Is your firm a "wind-down" firm, or are you well-positioned for the future?
In the recent book “Provoke: How Leaders Shape the Future by Overcoming Fatal Human Flaws,” authors Geoff Tuff and Steven Goldbach, principals at Deloitte, help answer that question and many more. They provide valuable background, and their primary advice is, "Do something." Being a provocateur is not an easy task in most organizations, but it is necessary for business transformation.
The talent wars, Great Resignation, resistance to changing the business model and failure to see opportunities are symptoms of a wind-down firm. This may be a good strategy for some in the short term, but for most professionals, the relevant question becomes: What if we don't change? What is the timeline for acting?
Action results in learning, and learning requires confidence. Often individuals and firms get caught in the “paralysis analysis” or “procrastination” mode. The best way to get out of procrastination is to do something or get into motion. This is leadership's responsibility and can be done with the visioning process and by assessing what you know you don't know (uncertainty). The status quo has a psychological advantage, but all professions are transforming, accelerated by the pandemic, automation and virtual capabilities.
The talent shortage is real for many professions and industries. But to put it in perspective, you should be familiar with Joy's Law, credited to Sun Microsystems co-founder Bill Joy. The law states that, "No matter who you are, the smartest people always work for someone else."Granted, you may be smart and surround yourself with smart people, but how can you expand your capacity and capability through sourcing and automation? Are you focused on your unique abilities or completing tasks that can be delegated or outsourced?
Most accounting firms and business owners spend too little time thinking and planning. What little time they spend thinking may be classified as worrying rather than thinking at a high level. Dan Sullivan, founder of the Strategic Coach, urges entrepreneurs to think at a higher level. He states that most thinking is done regarding things, people and thoughts. Real breakthroughs to difficult problems come when you think about your thinking. What is your vision? Has it changed in the past two years? Writing your answer will start the thinking process and lead to higher performance. Think — ink — execute.
If this sounds too philosophical, keep reading. You will find several areas where firm leadership needs to think about their thinking rather than things, people and thoughts. Of course, technology and processes come into play as they touch everything we do personally and professionally in today's microchip and AI environment. The experience is also extremely important for both employees and clients.
The mindset challenge
Basic human cognitive biases can narrow individual and organizational peripheral vision and lead to all-too-typical dysfunction. Uncertainty, especially in the absence of perfect data, often results in a lack of conviction to act and procrastination. Ignorance is not the same as uncertainty. Getting in motion and having the courage and confidence to continuously improve changes your strategy from "ready, aim, fire" to "ready, fire, aim," which goes against most accounting education and training.
I will provide five examples of how you can improve results if you change your way of thinking. This is the mindset challenge.
First, let me give you an example of different thinking that is currently changing the educational system and impacting our profession's talent development. Many of you have heard of Sal Khan and the Khan Academy. Sal was born in New Orleans to a father from Bangladesh and a mother from India. He has three degrees from MIT (a BS in electrical engineering, a BS in computer science and an MEng in electrical engineering and computer science). However, his thinking is changing the world with the Kahn Academy. In 2004, his cousin Nadia asked Sal to help tutor her in math using Yahoo's Doodle notepad. Other cousins also needed help, so he moved to YouTube. He quit his work as a hedge fund analyst in 2009 to focus full time on the Kahn Academy. Today he distributes through the
Khan compares our current education system to building a multistory building. At the end of 90 days, the foundation and basement are scheduled to be complete and proceed with the upper stories. Due to weather, the foundation and basement are only 80% complete after 90 days. But rather than complete the foundation, work proceeds on stories one, two, three, four and five. Ultimately the building collapses.
Granted, the examples I provide for firms may not be as monumental as the Kahn Academy, but they are improving the careers and lives of future and current CPAs. Here are five challenges in most firms that can improve service, cash flow and profitability by thinking about your thinking and changing your existing mindset and processes. Most of these issues require behavior changes rather than technical expertise. A provocative question is often all the stimulus needed to change your thinking.
1. How do we reduce WIP and AR by 50% while improving our bill payment and cash flow?
Bill payment and collection should be automated utilizing ACH payments rather than checks and credit cards. We are in a digital world of banking. This is done by educating your administrative team and clients. It requires an upfront conversation with your clients and inclusion in your engagement letter. Many firms have improved greatly in this area due to the pandemic and digital solutions that are currently available.
2. What services do we need to provide strategic clients to increase value exponentially (10X or more from our top 25 clients)?
Package and price multiple services in a subscription model from all service categories (transactional, compliance, advisory and consulting) to add value. This occurs when you have upfront conversations with clients allowing them to select services from a menu of items. Payment terms should be designed so you have no work in process and limited accounts receivable. The biggest challenge for most firms is that they have always used service line pricing rather than focusing on adding value to the client. A more client-focused approach is needed. Often, the question among partners is how to allocate revenue in the partner compensation formula. Changing that formula may also improve behavior and accelerate the firm's vision and strategic plan.
3. How do we improve retention and attraction of top talent in today's environment?
Learn your unique abilities and those of your team members. By doing so, you will be more productive, reduce burnout and be happier. Everyone has unique abilities, yet people are often placed in areas of responsibility that do not match their unique abilities. Services from the four service levels (transactional, compliance, advisory and consulting) require a team approach and different skills (unique abilities). The tool we utilize is the Kolbe Index and a synergy report. It will also improve communication within your firm as it defines how people like to communicate. This is an inexpensive but powerful tool. Also, don't forget Joy's Law and look to outsourcing and automation to augment existing unique abilities.
4. How do we reduce cycle time and improve the client experience?
Project management and workflow related to tax return preparation should be evaluated. The process should be more important than the people performing the process. This same thinking can apply to multiple processes in your firm. Don't assume you are efficient and offering five-star customer service. Evaluate the entire process from gathering the information, scheduling, preparation, review, delivery and billing. Apply the principles of Six Sigma (define the system, measure key aspects, analyze the data to determine cause and effect, improve processes and control processes). You will probably find steps and loops in your processes that create backlogs or no longer add value. Utilize someone from outside the process to evaluate the process to reduce personal preferences and the expected resistance to change.
5. How do we focus on higher-value client services rather than the accuracy of clients' accounting records?
Collaborative real-time accounting platforms can provide accurate and timely information that flows directly into tax and financial reporting packages. What you know about technology may be outdated. Your technology ecosystem comprises multiple developers, just like the Apple ecosystem. Developing a roadmap and integrating multiple applications into an accounting system is the new challenge. The IT focus should be on new revenue and five-star customer service, and no longer on maintaining internal technology infrastructure. Don't be afraid to ask: Are our current suppliers providing us with what we want and need? The answer in most firms is "No." It is time to ask some provocative questions.
The purpose of this article is to motivate you to think about your thinking. It is not about providing all the action steps. I strongly encourage you to prioritize the five ideas and focus on your highest priority. If you are a larger firm, you can use the task force approach to address multiple processes/areas simultaneously. Change isn't easy for most people. It requires planning, communication, engagement, accountability and trust. The higher the level of trust, the less time and expense required.
Think — plan — grow!
