented or improved in giant steps as opposed to evolutionary baby steps. If you’re feeling particularly bold, for emphasis, try abruptly just getting up and walking out of the meeting. In short order, your associates will start thinking differently. They’ll cease providing you with the answers they think you want. Some players will hate the new you, but the good ones will rise to the occasion and sharpen their games.
If you want reliability, flip the light switch. To jump-start innovation, you could begin driving that head-turning sports car. Better yet, get your team thinking by how you ask and answer questions and by not always being 100 percent predictable but always reliable.
Michael Feuer co-founded OfficeMax in 1988, starting with one store and $20,000 of his own money. During a 16-year span, Feuer, as CEO, grew the company to almost 1,000 stores worldwide with annual sales of approximately $5 billion before selling this retail giant for almost $1.5 billion in December 2003. In 2010, Feuer launched another retail concept, Max-Wellness, a first of its kind chain featuring more than 7,000 products for head-to-toe care. Feuer serves on a number of corporate and philanthropic boards and is a frequent speaker on business, marketing and building entrepreneurial enterprises. Reach him with comments at firstname.lastname@example.org.
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Rick Tigner carries on the legacy of Jackson Family Wines’ founder with a focus on lands, brands and peopleWritten by Gregory Jones
While many companies would be like a ship without its captain after the loss of its illustrious founder, Jess Jackson, the Jackson Family Enterprises had a very capable successor in Rick Tigner — one who would continue the family-owned winery group’s reputation and make mom and dad’s favorite chardonnay into the favorite of their millenial children too.
In April 2011, Jess Jackson died of cancer at the age of 81. He was an individual whose vision, perseverance and work ethic helped transform the wine industry.
He started the Kendall-Jackson wine business with the 1974 purchase of an 80-acre pear and walnut orchard in Lakeport, Calif., that he converted to a vineyard. Nearly 40 years later, Jackson Family Wines is among the world’s most successful family-owned winery groups, composed of more than 35 individual wineries.
Jackson Family Enterprises is the company that oversees Jackson Family Wines, its global sales organizations and the Kendall-Jackson brand. Tigner was named president of Jackson Family Enterprises a year before Jackson passed away. A 24-year veteran of the alcohol beverage industry, Tigner has held positions at Miller Brewing Co., Gallo, Louis M. Martini and nearly 20 years with Jackson Family Wines.
“When I first became in charge of Jackson Family Wines three years ago, one of my goals was to actually get one team, one dream,” Tigner says. “If I can get all 1,200 employees going in the same direction at the same time, how powerful would that be?”
The company, its 1,200 employees and its more than 30 brands of wine, was solely in Tigner’s hands, and it was now up to him to keep the operation flourishing.
“Our company mission is to be the best wine company in the world,” Tigner says.
Here’s how Rick Tigner is taking Jess Jackson’s legacy and moving Jackson Family Enterprises forward.
Connect with consumers
In any industry, it is extremely easy to be hands-off with consumers. In the wine industry, many vineyards deal with distributors or trade partners and aren’t very tight with the consumer. Tigner says that isn’t the case at Jackson Family Wines.
“Innovation comes in different forms and fashions,” he says. “In the wine business, what you get is a lot of what I call the ‘sea of sameness.’ You look at a wine magazine ad and you see a bottle and vineyard, but it can be anybody’s bottle and anybody’s vineyard. The question is how do you connect with a consumer in different ways?”
Last January, Tigner was featured on the TV show “Undercover Boss.” He saw this as a new way for a wine company, especially a family wine company, to go on television and tell people about who the business is as a family, as a company and how it produces its products. The blogosphere gave generally rave review about Tigner’s TV appearance.
“The one thing that we’re always very, very focused on is quality,” he says. “We want to make sure that consumers know that whether it’s the Kendall-Jackson brand or the La Crema brand, quality is one of the foundations of our organization.”
To tell its consumers about its products, Jackson Family Wines is putting more focus on social media. The company recently hired a digital marketing team to make sure it has a presence on Facebook, Twitter and YouTube.
“A lot of companies have pretty pictures,” Tigner says. “What we actually want is engaging content … versus the standard picture of a bottle in a Wine Spectator or Wine Enthusiast magazine.”
Being involved in social media is becoming increasingly important, but it isn’t enough to just have a Facebook page; you have to engage with your fans and potential customers.
“If you look at Facebook, a lot of brands have Facebook, but the question is do you listen to the people who are on your Facebook page?” he says. “Do you react to how they talk about you on Facebook? We listen, and we learn from that activity. These are our friends and family who actually went online and signed up on our Facebook page, because they’re looking for interaction.”
Tigner says this interaction can’t be boring or constantly the same old thing. You have to be looking for ways to keep your audience involved and engaged.
“The key for us in regard to capturing our consumer is actually listening to them,” he says. “We create content that they want to see on video or in photos. We’ve done a lot of recipes. A lot of people want to talk about food and wine pairings. We have spent hours and hours and hours putting together a recipe program for our website.”
Jackson Family Wines has a lot of pages on its website and on its social media because even if a consumer doesn’t go to them all, those pages are there and available to them. The same thing goes for YouTube.
“If you go to YouTube and capture that consumer and they see a training video or a wine education video or a food-and-wine program, the next time they go look at your YouTube, you better have new content,” he says. “It has to be ongoing engagement, intriguing and informative. If you don’t have that, then you’ll lose your consumer. Those are things we’ve done to continually engage the consumer.”
What this kind of engagement helps Jackson Family Wines do more than anything is reach a more diverse audience. Many of the company’s consumers are baby boomers and social media is helping the brand reach the younger generations.
“We want to keep the baby boomers like myself who’ve been drinking our brands for a long time,” Tigner says. “But we want to capture the millennials. Who is that 25- to 35-year-old out there who has disposable income to buy premium wine? We have to give them the messaging and the content.
“We’re going out and making it new and fresh for them so it’s not just their mom and dad’s favorite chardonnay, but it becomes their favorite chardonnay and then their favorite cabernet or pinot noir.”
Educate about your product
The wine industry can be very complex due to the sheer number of wine styles, brands and varietals that make each bottle different. For Jackson Family Wines, it is crucial that its staff and its business partners are knowledgeable about the company’s products.
“In our company, we have 1,200 employees,” Tigner says. “In our sales team, there are about 400. I would argue we have the best sales team in the world and the best fine wine team.”
Tigner makes this argument because the company has four master sommeliers on staff and nine more in training out of a total of 180 in the U.S., who help to educate the sales team.
“They educate our sales teams, our distributors and our internal staff,” Tigner says. “We want to make sure everyone who works for our company, whether in IT, marketing or finance, has knowledge about wine and a passion about wine.”
Transferring that knowledge outside of the company is the hard part. Jackson Family Wines has to work with its distributors, trade partners and, more recently, directly with consumers to educate them on the products.
“In this business, 20 years ago, manufacturers or wineries like us spent all our time selling our wine to distributors and educating our distributors who then sold to retail stores who then sold to consumers,” he says. “About 15 years ago, that was still important, but the next piece was actually us communicating with our trade partners.
“In the last five years, all that is still important, but now we’re talking directly to our consumer, whether it’s online, in our tasting rooms or our wine club program.”
One of the biggest things related to education that Tigner has to keep aligned is the messaging Jackson Family Wines spreads both internally and externally.
“We broke down our strategic initiatives into three simple buckets,” he says. “You want to keep it simple so everyone knows what the plan is. Our strategy is lands, brands and people. So that when people want to know what are we working on, you can break it down to land, brands and people, and then we have the initiatives below that.”
To aid in keeping this message aligned and helping to push the company forward, Tigner has implemented management meetings.
“In the last three years since I’ve been put in charge, I’ve had more senior management team meetings,” he says. “We really didn’t have those before.
“Every quarter, we bring in the top 50 managers of the company plus outside guests and visitors and we talk about lands, brands and people. We talk about the strategic initiatives. I want to make sure everything we put in place at the beginning of the process is still being worked on.”
While his management meetings are a new tradition, there are some things that Tigner wants to maintain, like the company’s culture.
“When I first took over being the president, we had a great training program, recruiting program and succession program,” he says. “I want to make sure we have that exact same culture. Culture doesn’t show up on a P&L, but culture is very, very important to the company.”
The culture is something Tigner wants to be identical whether it’s the IT, finance, marketing or production departments.
“I want to make sure all our employees are treated similar and fair throughout the entire organization,” he says. “I take it upon myself on a regular basis to check in with middle management, lower management, field workers and sales workers because I want to make sure everyone has the right communication and we’re all on the same page.
“I spend most of my time making sure the messaging of the organization runs wide and deep.”
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Steve Jobs was credited with inspiring Apple’s trademark advertising campaign challenging each of us to “think differently.” But how does one go about thinking differently? Since founding the Alliance of Chief Executives in 1996, I have passionately studied and experimented with how CEOs can generate breakthrough ideas — which are the most visible examples of thinking differently.
I recently had the opportunity to speak with Marty Neumeier who in 2003 launched a think tank called Neutron to merge design thinking with business management. He’s written three best-sellers, but his newest book, “MetaSkills: Five Talents for the Robotic Age” suggests that we are entering a new age in which the “left-brain” skills of the industrial age, while still very important, will be surpassed by the “right brain” skills of creativity, sensing and learning.
As computing advances have made information immediately and almost totally accessible, Neumeier believes that we must develop the ability to cultivate five “metaskills” if we are to reshape the world.
The ability to draw on human emotion for intuition, aesthetics and empathy is a talent that’s becoming more and more vital. It’s the ability to connect deeply with people through vicarious imagination or “putting yourself in another person’s shoes.”
Integrative thinkers don’t break a problem into separate pieces and work on them one by one. Instead, they see the entire architecture of the problem — how the various parts fit together and how one decision affects another. By resolving the tensions that launched the problem, they can craft a holistic solution, which often requires them to reject the urge for certainty and grapple with the messiness of the paradox.
The No. 1 hazard for innovators is getting stuck in the tar pits of knowledge. Knowledge has a powerful influence over creativity. When we’re stumped or in a hurry to solve a problem, our brains often default to off-the-shelf solutions based upon what everyone knows. The proper approach to invention is not logic but wonderment. Creative thinking begins with phrases such as “I wonder,” “I wish” and “What if?”
Creativity is a messy process, and we arrive at better decisions by making not-so-good decisions and then constantly improving upon them. The best designers believe in failing fast. Their drawings, models and prototypes are not designed to be perfect solutions.
If you’re seeking new information or fresh insights, you need to look beyond your clique, since a clique is a closed system that acts more like a mirror than a window. The antidote to the clique is to open the window and connect with groups outside your own. Put yourself in the way of meeting like-spirited people, not just like-minded people.
So how do normal people like us think differently? Steve Jobs was smart — but not exceptionally smart. However, he learned the trick of divergent thinking. Biographer Walter Isaacson said Steve’s “imaginative leaps were instinctive, unexpected and at times magical. He had the ability to make connections that other people couldn’t see, simply because they couldn’t let go of what they already knew.”
We need to stop seeking only current best practices and challenge our assumptions about our current limits and ask questions about what might be. Howard Schultz once said, “Who wants a dream that’s near-fetched?”
In order to solve the global problems facing us, we must think differently than we have done in the past. No single individual is as smart as all of us, so we must learn from others with different knowledge and skills. By seeing our problems from new perspectives, dreaming big ideas and fast prototyping new solutions, we can make a dent in changing our world.
Paul Witkay is the founder and CEO of the Alliance of Chief Executives. Based in Northern California, the Alliance of Chief Executives is the most strategically valuable and innovative organization for CEOs in the world. Reach him at email@example.com.
Employee benefit plans are an important part of your company, and participating executives have just as much at stake as anyone else. With continually evolving fiduciary roles, the last thing you want is to fail in your responsibility, lose money and possibly face penalties or a lawsuit. That’s why employee benefit plan audits are conducted to identify potential problem areas. But only by closely managing the plan with fiduciary governance can you be ready for an audit.
“It’s prudent to have the board delegate to someone that is closely managing the plan — an oversight committee,” says Bertha Minnihan, national practice leader, Employee Benefit Plan Services, at Moss Adams LLP. “There’s so much to know, you can’t possibly know it all. It’s great to have this committee working with people who have expertise in this area to make sure they are meeting their fiduciary responsibilities.”
Smart Business spoke with Minnihan about areas of concern in employee benefit plan audits.
How do these plans come to be audited?
There are two types of employee benefit plan audits. If you have more than 100 eligible plan participants at the beginning of the plan year, you generally need an independent financial statement audit attached to your plan’s annual tax Form 5500. Eligible participants not only include employees eligible to participate, whether they do or not, but also those with plan account balances who are no longer employees. However, if you have between 80 and 120 eligible participants, the Department of Labor (DOL) allows you to file the same as the year prior.
The other type is when the DOL decides to audit the plan. Most of the time the DOL says its audits are random. But, for example, if you’ve reported late deposits on your Form 5500, sometimes that causes the DOL to want to look further. Another trigger is an anonymous employee phone call. The DOL also has different levels of inquiry — sometimes it just asks for supporting documentation from the independent plan auditors or the company, and sometimes goes directly to auditing the plan as far back as three to five years.
What are some areas of noncompliance, correction and deficiency you’ve come across when auditing these plans?
The DOL hot buttons remain similar to what they’ve always been. The top ones, on the regulatory and compliance side, are:
- Timeliness of getting all employee contributions into the trust. The DOL has said small plans, with 100 eligible participants or less, need to get everything in the trust within seven days. However, there’s no hard-and-fast rule for large plans, just as soon as administratively possible. This leaves a lot of room for judgment.
- Eligible compensation. What are the compensation components that are eligible for deferral and match?
- Operational defects, like not following eligibility requirements as noted in Plan documents or auto enrollment that isn’t kicking in when it should.
What developments are auditors following?
The accounting and auditing world has gotten more complex, especially on the investment side. Auditors are waiting for additional guidance on disclosure requirements for investments for certain plan types. For example, the Financial Accounting Standards Board hasn’t ruled on whether employee stock ownership plans are exempt from certain quantitative investment disclosures about the valuation of private company stock. Another issue is what exactly makes a plan public or nonpublic, and how that impacts the benefit plan disclosure requirements. Additionally, auditors continue to follow the convergence of U.S. Generally Accepted Accounting Principles and International Financial Reporting Standards.
How should plan sponsors handle their plans?
Generally, sponsors need to stay educated. Things are moving fast, but companies have many service and investment providers at their fingertips. Call on them to educate your board and oversight committees.
When making a change in your plan, document it. Have an oversight committee, no matter how big the company, following and documenting the plan operations and plan investment decisions. The committee would, for instance, know the participant demographic trends or how auto-enrollment is unfolding. In the end, you’ll always be better for whatever is going on if you have that structure and a solid governance foundation.
Bertha Minnihan is national practice leader, Employee Benefit Plan Services, at Moss Adams LLP. Reach her at (408) 916-0585 or firstname.lastname@example.org.
Insights Accounting & Consulting is brought to you by Moss Adams LLP.