Your Firm’s Future is Determined Now
“Someone is sitting in the shade today because someone planted a tree a long time ago.” – attributed to Warren Buffet
I continue to be asked, “What is the Firm of the Future?” I have heard the question consistently over the past 15 years, especially since Ron Baker and Paul Dunn wrote their book, “The Firm of the Future,” in 2003.
The attitude of the majority of the CPAs that ask me the question has been inquisitive, rather than focused on innovation and change. I do not normally perceive a sense of urgency for change, likely because partner income has continued to grow. I believe the question should be, “What is the firm of today, which will continue to be successful and future ready?” My answer to that question is a formula: Planning + People + Processes = Success. All of these are accelerated by technology and accountability.
For the most part, firms tend to focus on financial results, especially partner income. While this is not necessarily bad, if partner income is the only focus, it may impede progress toward success and future readiness. Author Jack Dixon states, “If you focus on results, you will never change. If you focus on change, you will get results.”
Most firm leaders will agree that we are seeing disruption from the following factors:
- The need for a different economic model (hours times dollars is not sustainable).
- The continued retirement of the Baby Boomer generation.
- The need for quality talent, and a diversity of skills, to meet client needs and wants.
- Technology – the Cloud and web-based applications are automating many tasks that accountants have done in the past.
- Process improvement.
While I do not have space in this article to elaborate on these five disruptors in detail, I will attempt to touch on each in summary format. Before I do, I want to point out that most of my conversations with partners can be categorized into one of these three demographic groups:
- Those new to the profession (0-5 years).
- Those in the middle of their careers.
- Those approaching or thinking about retirement.
At first look, you may think these categories are generational. I believe a more important point is that they reveal perspectives of being self-focused, rather than firm-focused.
For example, what is best for the firm may not be best for those preparing for retirement. In fact, it generally is not. Those preparing for retirement may want to maximize current earnings, in order to maximize deferred compensation and retirement payments.
Likewise, those entering the profession are extremely concerned about talent development programs and their future employability. For the most part, they do not see the need to work the hours the Baby Boomers did, due to technology advances and improved workflow. Today’s digital world eliminates much of the data entry, aggregation and reconciliation that the Baby Boomers performed when they started in the profession. Naturally, those entering now have expectations that are much different from those who are still inefficiently working in a paper world.
So, let’s take a quick look at the five factors disrupting the accounting profession: economic model, retirement, talent development, technology and process improvements.
While there is no silver bullet, most successful firms have strong leadership and a shared vision throughout the firm. Great leaders identify and develop their successors, usually long before they are needed.
Many of the measurements and processes used in today’s practice management systems are outdated and add little, if any, value. Scheduling, project management, billing and cash collection processes are more important than utilization and realization calculations. While utilization and realization may be interesting indicators to project managers, they have little to do with your client’s perception of value and willingness to pay and purchase performance and strategic advisory services. Metrics, such as revenue per full-time equivalent, project cycle time and elimination of loops in the workflow, are more relevant. This requires different thinking and communication of a different value proposition to clients and prospects.
The talent wars are real, with few experienced people available in the market. Most experienced people who leave public accounting do so for numerous reasons. Firms are focusing on talent development through learning ladders and individual professional development plans. This requires firms to commit time and resources to the development of people at a much higher level than in the past.
Talent development challenges can also be reduced with improved processes and digital workflow, empowering firms to utilize a remote workforce. Lean Six Sigma processes reviews in the areas of tax return preparation, audit, and time and billing, which can identify efficiencies that lead to improved cash flow and profitability. New technology is also reducing the time required for expense management, audit work papers and financial statement preparation, as well as collections by using electronic billing and ACH payments.
Answer the following questions for a quick survey to see if your firm positioned well and future ready:
- Does your firm have a current vision/strategic plan that is shared with all members of the firm?
- Does your firm have a technology plan and budget that integrate with your firm’s vision/strategic plan?
- Do you identify leaders early in their career and provide leadership development?
- Do you have someone in charge of talent development?
- Do you have someone in charge of innovation?
- Do all members of the firm have personal development plans?
- Have you conducted a Lean Six Sigma review of key processes? Do you continually improve by leveraging available resources?
- Does your firm have a plan to grow advisory services? Who is in charge/responsible?
- Do you utilize 90-Day Personal Game Plans and Accountability Reviews?
- Does your firm have a yearly growth plan that includes organic, as well as merged, growth, required full-time equivalents, and net income before owner compensation?
These 10 questions will give you an idea about how well you are preparing for the future. Start today by building your vision and roadmap.