Engage. PLANTE MORAN REACHING A PLATEAU IN YOUR BUSINESS? REIGNITE GROWTH Cybersecurity Is Like a Sponge: Five Ways to Contain Your Data P.08 Identity Theft: It’s Not Just for Credit Cards Anymore P.14 2016 SPRING/SUMMER Audit. Tax. Consulting. Wealth Management. .

REACHING A PLATEAU IN YOUR BUSINESS? REIGNITE GROWTH All companies hit bumps along the road to growth. We can help. CONTENTS Engage. PLANTE MORAN . IN THIS ISSUE 02 About Our Authors 03 Culture MEET OUR CLIENT 20 Questions With Planet Fitness What’s the Most Important Ingredient in Creating a Great Place to Work? According to Great Place to Work’s Tony Bond, it’s a matter of trust. Learn more about PF’s “Lunk™ Alarm,” lack of “Gymtimidation,” and how Pete Hopkins and his partners have built a thriving franchise. 06 Tax 7 Things to Think About Before April 15 Here are some tax-planning tips to help you prepare for that all-important deadline. P .04 07 Wealth Management Achievement Unlocked: Strategic Moves to Levelling Up in Wealth Management Building, protecting, and transferring wealth is a process with distinct stages. But where do you start? 16 Technology Storing Data in the Cloud: 3 Things You Should Know CYBERSECURITY IS LIKE A SPONGE: 5 WAYS TO CONTAIN YOUR DATA If it exists digitally, it can find a home in the cloud. But how secure is that home? It’s tempting to imagine your computer systems are airtight vaults, impenetrable and immune to cyberattacks. But this would be a risky move. 17 Talent Practical Innovation: “Inside the Box” Tools for Advancing Creative Ideas P .08 How can leaders advance innovative ideas in the face of internal resistance to change? Try these six tactics. 18 Take 5 Check out our five-minute podcast on how to protect your organization against fraud, and then read on for five things you need to know about partnership audit rule changes. 19 Happenings 20 Letter From Our Managing Partner IDENTITY THEFT: IT’S NOT JUST FOR CREDIT CARDS ANYMORE P .14 How can you protect your tax return? The same way you protect yourself from any other type of identity theft — by protecting your personal information. 21 The Last Word Are We Ready for Principles-Based Revenue Recognition? Under the new guidance, two competing companies could recognize contract revenue on completely different timelines and still comply with GAAP. But how will that work, exactly? .

Authors. Nobody wants a tax controversy, but if you have one, Chuck’s the person to turn to. As leader of Plante Moran’s tax controversy group, Chuck has extensive experience in taxation with a heavy focus on IRS audit resolution. In addition to leading numerous successful audit defenses involving complex tax issues, Chuck has implemented and managed tax projects for a variety of organizations, including many Tier 1 automotive suppliers. On page 14, Chuck talks about tax return identify theft and how to protect yourself. 734.302.6946 chuck.marchand@plantemoran.com SARAH PAVELEK TOM HARPER TIM WEED CHUCK MARCHAND BOUT OUR Need a go-to-market strategy? Tom can help. As a senior consulting manager with Plante Moran’s strategy and operations management consulting practice, Tom provides upstream and downstream product development expertise and strategic marketing management insights. He’s an expert in product commercialization, due diligence, and business development.

On page 10, Tom discusses opportunities for business growth. Sarah is an expert at assessing risk and protecting organizations and individuals from cybercrime. As a principal in Plante Moran’s information technology consulting practice, she has deep expertise in information security, control, and IT audits. Her work spans a range of industries, including technology, service, insurance, financial institution, and healthcare. On page 8, Sarah provides insight on cyberattacks and ways companies can contain their data. 248.223.3819 tom.harper@plantemoran.com 02 Tim is known for his ability to help clients face the facts, develop alternative strategies for progress, and see their organizations through necessary improvement processes.

As a partner in Plante Moran’s consulting practice, he assists businesses in deploying change management, process improvement, and restructuring activities. On page 10, Tim provides insights on smoothly transitioning an organization from growth to maturity. 248.223.3613 tim.weed@plantemoran.com 847.628.8884 sarah.pavelek@plantemoran.com Engage. 2016 SPRING/SUMMER . Culture TONY BOND guest columnist What’s the Most Important Ingredient in Creating a Great Place to Work? What’s the secret to becoming a great place to work? An on-site day care center? A dog-friendly environment? How about a beach volleyball court? I believe the single most important factor can be summed up in one word: trust. A high level of trust that cascades throughout an organization creates the basis of collaboration and communication, instills a feeling of community, promotes teamwork and acceptance, and allows staff members to be themselves. Staff can trust leaders when they’re transparent, and leaders can trust staff because they know they’re working with a sense of purpose. If your company’s leaders aren’t equipped to build trust and relationships, it shows up in culture deterioration. Closely related to trust is leaders who set the right tone, day after day.

The way that leaders interact with their teams can build or erode their cultures. When we looked across our multinational list of great workplaces, the No. 1 key driver of success was recognition for a job well done.

It’s critical that staff have a shared sense of purpose, inspiration, and reward, and that’s tied to much more than the success of one dynamic CEO or president. For example, there’s a Michigan-based global advertising agency that builds its successor programs around this principle. It has a strategic mentoring program that takes culture as seriously as technical skills. Those at the top and on their way to the top are encouraged to carefully consider how they interact with people — every day. Each interaction is an opportunity to develop trust or to inhibit it. Being a great place to work is embedded in the company and in the relationships among its workers — it’s not hidden in a single person. Finally, a company can never become complacent.

If you’re not consciously questioning how you’ll maintain your culture, you’ll lose your edge. Consider the need for larger and more advanced technology departments in companies that didn’t have to think about that in the past. How do they blend those new elements together when the times are changing, when the makeup of the workforce is evolving, when there are clashes with the traditional ways of doing business as usual? A company is doing well if its staff members feel positively about the culture, and that starts with relationships at the top. This isn’t complicated to understand, but that doesn’t mean it’s easy to do.

You must identify and confront the things that can chip away at your culture. Believe in continuous improvement, and remember that the journey is never over. “If your company’s leaders aren’t equipped to build trust and relationships, it shows up in culture deterioration.” Tony Bond is an executive vice president and chief innovation officer with the Great Place to Work’s® Advisory Services Practice. He specializes in change management and coaching executives on how to align their organizations with culture initiatives and achieve business results.

The Great Place to Work® has spent 25 years identifying and studying great workplaces around the world, and it’s responsible for conducting the confidential surveys comprising FORTUNE’s “100 Best Companies to Work For” list. 2016 SPRING/SUMMER Engage. 03 . 1. Describe your franchise. The PF Michigan Group is one of the largest franchise groups in the chain with 24 operating gyms and two locations under construction. We have 19 gyms in the greater Detroit market, four in the Toledo area, and three in the Grand Rapids market. We plan to open 15–18 more units over the next three years. Founded in 1992 in Dover, N.H., Planet Fitness (PH) (NYSE: PLNT) is one of the largest and fastest-growing franchisors and operators of fitness centers in the United States. PF’s mission is to enhance people’s lives by providing a high-quality fitness experience in a welcoming, non-intimidating environment. More than 90 percent of PF stores are owned and operated by independent businessmen and women. Pete Hopkins, co-owner of PF Michigan Group, recently took a few minutes to talk to us about PF’s “Lunk™ Alarm,” lack of “Gymtimidation,” and the future of the franchise that he and his business partners have built. 04 Engage. 2016 SPRING/SUMMER 6.

And that philosophy actually 7. What’s the forecast for the growth 8. Who are your biggest competitors? 3.

Why did you invest in a PF franchise? Living and working in New Hampshire, the birthplace of PF, I witnessed the meteoric growth of the brand from four corporately-owned stores in 2002. When my partners, Bryan and Laura Rief, presented me with a business plan in 2007, the entrepreneur in me jumped on the opportunity. 5. Tell us about PF’s “Judgement Free Zone®.” Planet Fitness is known for its non-intimidating Judgement Free includes a “Lunk™ Alarm,” correct? Yes. Our Lunk™ Alarm, which is an actual beacon light and siren, is intended to deter members from the hard-core, look-at-me behavior found in too many gyms. of the health and fitness industry? The International Health, Racquet, & Sportsclub Association reports that 53 million people in the United States have active gym memberships.

With a population of more than 320 million (more than 75 percent of them adults), there’s still tremendous growth potential for gyms. I would say that we truly believe that what PF offers — a high quality gym experience, in a Judgement Free Zone® for only $10 a month, isn’t something that any other fitness concept can match. 4. Have you owned other businesses? My prior business experience involved commodity trading, which is all about scale and volume. That’s probably why tackling a 41-club area development agreement didn’t scare me when we first started franchising with PF. Both businesses are capital intensive. 2.

Where are other PF franchises? PF has more than 1,000 units in 47 states, the District of Columbia, Puerto Rico, Canada, and the Dominican Republic. Zone®, and we stand apart from other health clubs by providing a relaxed, non-intimidating atmosphere where anyone — regardless of their fitness level — can feel comfortable. 9. Describe the PF culture in five words or less. Non–intimidating, friendly staff, and clean. 10. What traits do you look for in your staff? Friendly, energetic, and passion for life.

Our customer service goal . is to create “raving fans,” turning our members into our best form of advertisement. 11. How else do you create loyalty? Beyond providing exceptional customer service, PF has launched Planet of Triumphs®, an online community that allows members to share success stories and goals, no matter how big or small, and encourage each other. They’re really inspiring, and you can view them here: www.planetoftriumphs.com. 12. How do you stay involved in the community? Locally, we are the lead sponsor for Walk-for-Wishes, a walkathon that helps raise money for the Michigan Make-a-Wish Foundation.

In addition, we’ve volunteered at Gleaner’s Food Bank in downtown Detroit. 13. What’s your greatest success with this franchise? Our investment in the Detroit market coincided with the most challenging economic downturn of recent history. Developing the PF model through this period forced us to be creative with our financing and disciplined with our tax planning. 14.

What’s your greatest challenge? We set the bar very high when it comes to how we operate our stores. Maintaining that level of exceptional customer service, while offering a clean, friendly, non-intimidating atmosphere day in and day out requires that we have a strong operations team. Pete Hopkins (right) with Livonia Store Manager Erik Boyd 15. How important is location, location, location? Critical. Despite the fact that we are in many ways a “destination,” finding high-traffic locations with excellent visibility and ample parking is important. We’re also the leading full-size, low-cost gym provider, so we need larger spaces in the 25,000–30,000 sq.-ft. range.

That size is important because we try to reduce waiting times for equipment, which requires us to have a large number and variety of machines. That’s what differentiates us from other low-cost gyms, which typically are much smaller. 16. How important is fitness in your life? Daily exercise is my 2016 resolution. I have no excuse either as I built a gym in our corporate office in New Hampshire. 17.

What do you like to do in your spare time? I try to spend as much time as possible with my wife and three children. We’re uncomfortably close to being empty nesters, and I don’t want to regret lost time. 18. Who are your business role models? My great, great-grandfather, Carl Schlegel, was an impressive entrepreneur, who built a business empire as an emigrant from Germany.

I have always attributed my entrepreneurial nature to his gene line. 19. Who are your personal role models? My mother and father have always been my moral compass. They both supported me at every critical step in life and made significant sacrifices to send me to college. 2 0.

What do you want your business to look like in five years? Our ownership team wants to build a competent, highly effective management team for the long term. This is critical to our continued growth and will position us to become one of the largest PF franchisees in the Great Lakes Region. 2016 SPRING/SUMMER Engage. 05 . CHRIS ABI-RAJI Tax contact chris.abi-raji@plantemoran.com 7 Things to Think About Before April 15 The April 15 deadline will soon be upon us. Here are a few tips to help you prepare for that all-important deadline. When organizing your tax information, remember that you should have a written acknowledgement from the recipient for any charitable contribution of $250 or more. Also, if you contributed goods valued at more than $5,000, you’ll need to have a valid appraisal on file to support the valuation if the IRS asks. Watch for 1099s and K-1s that report taxable income. If you own an interest in a partnership that you know won’t provide a K-1 until after your filing deadline, go ahead and file your extension early.

If you don’t receive an information report that you’re expecting, contact the payor to find out why. Check your 1099s. Did they get your identifying information correct, including your social security or employer I.D. number? Does the income reported match the income you show from the payor in your books? If something is not right, contact the payor to request a corrected 1099 as soon as possible. Watch for corrected 1099 forms, especially ones received after you file your return. 06 Engage. 2016 SPRING/SUMMER Be sure to fully fund your IRA or other tax-deferred accounts.

In many instances, you can make contributions for 2015 any time up until the due date of the return. While the regular tax return filing deadline is April 15, the Washington D.C. Emancipation Day holiday will be observed on Friday, April 15, instead of April 16, 2016. This means that the filing deadline for 2015 individual federal income tax returns without extension is April 18, 2016. Even though you’ve got a few extra days, don’t put off organizing your tax information. Remember that an extension of time to file your return is not an extension of time to pay the taxes you owe.

Use the information you have available to make an accurate projection of your tax due, and pay that with the extension. If you have any questions or concerns about filing your 2016 income tax return, please contact any member of your Plante Moran engagement team. . AMBER TERAKEDIS Wealth Management contact amber.terakedis@plantemoran.com Achievement Unlocked: Strategic Moves to Levelling Up in Wealth Management Before most people begin thinking about wealth management, they’re focusing on more immediate concerns like careers, housing, and debt from college or graduate school. Yet building, protecting, and transferring wealth is a process with distinct stages. Each stage presents its own challenges and opportunities, and the first — building — is no exception. But where do you start? First, map out your income and financial obligations, ensuring that you’ve covered the necessities — housing, food, transportation. Once this is done, it’s time to consider more complex questions. Here are a few I’m frequently asked. How much income should I allocate to necessities vs. discretionary spending? It’s helpful to think of your income and spending in terms of the 50/30/20 rule: 50 percent on essentials (housing, food, childcare) — with the caveat that rent or mortgage payments should be under 30 percent of your take-home salary. 30 percent on lifestyle — entertainment, restaurants, shopping. 20 percent on future — emergency funds, debt repayment, and investments. What should I do with extra cash? What should I do about insurance? After obligations and fixed expenses are met, order your savings and spending priorities to best allocate the 20 percent of your income dedicated to the future or windfalls such as year-end bonuses: Start with the most cost-effective option, which is usually employer-offered group coverage. It’s affordable, and there’s no medical exam, so take the maximum available.

If you require additional coverage, get quotes on term policies that cover the necessary time frame. • Ensure you have sufficient emergency funds, meaning dual-income households need enough to cover three months of expenses, and single incomes require six months. • If your company has a 401k plan, contribute at least as much as the company will match to avoid leaving money on the table. • Pay down debts, starting with the highest interest accounts. • If your career is just starting and you expect to be in a higher tax bracket in later years, investments like Roth IRAs can be beneficial. “Each stage presents its own CHALLENGES & OPPORTUNITIES.” How much should I be saving for education? I recommend meeting your retirement needs first — you can finance an education, but you can’t finance retirement. Then, for those seeking education funds, tax-free plans are available. However, avoid overfunding an education savings plan; you could pay a penalty on funds that aren’t used for that purpose. When contributing to my company retirement plan, where should I invest? First evaluate the level of risk you’re comfortable with and the target date you want the funds available. Then select a plan that fits your needs.

The best options are often “lifestyle” funds, which automatically rebalance over time. Do I need an estate plan? Many at this stage don’t require a full estate plan; however, there are essential elements that should be addressed. For example, ensure accounts have up-to-date beneficiary/survivorship instructions, and if you have children, ensure a guardianship plan is in place. It’s never too early to plan for wealth. If you have any additional questions, feel free to give me a call. 2016 SPRING/SUMMER Engage. 07 .

It’s tempting to imagine your computer systems as airtight vaults, impenetrable and immune to cyberattacks. But this would be a risky move. In reality, IT infrastructure is more like a sponge. All organizations absorb and retain digital data. Like a sponge, IT infrastructure is porous, often with gaping holes.

Data can leak out of these holes when things don’t go according to plan: a staff member might lose a laptop, a system might experience a configuration error, or sensitive information might accidentally be published online. But in today’s world, a more prevalent scenario is what happens when the sponge is squeezed — when a hacker causes a breach that results in a damaging data leak. Here are five ways to contain your organization’s data. 1 Always encrypt sensitive information. When a federal computer system was hacked in December 2014, the personal data of nearly 4 million current and former federal employees was compromised. Regardless of whether the hack itself could have been prevented, encrypting this sensitive information from the get-go could have limited the breach. Due to the high cost of encrypting stored data, you may decide to be selective when it comes to what data to encrypt. You’ll want to consider the data’s sensitivity, as well as the level of security controls that limit access to it.

But when data moves outside your control, encryption is a must for confidential information. A company relinquishes control of its data every time a staff member sends an email or takes a laptop, iPad, or other device out of the office. Encrypting these channels and devices protects the information they carry, so that the only consequence of a stolen laptop is a mere loss of hardware. 08 Engage. 2016 SPRING/SUMMER . 2 Take passwords with a grain of salt. 4 A major online retailer was the victim of a large data breach in 2014, when hackers gained access to 145 million user passwords. The company had encrypted the passwords on its network but still instructed customers to immediately change their passwords to further reduce the risk of unauthorized activity. User-managed passwords are the most common form of authentication and also the biggest security weakness. Not only can passwords be cracked by hackers, but they also place an inordinate level of responsibility on users, both to create sufficiently strong passwords and to not reuse them across multiple systems or online sites. As the future moves toward multi-factor biometric verification — including fingerprint scanning — we’ll approach a stronger, enhanced form of authentication that reduces our reliance on user-managed passwords. 3 Monitor data diligently. When a major retailer’s credit card terminals were breached in 2013, card data was transmitted to hackers each time a customer swiped his or her card.

As a result, approximately 40 million credit and debit card records were stolen. If network monitoring had been focused on the right factors (including traffic volume and source/destination IP addresses), the unusual activity might have been discovered earlier, allowing for a faster response to the breach. Many companies implement security controls to protect their information systems but forget to monitor them. This is a big mistake, as the porous nature of network infrastructure makes data monitoring a critical step.

Fortunately, there are numerous network monitoring tools available that can help you effectively detect breaches on critical servers and databases. Alternatively, companies can also engage third-party vendors to monitor their networks 24/7. Manage user access. The 2014 breach at a global financial institution — which compromised more than 80 million accounts — was rooted in the improper management of administrative access. If a hacker gains access to high-level privileges, he or she will have the ability to bypass implemented controls, making it easy to enter and manipulate the system. Regularly ask yourself who has access to your networks and to what degree.

For instance, what level of access is given to third-party vendors? Has access been terminated for staff who have left the company? As a rule of thumb, about 10 percent of user access is not managed properly — an unsafe percentage when it comes to cybersecurity. 5 Re-evaluate your independent testing. In December 2015, a digital toymaker experienced a breach that exposed the data of 6.4 million children and 4.9 million adults. Even more unsettling is that by linking the accounts of children to their parents, the data ultimately revealed children’s full names and addresses. They were alerted to the breach by a journalist from the technology news site Motherboard, who had been notified by an anonymous hacker. This example is a testament to the importance of independent testing; you’ll never know how effective your security really is if you don’t have an outside party test it on a regular basis. Companies should schedule an independent test at least once a year, but infrastructure changes or regulatory compliance standards may require more frequent testing.

Supplementing an annual test with smaller-scale monthly or quarterly tests of specific areas also reduces delay when it comes to finding and resolving issues. By continually making improvements throughout the year, you’ll have greater confidence that your multi-tiered cybersecurity strategy is protecting your customers, your staff, and — of course — your reputation. This feature was written by Sarah Pavelek Principal, Information Technology Consulting 847.628.8884 sarah.pavelek@plantemoran.com 2016 SPRING/SUMMER Engage. 09 . Reaching a Plateau in Your Business? GROWTH There are three types of successful organizations: those that have experienced growing pains, those that currently are experiencing growing pains, and those that will. All companies hit bumps along the road to growth, bumps that usually have less to do with external factors like the industry and marketplace and much more to do with the natural way organizations evolve. Just as we humans develop, grow, mature and, unfortunately, decline, so too do organizations. Of the 12 original stocks in the Dow Jones Industrial Average (DJIA), only one company (General Electric) is still listed. The rest of the original DJIA companies have either declined into extinction or been acquired over time. The business life cycle follows a true life cycle, and its four phases — startup, growth, maturity, and decline — are real and predictable. Since much of the pain experienced by organizations occurs as they transition between these phases, the most successful organizations plan ahead.

They have foresight, and they proactively make the proper organizational changes — significant changes — to accelerate the organization through these inflection points. 10 Engage. 2016 SPRING/SUMMER The transition from the growth phase to the mature phase poses particular challenges for most organizations. Until this inflection point, growth organizations have been focused on feeding the hungry beast, doing everything in their power to commercialize products and services, and gaining market share. Their customer bases are growing rapidly; they’re expanding into new markets; the media are calling; and revenue is flowing.

Life is pretty good. But then maybe a decision blows up in an unexpected way, or perhaps a customer stuns the organization with a large return of a new product. Why? Because what worked for an organization in the startup and growth phases no longer cuts it for an organization evolving into a mature enterprise. So what does cut it? We’ve identified seven critical factors for organizations to successfully navigate the transition. As you’ll see, the unifying theme among all of them is the need to transition from a people-centered to a more process-oriented organization. .

2. ESTABLISHING KEY PERFORMANCE INDICATORS (KPI) FOR CRITICAL PROCESSES The KPIs we’re talking about go well beyond sales, profitability, income, and the like, which are already tracked in monthly financials. Such metrics might work for a small startup, but you can’t effectively monitor the intricacies of a growth-to-mature company with basic financial KPIs. Instead, organizations need to identify and map key processes. As your product and service offerings expand, it’s impossible to make sound decisions without understanding the nuances of those processes. However, if you’ve identified the right metrics, they’ll show you when you’re out of balance or compliance with your processes. Some new KPIs might include: profit velocity, cost per acquisition, average order size, and customer lifetime value. Such KPIs yield valuable insights into the critical pathways of your supply and value chains.

They minimize surprises and help you make proactive course corrections. A solid dashboard of 10 to 12 of the right KPIs can help executives sleep better at night. 3. BRINGING DISCIPLINE, ACCOUNTABILITY, AND EMPOWERMENT TO THE FIRM CULTURE As organizations grow, it becomes harder for the founders and/or chief executives (the “c-suite”) to be involved with all aspects of the business, particularly day-to-day operations. It’s a real challenge for most founders to delegate key decisions and tasks they were a part of since day one. 1.

EFINING INDIVIDUALS’ ROLES AND D RESPONSIBILITIES IN KEY BUSINESS PROCESSES As organizations mature, business processes grow and evolve. The inevitable added complexity brings with it inefficiencies and waste that quickly gum up the works. Questioning the effectiveness of key processes and how they affect employees and customers should be reviewed on a regular basis. Responsibility matrices such as the RACI (Responsible, Accountable, Consulted, Informed) model and other tools can help organizations identify key decisions and processes. They also help dynamically define roles and responsibilities as those processes change and multiply. But it’s no longer day one. The c-suite must be disciplined about delegating to accountable parties so they can focus on strategy, culture, and other leadership responsibilities.

As one of our partners likes to tell the company owners he works with, “You may own the pool, but you still have to stay in your swim lane.” In order to successfully delegate, first the c-suite must empower those who will be held accountable for new responsibilities. Accountability without empowerment is disastrous to organizations. That said, the individuals you empower are human. They’ll make mistakes.

But if you’ve done a good job identifying the KPIs for critical processes in #2, you’ll catch those mistakes early and can seize the opportunity to address them. 2016 SPRING/SUMMER Engage. 11 . 4. EMBRACING CREDIBLE FINANCIAL MANAGEMENT AND BUDGETARY PROCESSES In the startup and growth phases of the business life cycle, founders and vice presidents of finance spend a lot of time making sure the company has adequate funds — obtaining loans from banks or investors or securing venture funding. But as the business develops, financial leadership needs to play a more active and strategic role. This includes working with the whole c-suite to develop overall corporate goals and objectives, which then can be translated into the capital needs, cash flow, and profitability targets for the organization. Better understanding short- and medium-term cash flow needs improves decision making, including tough choices about capital expenditures, joint ventures, make-vs.-buy, banking relationships, and terms and conditions with customers and suppliers. What we often see at the growth-to-mature transition, however, are financial teams that play a less strategic and more supportive role within the organization. They often rubber-stamp CEO decisions rather than question them in the context of the company’s goals and targets.

Not every financial leader is cut out to go toe-to-toe with the CEO, and we’ll talk about optimizing talent — finding the best fit for the demands of each role — in a moment. 6. PTIMIZING TALENT O As organizations address each of the previous steps, they inevitably turn their attention to talent, since new and different leadership skills are required when organizations transition from the growth to mature stage. For example, the sales executive who may have been perfect for finding entrepreneurial sales representatives and working with early customers but who is uncomfortable pushing back when the CEO wants to expand into new distribution channels.

Or an associate who meticulously ran a startup’s shipping department, who may not be the right fit for overseeing a mature company’s entire supply chain management process. As organizations grow, internal (and external) communications necessarily change, requiring new skill sets. New organizational needs in terms of talent development and acquisition may also include merger and acquisition and licensing experience, strategic planning knowledge, global marketing and corporate brand management expertise, talent management, accounting know-how, and many others. New product and service offerings and increasing customer demands bring new processes, sales channels, and regulations that require different or more specialized expertise. Optimizing talent is a twofold endeavor.

First, organizations need to realign their new and changing talent needs with current associates’ skill sets. Second, organizations must identify and create a plan for internal development needs and for recruitment if tapping external resources. 5. BUILDING KEY STRATEGIC PARTNERSHIPS FOR GROWTH AND MATURITY Challenges multiply as growth organizations gain more customers, manage product and service life cycle needs, and explore new markets. Successful organizations form strategic partnerships to help address these challenges.

You might consider strategic alliances in any number of areas, including co-development, distribution, sales and marketing, or logistics and supply chain. Fundamental to effectively managing strategic alliances is defining — together — what shared success looks like. In turn you and your partners can then co-develop processes and metrics around that vision. We urge companies to get specific when doing this.

For example, how much product inventory will you expect in your strategic partner’s stores in a given period of time? How many sales presentations per day will your partner’s sales representatives make to your shared target customers? What’s their sales yield for those sales calls? 12 Engage. 2016 SPRING/SUMMER 7. CREATING A DATA-DRIVEN CULTURE Decision making in startup and growth companies often relies on the intuition of c-suite leaders. That may work when your product and service offerings — and your customer base — are small. But as growth companies make the transition to mature enterprises, a data-based framework for making informed decisions is crucial. Essential business insights are all but invisible without CRM and ERP systems to keep track of relationships and operations. Companies can easily overlook market opportunities, production or supply chain improvements, or trends in customer demand that can impede further growth. .

This feature was written by Tom Harper Senior Consulting Manager Strategy and Operations Improvement 248.223.3819 tom.harper@plantemoran.com Tim Weed Partner Strategy and Operations Improvement 248.223.3613 tim.weed@plantemoran.com We often encounter a real misperception about the investment required for such relationship and enterprise systems. Certainly, yes, you can spend millions of dollars. But you also can smartly invest a fraction of that to implement a solid base system, adding to and customizing it as your organizational needs change with time. You can’t run a large company as if it were a small one What worked in the growth stage of the business life cycle won’t work at the mature stage. In our experience, the seven factors above can make or break the transition. We won’t tell you it’s easy; it’s not.

But the factors overlap and strongly influence each other. Address one, and you’re making progress on others at the same time. The effects are additive and synergistic.

And they can change the trajectory of your organization. 2016 SPRING/SUMMER Engage. 13 . IT’S NOT JUST FOR CREDIT CARDS ANYMORE This feature was written by Chuck Marchand Associate, Tax 734.302.6946 chuck.marchand@plantemoran.com 14 Engage. 2016 SPRING/SUMMER theft: It wasn’t long ago that the most important tool a person needed to protect his or her identity was a shredder. Unfortunately, in today’s world of big data, even the most conscientious shredder of documents who uses the most sophisticated of passwords is still at risk from an information breach that puts sensitive financial data in the hands of people who would use it for fraudulent purposes. One of the most troublesome uses for stolen information is the filing of fraudulent tax returns; in 2015 alone, an IRS hack left the data of more than 700,000 taxpayers compromised. . “Tax return identity theft presents a harder problem to solve than fraudulent credit card use.” The IRS provides advice on how to protect yourself from tax return identity theft in Publication 4524, Security Awareness for Taxpayers, available at www.irs.gov. It sounds a lot like other identity theft protection suggestions, but the key points bear repeating: Protect your computer. Use security software, and make sure it updates automatically. Encrypt sensitive data. Tax return identity theft presents a harder problem to solve than fraudulent credit card use. If a thief uses a person’s credit card, or obtains a credit card fraudulently in someone else’s name, the credit card company can shut down the compromised account and, if necessary, quickly issue the rightful cardholder a new account.

But if criminals file a false tax return using someone else’s information, a taxpayer’s social security account is much harder to change. Know who you’re dealing with when you share sensitive data online. Use strong passwords, and change them often. Once a criminal files a false return, it’s processed by the laws and regulations that are in place. First, the IRS is obligated by law to pay a claim for refund within a very short turnaround time. In many cases, the refund must be paid before the IRS has a chance to match the income reported on the tax form with information reports that it’s received, such as Forms W-2.

Also, in an ironic twist that’s caused frustration for many victims of this crime, the fraudulent return gets the protection of IRS privacy restrictions. These examples illustrate a critical challenge facing the IRS: the agency must observe laws and regulations that, in some cases, protect the fraudulent filer. In some instances, the changes the IRS needs to make in order to improve its ability to identify and prevent tax return identity theft require law changes. Beware of scams.

Emails, texts, Still, the IRS has made substantial progress when it comes to identifying returns filed under stolen identities. The initial screening process for an electronically filed return has been adapted to identify and reject forms that have indicators of identity theft. The service has issued “Identity Protection PINs” to more than a million taxpayers who fit a profile suggesting that their tax account may have been compromised.

These PINs provide a second layer of security as they’re required to be used by taxpayers in addition to their social security numbers. in emails unless you know who sent it and what it is. So how can you protect your own tax return? The same way you protect yourself from any other type of identity theft — by protecting your personal information. The recent increase in fraudulent filings hasn’t resulted from secure taxpayer information that was breached at the IRS. All indicators point to the use of identifying information obtained elsewhere to file fraudulent returns. or calls that appear to be from the IRS or a company you know are often phishing scams. The IRS will not call you with threats of jail or lawsuits. The IRS doesn’t send emails suggesting that you have an unclaimed refund and you need to update your account. D  on’t open attachments If you believe you may have been subject to tax return identity theft, or an identity theft that may include the information needed to file a return in your name, the IRS provides a Taxpayer Guide to Identity Theft on its website.

For more information, give us a call. 2016 SPRING/SUMMER Engage. 15 . JENNIFER FIEBELKORN Technology contact jennifer.fiebelkorn@plantemoran.com Storing Data in The Cloud: 3 Things You Should Know THE CLOUD: 3 things you should know Photos? Check. Emails? Absolutely. Financial records? You bet. The easy answer is this: if it exists digitally, it can find a home in the cloud. A better question is, “How secure is that home?” The answer depends on you. Here are three things to consider. Due diligence Cloud storage providers are no different from other retailers in that some are better than others at what they do. So look for the best in class. You can start your due diligence with a simple Google search and continue it with direct questions to cloud storage providers. For example, has the storage company you’re considering been the victim of a cyberattack? Several attacks? Or has it won awards for multiple layers of security and the strength of its private network? Is the company a trusted name that’s been around for decades, or is it a small start-up offering a $9.99 sale in the cloud? Is the company compliant with privacy regulations? Will your uploaded information always be encrypted? Never assume that all cloud storage providers offer the same levels of security. Private cloud storage vs. public cloud storage According to Wired.com, close to $20 billion annually will be spent on combined private and public storage by 2017.

Both options are fueled by a voracious demand for data storage; however, each has its own pros and cons depending on the user’s needs. A private cloud is a virtual private data center that exists solely for you, is therefore customizable, and is usually hosted at your location with private access and the highest level of security. A public cloud supports multiple clients, is usually hosted at the provider’s location, and is often accessed over a less secure network.

The benefit of a public cloud is its price — it runs about half of the cost of a private network. Depending on what you’re planning to store — customer information, for example — it may be worth investing more for peace of mind. 16 Engage. 2016 SPRING/SUMMER Due diligence Research and ask questions Private vs. public Make the right choice for what you're storing Keep private A secure password keeps your data safe Passwords are meant to be private This can’t be emphasized enough.

Your cloud storage is about as safe as your password is private. Don’t share it with friends, co-workers, or your assistant. Create a strong password that isn’t based on information that could be found on your Facebook profile.

Change it regularly, and don’t write it down. A password like OhwPR3yago (our honeymoon was Puerto Rico three years ago) will be harder to crack than Fido123. The password you engineer to protect your cloud data is more effective at keeping your private data private rather than the actual cloud service that you might choose. The cloud is a powerful solution, but with great power comes great responsibility.

Remember: it’s not what you store in the cloud that matters as much as what you expect of — and the accountability you take for — that storage. . STEVE GRAVENKEMPER Talent contact steve.gravenkemper@plantemoran.com Practical Innovation: “Inside the Box” Tools for Advancing Creative Ideas in Your Culture We know that innovation is a key differentiator in achieving revenue growth, and disruptive and game-changing ideas continue to dominate headlines. (Uber is an excellent example.) But what we don’t often read is how leaders advance creative or innovative ideas in the face of internal resistance to change. LINK YOUR IDEA TO ORGANIZATIONWIDE INITIATIVES. For example, if growth TRANSLATE YOUR IDEA INTO YOUR ORGANIZATION’S LANGUAGE. is a key initiative, how might your idea support growth? It’s critical that new ideas align with the strategic direction of the organization. Each organization has its own key words and acronyms embedded into its culture and communication. Communicating your ideas using familiar key words or mantras can be helpful in creating buy-in so that suggestions seem more doable and less “foreign” to the organization. Here are a few practical suggestions for advancing creative ideas in a way that has a greater likelihood of being accepted and implemented. FRAME IDEAS AS “PILOT STUDIES.” A pilot program is often much more acceptable to organizations than a fullfledged initiative rollout.

It’s hard to argue with, “I’d like to try X and see what we learn.” If the idea doesn’t work out, then little is lost. But it may trigger another idea that will work — and pay dividends — later on. AMPLIFY THE VOICE OF THE CUSTOMER. What’s the most important circumstance facing a business? Its customers’ challenges.

Emphasizing how suggestions meet existing and emerging customer needs is a great way to entice even the most change-resistant team member to consider a new way of thinking. CELEBRATE INCREMENTAL INNOVATION. As leaders, we tend to celebrate the big ideas. However, smaller innovations or tweaks to existing products and services can contribute significantly to improving revenue, quality, and customer satisfaction.

Encourage ideas throughout the organization, and reward those who submit them. A simple, “Thank you for your great idea” goes a long way in creating a culture of innovation and making staff feel heard. DON’T GO IT ALONE. Float your ideas “Emphasizing how suggestions meet existing and emerging customer needs is a great way to entice even the most changeresistant team member to consider new ways of thinking.” with others in positions of power to enlist support and create momentum and sponsorship.

Plus, like Oliver Wendell Holmes once said, “Many ideas grow better when transplanted into another mind than the one where they sprang up.” In today’s quick-paced business environment, cultures that adapt to changing marketplace conditions develop a built-in competitive advantage. So give these tactics a try. Combined, they’re a great way to guide your organization toward future success. 2016 SPRING/SUMMER Engage. 17 . take 5 podcast 5 THINGS YOU NEED TO KNOW ABOUT Don’t Be a Statistic: Partnership Audit Rules HOW TO PROTECT YOUR ORGANIZATION AGAINST FRAUD According to the Association of Certified Fraud Examiners, the typical organization loses 5 percent of its revenue to fraud each year, translating to a projected global fraud loss of nearly $3.7 trillion. Fraud affects more than a company’s bottom line — it affects every single person in an organization. Giving employees the education to detect, deter, and report fraud is vital and necessary to protecting a company’s financial and human assets. To learn more about how you can protect your organization, check out our podcast at fraudpodcast.plantemoran.com. If you have any questions about establishing internal fraudreducing policies, contact Eric Conforti at 248.223.3621 or Kari Shea at 248.223.3287. 18 Engage. 2016 SPRING/SUMMER KURT PIWKO | 586.416.4948 | kurt.piwko@plantemoran.com A recent law change removed the requirement that the IRS perform the often complex calculations to allocate audit adjustments to the relevant partners. As a result, there are big changes ahead for partnerships subject to these rules, likely including more frequent IRS audits.

Here are five things you should know about the new rules: 1. partnership rather than the partners. Tax is calculated at a flat 39.6% rate, The law requires the IRS to assess tax, penalties, and interest to the but that rate can be reduced under certain circumstances.

Amended partnership tax returns will have similar treatment. 2. Affected partnerships can allocate adjustments to the appropriate partners rather than pay tax at the entity level. 3. only if they don’t have another partnership or certain trusts as partners. 4. Partnerships with fewer than 100 partners can elect out of these rules but Partnerships must designate a representative who will have sole authority to act on behalf of the partners with regard to an audit. Operating agreements may need to be amended to define the desired actions of the representative. 5.

much more guidance will be issued before the rules become effective, The new rules are effective beginning for audits of 2018 tax returns. While taxpayers should understand right now how these rules could impact existing partnerships or the sale/purchase of a partnership interest. . 18th Consecutive Year Shelly Gower Named DIRECTOR OF PROFESSIONAL STANDARDS Plante Moran has been named We’re excited to announce one of FORTUNE Magazine’s “100 Best Companies to Work For” for the 18th consecutive year. The list, which appeared in the March 15 issue of FORTUNE Magazine, ranks Plante Moran #33 — the highest ranked accounting firm on the list. that Shelly Gower has become the firm’s director of professional standards. Shelly replaces Greg Coursen, who has served in the position since 1994 and will retire in 2017. “We’re thrilled to once again be named one of FORTUNE’s ‘100 Best,’” said Gordon Krater, Plante Moran’s managing partner. “The fact that we’ve maintained our position on the list for 18 years, even while experiencing tremendous growth, is a testament to our commitment to culture. Our culture is what sets us apart; it’s our secret weapon.

We must continue to nurture it, allowing it to grow and strengthen just as the firm does.” Plante Moran’s Joan Waggoner JOAN WAGGONER APPOINTED TO THE FINANCIAL ACCOUNTING STANDARDS ADVISORY COUNCIL Joan Waggoner, partner in Plante Moran’s Chicago office, has been appointed by the Financial Accounting Foundation to the Financial Accounting Standards Advisory Council. As a member of the FASAC, Waggoner will work with the council to advise the Financial Accounting Standards Board on a variety of issues, including agenda items, project priorities, and procedural matters. Waggoner is one of 15 new FASAC members who will serve one-year terms and are eligible to be reappointed for three additional one-year terms. SH EL LY GO WER PLANTE MORAN NAMED ONE OF FORTUNE’S “100 BEST” FOR THE “We’re really excited that Shelly will be taking on the role,” said Group Managing Partner Frank Audia. “In addition to her high level of technical competency, Shelly brings very strong project management and leadership skills which will make her effective in this critical role for the firm.” PLANTE MORAN RECEIVES BETTER BUSINESS BUREAU 2016 Torch Award FOR MARKETPLACE ETHICS Plante Moran has received a Torch Award for marketplace ethics from the Better Business Bureau of Chicago and Northern Illinois.

The award, which recognizes Plante Moran in the category of companies with 1,000–7,499 employees, was designed to promote the importance of ethical business practices, along with the willingness and efforts made by outstanding organizations to ensure a fair and honorable marketplace. “Our ongoing commitment to our clients and staff has helped Plante Moran build a reputation based on quality and integrity,” explains Tom Kinder, Plante Moran’s Chicago office managing partner. “We strive to create an environment that our partners and staff enjoy. As a result, our clients are served by people who love what they do, where they do it, and who they do it with.” 2016 SPRING/SUMMER Engage. 19 .

Letter From Our Managing Partner gordon.krater@plantemoran.com Who doesn’t want to do better? Dear Clients and Friends, Raise your hand if you made a New Year’s resolution for your business this year. Keep it up if, three months later, you’re sticking to it. Still have your hand in the air? Good for you! However, I’m betting many of us have abandoned those great intentions, focusing instead on the day-to-day issues that demand our attention. That’s how our “Big Idea” of the year was born. ILLINOIS Chicago — Riverside Plaza 312.207.1040 Chicago — W. Washington 312.899.4460 Ann Arbor 734.665.9494 Detroit 313.496.7200 East Lansing 517.332.6200 Flint 810.767.5350 Grand Rapids 616.774.8221 Over the next year, you can expect a variety of thought leadership from Plante Moran to help you do better.

In fact, the articles within this very issue were developed around that theme. We’ve also set up a website — dobetter.plantemoran.com — full of articles and webinars designed to help you navigate your short- and long-term business challenges. And then there’s our new executive series dedicated to the topic. Here’s to your success in 2016. Even if you’re doing well, you can always do better. MICHIGAN Auburn Hills 248.375.7100 Football coach and former professional player Mike Singletary once said, “Players respond to coaches who really have their best interests at heart.” We’ve always said that we put client interests before firm interests, and we understand that even the best athletes need a good coach — someone to understand their potential and challenge them to always do better. As managing partner of Plante Moran, I get to talk with business leaders from all over the United States about their challenges and successes. I’ve made a short list of some of the most common challenges — real estate, when and how much to invest in IT, organizational strategy, customer uncertainty, and exit strategy — and we’re developing a five-part video series featuring a handful of Plante Moran’s top experts. I will be moderating the series, which we expect to occur between May 15 and June 15.

Invitations will go out within the next month or two, but if you’re interested in attending, feel free to contact me at gordon.krater@plantemoran.com. Northwest Chicago 847.697.6161 Kalamazoo 269.567.4500 Macomb 586.416.4900 St. Joseph 269.982.8000 Southfield 248.352.2500 Traverse City 231.947.7800 OHIO Cincinnati 513.595.8800 Engage.™ Managing Editor Mindy Kroll Art Director Jill E. Kulchinsky Designers Ciara Diamond Amanda Dine Courtney McCall Olivia Nixon Kelly Turner Contributing Authors Jeff Botti Kathleen Conley Alexandra Haller Cleveland 216.523.1010 Columbus 614.849.3000 Toledo 419.843.6000 CHINA Shanghai 86.21.5213.1026 INDIA Mumbai 91.22.6656.2222 Gordon E.

Krater Managing Partner What’s on your mind? We want to know. We encourage questions or comments of any kind. Contact us at melinda.kroll@plantemoran.com. For specific questions regarding the articles in this issue, contact the contributing authors via the email address next to their photo. You can visit us online at engage.plantemoran.com. For even more insights from Gordon, check out his blog: gordon-krater-blog.plantemoran.com plantemoran.com 20 Engage. 2016 SPRING/SUMMER MEXICO Monterrey 52.81.1477.5151 . DAVID GRUBB The Last Word contact david.grubb@plantemoran.com Are We Ready for Principles-Based Revenue Recognition? As a firm, we’ve spent considerable time and energy helping clients understand and create a roadmap for the new revenue recognition standard that’s scheduled to go into effect in 2018 and 2019. The new guidance provides a principles-based, five-step process for recognizing revenue that’s in sharp contrast to the current rules-based, industry-focused standards that have been in use for decades. But how will the market respond to financial statements based on the new standard? And how will regulators oversee the reporting process once the standard goes into effect? Under the current standards, many industries have specific revenue recognition rules that have developed over time to address unique aspects of their business models. For example, when comparing financial statements for software companies, we can expect that the revenue each company recognizes from licenses is determined using the same rules.

Under the new principles-based standard, the industry-based rules have been eliminated in favor of a single five-step process that will be applied to customer contracts by all entities. For a software company, the new principles-based revenue recognition model requires each license arrangement to be analyzed to properly identify the promises made to the customer (referred to as performance obligations), estimate the value of each, and recognize a portion of the total revenue as each obligation is fulfilled. There aren’t many companies that have only one form contract for all transactions, much less industries where competitors all use the same contract terms. Under the new guidance, two competing companies could recognize contract revenue on completely different timelines and still comply with GAAP.

To use the roadmap analogy, two competitors could correctly follow the roadmap and each wind up in different locations. Given this potential “diversity” in financial statements, it seems like a good time to ask how the market and regulators might respond once the standard goes live. If two similar organizations examine their contracts and come to two different but equally sound and supportable conclusions about when revenue should be recognized, The industry-based rules have been eliminated in favor of a single five-step process. Identify contracts Identify performance obligations Determine transaction prices Allocate transaction prices Recognize revenue have we lost one of the primary benefits of GAAP, which is comparability across financial statements of different entities? The general thought is that the marketplace and regulators are willing to accept this new diversity because the tradeoff is more uniformity across industries. Plus, once the new standards have been in use for some time and the accounting industry begins sharing ideas, best practices are bound to develop that will narrow the gaps.

If there’s too much diversity, however, history tells us that the SEC and other regulators will likely step in and provide any standardization that’s deemed necessary for publicly listed companies. There are many questions to answer before the standard goes live. In fact, it’s possible that some significant questions haven’t even been asked yet. As we move forward, the knowledge, experience, and viewpoints of key stakeholders, including regulators, accounting standard-setters, and others will have a profound impact on what the final implementation looks like. But make no mistake — things will look much different than they do today. And that’s my last word. 2016 SPRING/SUMMER Engage. 21 .

Learn more at events.plantemoran.com LOOKING FOR IDEAS TO TACKLE YOUR INDUSTRY’S key challenges and position your organization for success? Don’t be content with “good” — not when you can do better. Learn more at dobetter.plantemoran.com OUR OWN CYBERSECURITY PRACTICE LEADER RAJ PATEL has guest blogs at Crain’s Detroit and Crain’s Cleveland Business where he addresses everything from responding to a cyberattack to the security implications of drones and other technologies. TECHNOLOGY a. Epicor Insights 2016, April 17–20, Las Vegas, NV b. ACG Intergrowth, May 2–4, New Orleans, LA c. Insurance Accounting & Systems Association Conference & Business Show, June 12–15, San Antonio, TX d. 2016 Housing Credit Connect, June 13, Seattle, WA Learn more at crainsdetroit.com or crainscleveland.com WEALTH MANAGEMENT NATIONAL EVENTS DO BETTER PLANTE MORAN is speaking at or sponsoring a number of upcoming national events, including: PMFA’S MARKET PERSPECTIVES blog can help you stay up to date on economic and market developments. Learn more at market-perspectives-blog.pmfa.com WANT EVEN MORE GREAT THOUGHT LEADERSHIP? Visit Plante Moran’s Subscription Center to opt in to any of our publications, from Engage to our industry-focused Perspectives e-newsletters to timely alerts. It’s all available at subscribe.plantemoran.com. Plante & Moran, PLLC and its affiliates (collectively, “Plante Moran”) is providing the attached marketing materials for promotional and educational purposes only and the contents hereof do not constitute the rendering of accounting, tax, financial, or other professional advice or services. These materials are presented without any representation or warranty as to the accuracy or completeness of the information and should not be relied upon by taxpayers as a substitute for professional advice or otherwise used for the purposes of avoiding tax and/or the abatement of any penalties or interest assessed by the IRS or any state taxing authority. We recommend that you consult with a Plante Moran professional as your facts and circumstances may differ from the materials enclosed, which may or may not impact the applicability of any tax planning contained herein. While Plante Moran has made every attempt to confirm that the information contained in this publication has been obtained from reliable sources, Plante Moran is not responsible for any errors or omissions or for the results obtained from the use of this information.

All information in this publication is provided “as is,” with no guarantee of completeness, accuracy, timeliness, or of the results obtained from the use of this information and particular purpose. In no event will Plante Moran, or Plante Moran’s partners, agents, or employees be liable to you or anyone else for any decision made or action taken in reliance on the information in this publication or for any consequential, special, or similar damages, even if advised of the possibility of such damages. .