Executives depend on the quality of their people to achieve their corporate and personal career goals. It is an old adage – and a true one – that the best jockey cannot win races if he only rides slow horses. A better understanding of the skills and abilities of executive recruiters will enable any manager to greatly increase the quality of his hiring decisions, and thereby enhance his own career!

Some managers are aware and take full advantage of the best possible means of identifying and selecting top quality candidates for critical staff openings. However, many do not. Frequently, this stems from misconceptions regarding the merits of utilizing the services provided by topflight executive recruiting firms.

By a better understanding of these realities, hiring managers will dramatically improve their ability to secure the most qualified candidates in a timely manner.

Misconception # 1: Companies Can Find the Same Talent That Executive Recruiters Can.

With the rise in popularity of on-line job boards and networking platforms, many companies mistakenly believe that these sources contain the same talent that can be found through executive search firms.

This belief couldn’t be further from the truth. Executive recruiters don’t just post ads on job boards to find qualified applicants. Typically, they focus on specific industries, and many even specialize by types of positions within those industries. The benefits of doing so are enormous. It allows them to invest tremendous time and energy forging relationships with high performing candidates within these niche markets, learning the types of positions in-demand people would see as advancing their careers.

Professionals who genuinely excel have neither the time nor desire to peruse on-line ads or to respond to on-line inquiries. It is only when a search consultant personally approaches them that the best people take the step to becoming available for your firm.

Good recruiters invest countless hours establishing unique connections with key performers. These connections allow access to talent pools built over many years…and which are available through no other sources.

This, along with the ability of executive recruiters to carefully screen and evaluate the best candidates, is what allows them to bring the strongest talent to a company’s attention. Companies that rely on job boards or networking platforms will never find the outstanding quality of talent that executive recruiters can provide.

Misconception #2: The Internal Staff Can Do the Same Job as a Quality Executive Search Firm.

While this belief is prevalent within some firms, a thoughtful analysis will prove the opposite. Executive recruiters make a living by finding talent that companies cannot find on their own. While in-house resources may be effective for lower level roles, it makes sense for hiring managers to give themselves every opportunity to interview the very best candidates.

Moreover, internal recruiters typically spend their time vetting applicants who apply or can be found through on-line portals. Search firms focus on finding superior candidates who are successful in their present situation. This very different methodology results in a very different level of candidate.

The ability to call proven performers with direct competitors to discuss career options is a significant factor in what sets professional recruiters apart from internal recruiters or HR people. Having the ability to reach out to these peak performers offers hiring managers access to highly-sought-after candidates they would never see otherwise.

What experienced manager has not extended an offer to a candidate who would have helped the manager’s company and career enormously – only to receive a turndown? In many instances, the manager is not emphasizing the specific elements of the opportunity which are of greatest interest to the candidate. These quality performers are not actively looking, and may need to be “sold.” While there are various reasons why good candidates are open to making a change, the fact is that virtually none would be comfortable sharing those concerns with an internal recruiter.

Professional recruiters have great expertise in developing in-depth individual relationships with the candidates they present. As part of a professional recruiter’s service, they will provide the candidate’s primary motivators to making a move – and thereby reduce or eliminate turndowns and assure the manager of securing the best talent available.

Misconception #3: Executive Recruiters Are Too Expensive.

Executive recruiters report that many of the companies that can most benefit from their services employ internal recruiters. This may lead to the belief that utilizing executive search firms when internal recruiters or HR people are employed is not cost effective.

A simple cost analysis will show otherwise. Consider the combined cost of salaries and benefits of HR personnel and internal “recruiters”, as well as the time that HR people spend doing non-productive interviews with unqualified candidates. These direct and indirect costs are substantially higher than paying out a one-time fee for an executive recruiter’s services.

Executive recruiters eliminate the time and expense required by a firm to find, hire, and train a new internal “recruiter”. And any truly successful in-house recruiter will soon leave his salaried position to become a successful executive search consultant.

Additionally, your chances of securing a long-term contributor are much better if an experienced executive search consultant is involved. Studies have shown that a bad hire costs companies three times more than an employee’s annual salary.

With executive recruiters, their work isn’t done once a candidate has been placed successfully. A guarantee covering the candidate during the probationary period is standard in the industry. Seasoned recruiters make a point of periodically checking in with candidates that they have placed and will share any concerns with the hiring manager. This is invaluable information and directly contributes to a long-term successful employee… and a highly productive staff.

Internal recruiting can be a good solution to filling less critical positions. They can screen the candidates that apply via the company portal and can provide hiring managers with candidates for lower end roles.

However, for more significant positions, it is an excellent and necessary business decision to utilize the services of a highly skilled executive recruiter with a strong industry focus.

At some point, every business owner leaves the company, either voluntarily through retirement or otherwise. Some businesses will outlive their founders. Others can’t survive without the continued involvement of a key owner-employee. And a few business concepts — from horse-drawn buggies to video rental stores — eventually lose relevance. Here’s an overview of the options for owners in this phase of the business lifecycle.

Selling the Business

Many owners cash out by selling their business interests to the remaining owners, family members, employees, private equity firms, competitors, or other outsiders. A sale provides owners with cash flow to fund retirement and pass along to their heirs.

Steps to make your business sale-ready may include:

• Divesting less-desirable assets,
• Buying out difficult shareholders,
• Trimming excessive overhead costs, and
• Transitioning customer accounts to employees who will continue working for the business after the deal closes.

Your professional advisors can help position your business for sale and maximize the selling price. They can also help identify potential buyers, compile financial documents for prospective buyers, set a reasonable asking price and recommend alternative deal structures.

After closing, buyers might ask key owner-employees to continue working for the business as an employee or consultant. These arrangements are usually temporary and go hand-in-hand with a noncompete agreement and/or an earnout provision, where a portion of the purchase price is contingent on the company meeting certain financial benchmarks in the future. It’s important to understand the tax obligations associated with these arrangements — they may be treated differently than capital gains from sales proceeds.

Going Public

With a professional management team in place and audited financial statements, larger companies might be positioned to make an initial public offering (IPO). This can be a daunting endeavor, but an experienced professional advisor can help navigate the details.

When contemplating an IPO, it’s important to carefully estimate the costs associated with going, and being, public. Beyond the initial registration costs, publicly traded companies are subject to extensive ongoing filing and disclosure requirements with the Securities and Exchange Commission.

Reorganization

When a mature business’s performance starts to decline, it can potentially be saved with a turnaround (or reorganization) plan. Reorganizing can provide a fresh start, especially in today’s volatile economy. For instance, management might:

• Renegotiate debt terms,
• Close unprofitable segments,
• Refocus on core business operations, and
• Revise its marketing strategy.

Professional advisors are central to an effective turnaround. They can help you get the business back on track by creating short-term cash flow projections and monitoring progress. Real-time tracking allows you to pivot as needed and improves the odds of success.

Once a turnaround is successfully completed, the business could be positioned for a sale. Conversely, failed turnaround attempts may result in a distressed business sale or an asset liquidation.

Liquidation

Some businesses are no longer viable. In this situation, the owner will need to sell assets, repay creditors and wind down operations. This includes filing final tax returns.

Selling assets at auction is usually the method of last resort because you’ll receive pennies on the dollars you’ve invested. Professional advisors can help liquidating businesses find competitors, suppliers and even customers who might be willing to buy the assets for a fair price. When creditors are involved, liquidation might require a formal bankruptcy proceeding. Your advisors can guide you through this process.

Ask the Pros

Businesses need guidance from experienced professional advisors as they mature and evolve. Sometimes long-term plans may need to be revised as market conditions and owners’ personal circumstances change. If you haven’t done so already, discuss exit strategy options with your tax and legal advisors. They can help determine the optimal path based on your business and personal situation.

By Larry Adams

WOODWORKING NETWORK

October 23, 2023

Custom and semi-custom cabinet sales increased from August 2022 to August 2022, rising by 11.4 percent and 6.3 percent respectively. These positive gains, however, were muted by stock sales, which took a YTD drop of 22 percent.

According to the Kitchen Cabinet Manufacturers Association’s Trend of Business Report, August’s year-to-date sales were $1,879,829 in August 2022 and rose 1.7 percent to $1,911,327 in August 2023.

In terms of monthly sales comparison, August 2023 compared to August 2022 is down 7.4 percent. However, when compared to July 2023 numbers, which were $211,047, sales were up 12.5 percent.

Estimated year-to-date sales through August were $11,847,800, according to KCMA statistics. In July 2023, YTD sales were $10,357,800.

Jon Jennings, Forbes Councils Member

Forbes Business Council

In today’s fiercely competitive market, the talent behind a company’s pricing strategy can significantly influence its trajectory. Finding the ideal fit for such a pivotal role can be daunting. This is where executive recruiters can come into play, bridging the gap between businesses and top-tier talent.

But how can businesses ensure they select the right recruiter for their unique needs? Let’s look at the intricacies of executive recruitment, highlighting the traits of effective recruiters and offering a road map for businesses to find their perfect match.

Traits Of A Skilled Executive Recruiter

A recruiter’s merit doesn’t only lie in their ability to spot talent but also in their understanding of the nuances of the industry. Here are some pivotal traits that I have found set top-tier recruiters apart:

1. Deep Industry Knowledge

To be truly effective, recruiters should possess an in-depth understanding of the industry they serve. This includes staying updated with market trends, recognizing the intricacies of pricing strategy roles and being aware of emerging opportunities and challenges. Their insights should be actionable, enabling them to spot and attract talent that’s not just qualified but is also poised to innovate and lead.

2. Assessment Of Cultural Fit

Every organization boasts its own unique culture. A seasoned recruiter shouldn’t just scout for skills; they should also ensure candidates resonate with a company’s ethos. This alignment between a candidate’s values and a company’s culture can be the differentiator between a good hire and a great one, and it often involves an intricate dance of assessing candidates’ soft skills, adaptability, and alignment with organizational values.

3. Broad And Deep Networking Capabilities

A hallmark of an experienced recruiter is their diverse network. Their connections should range from budding professionals in the field to seasoned industry stalwarts, ensuring a rich talent pool to choose from. This network is typically nurtured over years and is often global, ensuring a diverse mix of candidates from various backgrounds and expertise levels.

Key Questions To Guide Your Recruiter Selection

Selecting the right executive recruiter is akin to choosing a strategic business partner. Their expertise and network can have a profound impact on your company’s future leadership. To make an informed choice, it’s essential to initiate a meaningful dialogue and ask pertinent questions. Here are some questions that can shed light on a recruiter’s capabilities and fit:

• “How do you stay updated with industry trends?”This question can reveal the recruiter’s commitment to continuous learning and staying ahead in the ever-evolving landscape of pricing strategy.
• “Can you provide examples of successful placements you’ve made in the pricing strategy domain?”Past success can be an indicator of their understanding of the role, their network’s quality, and their ability to match candidates effectively with organizational needs.
• “How do you assess cultural fit?”Understanding their methodology can offer insights into the depth and breadth of their evaluation process.
• “What’s your approach to passive candidates?”This can help determine their proactive nature and their ability to engage candidates who might not be actively looking but could be the perfect fit for your needs.
• “How do you handle confidentiality throughout the hiring process?”The ability to ensure discretion is vital, especially when the recruiter will be dealing with high-level positions and candidates.
• “What post-placement support do you offer?”This gauges their commitment to long-term success and not just a one-time placement. It can also provide insights into how they handle situations if initial placements don’t work out.
• “How do you customize your approach for each client?”Every company is unique, and a standardized approach might not always yield the best results. Their answer can reveal their adaptability and client-centric focus.

When posing these questions, evaluate not just the answers but also the depth, clarity, and specificity with which the prospective recruiter responds. Their willingness to engage, clarify doubts and provide detailed insights can often serve as strong indicators of their commitment and expertise in the realm of executive recruitment.

Navigating Challenges In Engaging Executive Recruiters

The recruitment journey can present certain hurdles, but by understanding these challenges upfront, you can devise strategies to mitigate them so that your engagement with a recruiter can be both efficient and effective. Here are a few to keep in mind.

• Niche Expertise: While many recruiters are available, not all will have specialized knowledge in the pricing strategy realm. Ensure your chosen recruiter is well-versed in your industry.
• Balancing Reliance: While leveraging a recruiter’s expertise is beneficial, solely depending on them without internal hiring efforts can be restrictive. Try to find the sweet spot between external recruitment and in-house initiatives and be ready to adjust your expectations and strategies as needed.
• Cost Considerations: Top-tier executive recruitment often comes with a price tag, so make sure this step fits within your budget. In my experience in this industry, however, the long-term value of securing the right talent can often justify the initial investment.

There are multiple ways you can further ensure your recruitment journey goes smoothly. Maintain a transparent communication channel with your recruiter. Having open discussions about requirements, potential challenges and specific expectations can streamline the process. I also recommend regularly touching base with your recruiter; these check-ins can provide updates and feedback that may highlight when a strategic shift is necessary.

Feedback is gold, so consider posting any placement, successful or otherwise, and sharing your feedback. This iterative feedback loop can help refine future searches for stronger and more effective partnerships.

Conclusion

Talent acquisition is nuanced. By understanding what to look for in an executive recruiter and by being aware of potential challenges, you can make informed, strategic decisions for your company. Transparency, active engagement, and feedback can help you turn potential obstacles into steppingstones for a more refined and effective recruitment process.

In recent years, recycled building materials have become increasingly popular in the world of construction and home design. From glass to newspaper, your recyclables are being turned into a wide range of unique and useful building materials. Here’s a closer look at some of the latest advancements.

Recycled Glass
Recycled glass has been repurposed into many different materials for construction projects. From asphalt to glass bricks to fiberglass insulation, it’s a versatile material known for its durability. In home design, recycled glass can be used to create decorative tiles. These tiles can be used anywhere normal ceramic tiles would be installed – kitchen backsplashes, shower walls, even pool floors. The best aspect of using recycled glass tiles is that they create a distinct appearance that other materials don’t offer.

Recycled glass can also be used in large-scale products like countertops and flooring to give a decorative finish.

Newspaper Wood
Newspaper wood turns paper back into wood. To form this material, many sheets of paper are glued together then rolled and compressed into solid logs. When a newspaper wood log is cut, the layers of paper mimic the growth rings of a tree and therefore resemble the aesthetics of real wood. Newspaper wood can be treated like most other wood products by cutting, milling, sanding, and finishing with paint or varnish.

Ecobricks
Ecobricks are made directly from plastic waste pollution to reduce the harmful effect that plastic has on the environment. Ecobricks are plastic bottles that are filled with small pieces of plastic waste to create a solid plastic brick. These bricks can then be used to construct buildings or architectural elements in your yard.

Rubber Tires
Tires take 50-80 years to break down in a landfill, but they are highly useful when recycled into building materials. Shredded or chipped tire rubber can be used as a lightweight and flexible fill material in construction projects like highway embankments and retaining walls.

The same shredded rubber can be used as mulch in landscaping and gardening. Recycled tire rubber is also frequently used to create impact-absorbing surfaces for playgrounds, sports fields, and athletic tracks.

There are many interesting and inventive ways that your recyclables are being turned into building materials. As the construction industry continues to strive for lower carbon emissions, we’re sure to see more sustainable building materials develop in the coming years.

Tax Deductions: Right, Wrong, and Risky

by Charles RenwickSeptember 27, 2023

PLANNING FOR TAXES

Tax law is not just a complex matrix of rules and regulations—it’s a world in which interpretation and decision-making play vital roles. Deciding how to handle deductions and tax positions is critical to tax planning for individuals and businesses alike.

Tread too carefully, and you might miss out on legitimate savings. Tread too recklessly, and you might find yourself on the wrong side of an audit or, worse, legal action. This article aims to help you find the sweet spot between conservative, aggressive, and illegal tax positions.

The three distinctions:

1. Conservative approach:Conservative deductions and tax positions are well within the precise boundaries of tax laws. You might choose not to take certain deductions even though those deductions are legitimate. By taking a conservative approach:

• You minimize the risk of an audit
• You may, however, miss out on potential deductions that could be legitimately claimed

2. Aggressive approach:Aggressive deductions and positions push the boundaries of what’s acceptable within tax law. For example, you might deduct a business trip to the beach. While they might be legal, they can raise red flags. This approach:

• Increases the risk of an audit or inquiry
• Maximizes potential savings if all deductions are ultimately deemed legitimate
• Requires a deeper understanding and substantial documentation to back up each deduction

3. Tax fraud:Fraudulent deductions, positions, and omissions clearly and knowingly violate tax laws. For example, if you’re required to disclose foreign bank accounts and choose not to disclose them to hide income. Individuals or businesses that opt for this path:

• Face significant risks, including hefty fines, penalties, and potential legal action
• Compromise their reputation and credibility

Tips for making the right deduction choices:

1. Understand the boundaries:Familiarize yourself with tax laws and the latest interpretations. IRS publications, tax seminars, and professional consultations can be valuable resources.
2. Document everything:Documentation is critical whether you decide to be conservative or aggressive with your deductions. Detailed records can provide the necessary justification for deductions if questioned.
3. Seek expert advice:A tax professional can offer guidance on where the line is drawn between aggressive and illegal, helping you make informed decisions.
4. Consider your risk tolerance:While being aggressive might offer more savings, it comes with heightened risks. Evaluate your comfort level with these risks before deciding on your approach.
5. Stay updated:Tax laws and interpretations change. Regularly reviewing updates ensures that what was once considered an aggressive deduction hasn’t shifted into the realm of the illegal, or vice versa.

A fourth distinction: honest mistakes

Even with the best intentions, mistakes can happen. Tax codes are extensive and intricate, and misinterpretations are not uncommon. An “honest mistake” is an unintentional error in understanding or applying a tax rule. It’s distinct from aggressive or illegal deductions in that there’s no intent to deceive or manipulate the system.

However, it’s essential to understand that accountability still applies, even when you make a mistake. The IRS can still impose penalties or require back payments. The severity often depends on the error’s nature and its perceived intent. Additionally, once you become aware of a mistake, taking the initiative to correct the error can demonstrate your commitment to compliance.

Right, wrong, and in between

“Aggressive” doesn’t necessarily mean “wrong,” just as “conservative” doesn’t always mean “safe.” The key is understanding the nuances of tax laws and where each deduction falls on the spectrum of conservative to illegal.

As the adage goes, “It’s not about what you make, but what you keep.” To keep more of your earnings, remember to walk the tightrope of tax deductions with balance, knowledge, and care.

By: Daniel Abramson
Managing Lead of HRSource

Guidelines by the Equal Employment Opportunity commission (EEOC), as well as federal and state law, prohibit asking job applicants certain questions, whether on the application form or during the job interview.

It is also illegal for an employer to discriminate against a job applicant due to race, color, religion, age, national origin, disability, or sex (including gender identity, sexual orientation, and pregnancy).

With those in mind, here are some prime examples of interview questions that are illegal to ask, along with alternative inquiries that are permissible.  (Please note:  if you have questions or require clarification, it’s probably best toc heck with your attorney or legal department.)

MARITAL STATUS

Unlawful:  It is illegal to ask whether the applicant is married, divorced, separated, engaged, or widowed, or for any details about their relatives.  “What is your marital status?”  “What is the name of your relative/spouse/children?”  “How old are your children?” – these are all no-no’s.

Lawful:  You may ask, “What are the names of relatives already employed by the company or a competitor?”  Anything other than this specific question is off limits.

PREGNANCY

Unlawful:  All questions relating to pregnancy, or medical history concerning pregnancy, are verboten, including “Do you plan on having more children?”

Lawful:  It’s okay to ask how long the applicant plans to remain in the job, and to inquire about anticipated absences that apply to males and females alike.

AGE

Unlawful:  You can’t ask questions that seek to determine whether applicants are 40 years old or older, which smacks of age discrimination.

Lawful:  You may, however, ask, “Are you at least 18 years of age?” or, “If hired, can you furnish proof of age?”

NATIONAL ORIGIN/ANCESTRY

Unlawful:  Any inquiries related to this topic are prohibited.  “What is your nationality?”  “What language is spoken in your home?”  “What is your mother tongue?” – these are all illegal to ask.

Lawful:  You may ask, “Which languages do you speak, read, or write fluently?” but only when the inquiry is based on a job requirement.

HEIGHT AND WEIGHT

Unlawful:  Any inquiries that aren’t based on actual job requirements are off the table.

Lawful:  Inquiries about the ability to perform a particular job are permissible.  A specific weight or height range will not be considered a job requirement unless the employer can show that no employee outside those parameters could do the work.

ORGANIZATIONS

Unlawful:  You cannot ask which organizations, clubs, societies, or lodges the candidate belongs to.

Lawful:  Rather, your inquiry must relate only to the applicant’s professional qualifications, such as, “Do you belong to any professional organizations?”

ARRESTS AND CONVICTIONS

Unlawful:  All inquiries relating to arrests are off limits.  For example, it is illegal to ask, “Have you ever been arrested?”

Lawful:  However, it is legal to inquire about convictions.  For example, it’s okay to ask whether the candidate has ever been convicted of a crime, and to inquire about the disposition of the case.  Also allowable is, “Have you been convicted under criminal law within the past five years, excluding minor traffic violations?”

RACE OR COLOR

Unlawful:  Any question that directly or indirectly relates to race or color is illegal, period.

Lawful:  None!

RELIGION

Unlawful:  It is illegal to ask any question that relates directly or indirectly to a religion.

Lawful:  In fact, the only question you may ask on this topic is, “Can you work on Saturdays or Sundays?” – and then only if this is a requirement of the job.

Analysis by Nicole Goodkind, CNN
Published 8:26 AM EDT, Wed September 13, 2023
CNN New York

Chief executives have left their posts at an alarming rate this year.

It’s been a bad year for CEOs.

Chief executives have left their posts at an alarming rate as their performance — and their behavior — come under increased scrutiny by corporate boards.

What’s happening: Well over 1,000 CEOs have left their companies this year, according to a Challenger, Gray & Christmas report. That’s 33% more than last year and the highest total in the first seven months of the year since the staffing research company began tracking exits in 2002.

The average CEO tenure has significantly decreased from an average of 12 years to between 5 and 7 years now, according to analysts who focus on CEO succession for talent management company Ferguson Partners.

“While specific details regarding these exits are typically undisclosed, it is evident that more CEOs are exiting due to the new pressures of their roles, the relentless pace of change, and, in some cases, their own actions,” they wrote.

The role of the CEO is changing rapidly, they said, and executive boards have been struggling to keep shareholders happy.

September’s exits: At least three major CEOs have stepped down in the first two weeks of September alone.

BP CEO Bernard Looney resigned on Tuesday “effective immediately” after admitting that he had not been “fully transparent” about “historical relationships with colleagues,” according to a statement from the oil giant.

Looney had spent less than four years on the job but was a company man through and through — he was a BP lifer, joining the company in 1991 at the age of 21 as a drilling engineer and working his way up to the top position.

But ethical infractions aside, investors were disappointed with his performance well before his resignation.

On Looney’s watch, BP became the only major oil company with goals to reduce oil and gas output this decade. Shareholders weren’t too happy with the decision -— or with BP’s share price (BP), which has lagged that of its competitors.

Looney recently trimmed BP’s emission reduction goals and increased spending on crude oil and natural gas. Still, BP missed profit expectations last quarter. Shares of the company fell 1.3% on Tuesday.

Meanwhile, clothing company Express announced on Saturday that former Tyson Foods executive Stewart Glendinning would become its next CEO, replacing Timothy Baxter, effective September 15.

Baxter’s resignation was announced just one day after the company released its second-quarter results, with net sales of its Express brand and its lifestyle line UpWest decreasing 15% compared to last year. The company’s sales in retail stores were down 21%, and its e-commerce sales were down 1%. Express reported a net loss of $44.1 million, compared to a net income of $7 million in the same quarter of 2022.

Express said Baxter’s departure was not related to the company’s financial performance. Still, shares of the company are down by about 85% since Baxter joined Express in June 2019 after spending 11 years with Macy’s.

Earlier in September, Walgreens Boots Alliance said that CEO Rosalind Brewer stepped down less than three years after taking the helm at the pharmacy chain.

Brewer’s expertise is in retail, and her exit comes as Walgreens aims to focus more on health care, said Neil Saunders, managing director of GlobalData. Retail, he said, hasn’t been a driver of growth for the company.

Shares of Walgreens are down 32% so far this year. Walgreens slashed its full-year profit guidance in June, warning of softening consumer spending and a pullback in demand for Covid vaccines.

********************************************

Typically, companies don’t provide detailed reasons for why a CEO exits. Of the leaders tracked by Challenger, Gray & Christmas this year, 266 CEOs have left this year without reason. Another 182 retired, 168 either stepped down or resigned, 40 took a new opportunity, 37 had their interim positions come to an end, 32 took new positions within their companies, and 17 left for personal reasons.  Economic uncertainties and “a much faster rate of change in the business environment are  causing companies to desire new approaches, new innovations, and new strategies to compete more vigorously.

While technology has empowered humans to do some incredible things, it’s also contributed to a rise in scams. According to the Federal Trade Commission (FTC), 2.4 million consumers filed fraud complaints in 2022, with over $8.8 billion lost to scams (an increase of more than 30% compared with 2021).

Though there are many types of fraud, imposter scams were the most frequently reported scam, with artificial intelligence (AI) making it easier than ever to pretend to be someone you’re not. A global study conducted by computer security company McAfee revealed that one in four people worldwide had either experienced a voice cloning scam or knew someone who had. With the prevalence of AI scams growing every day, it’s more important than ever to stay informed and take precautionary steps to protect yourself and those around you from AI scams.

How scammers are using AI

Though fraud has been around for centuries, today’s scammers are increasingly using artificial intelligence to carry out even more sophisticated scams. Common examples of AI scams include:

Voice cloning

Voice cloning uses AI to replicate someone else’s voice. Scammers may pose as relatives or friends over the phone, fabricating a story about an emergency and asking their victim to send money immediately. Scammers can also use AI voice cloning to try and gain access to victims’ financial accounts at institutions that use voice recognition prompts for security.

CEO scam

In a CEO scam, a scammer impersonates a business’s CEO and asks an employee to make a payment or share confidential information. Since these emails or texts appear to come from the CEO, some employees won’t think twice about questioning the head of the company.

Phishing

Phishing is a common impersonation scam where the attacker aims to steal sensitive information by pretending to be a trustworthy source. Scammers may utilize AI to add personalized greetings and perfect the company’s language, which can make phishing messages seem even more legitimate and convincing.

Malicious computer codes to crack passwords

Hackers may use malicious computer codes (aka malware) to try and steal passwords and gain access to bank accounts and other confidential information. Under the guise of a legitimate software program, scammers will trick computer users into downloading programs containing malicious code. The scammers will then run these codes on the victim’s computer, which can use different methods to steal passwords.

Ways to Protect Yourself from AI Scams

The best ways to protect yourself against AI scams are to be prepared, understand these scams and be on the lookout for them. If you suspect an AI scam, use these cybersecurity tips to help keep your information safe.

Create a “safeword” to share with family and friends to help authenticate phone calls.

Scammers can use AI to replicate the sound of someone’s voice, which can be very convincing. A safeword is a quick and easy way to verify a person’s identity.

Strengthen passwords by using two-factor authentication.

Some companies require two-factor authentication before granting you access to your email or financial accounts. A two-factor authentication code can help stop scammers in their tracks, keeping you safe in the event your passwords are compromised.

Let unknown calls go to voicemail, then call back to verify identity.

Scammers only need to record you speaking for a few seconds to clone your voice. If you receive a call from an unknown number, let it ring through to voicemail. Then, if you decide it seems legitimate, you can call back to verify the identity of the person who called.

Know most banks will never initiate conversation and ask for your personal information.

Never give your personal information over the phone to someone claiming to be your bank. Most banks will never initiate a conversation over the phone to ask for your personal information. If you’re ever in doubt, hang up the phone and call your local bank branch to verify any requests.

Educate yourself.

Taking time to educate yourself about AI and how criminals use it to scam people is one of the most important things you can do to keep your money and confidential information safe. By understanding how scam artists can trick people, you’ll be in a better position to recognize AI scams and avoid falling victim to these deceptive techniques.

Terms to know.

• Deepfakes: Artificial videos or photos that synthetically replicate someone doing or saying something by using AI.
• AI Chatbots: Software programs designed to communicate with people and have full, human-like conversations.
• Natural Language Processing (NLP): Linguistics-based AI enabling computers to process human language similarly to how humans understand it.
• Machine Learning: A subset of artificial intelligence, machine learning is a computer’s ability to replicate human thinking and behavior.
• Voice Cloning: Also known as an audio deepfake, voice cloning artificially replicates someone else’s voice to make it sound nearly identical to the real person’s tone, pronunciation and intonation.
• Two-Factor Authentication (2FA): Also known as multi-factor authentication (MFA), two-factor authentication is a security method that requires two forms of identification (such as a password or fingerprint and an email or text authentication code) to access information.
• ChatGPT: ChatGPT is an AI chatbot that uses natural language processing to intelligently respond to user prompts and questions. ChatGPT was originally released in November 2022 and was developed by OpenAI, a California-based research organization.

Conclusion

The rise of publicly available AI tools like ChatGPT offers scammers a way to leverage AI to create even more sophisticated scams. While these scams can be convincing, you have the power to prevent them by recognizing the signs of an AI scam and following best practices for protecting your information.