According to a recent article in CIO Magazine, "Clueless in the Boardroom," research shows that most boards don't understand enough about information technology to keep up. The research was done by PwC LLP and reveals that only 1 percent of directors have any technology background. Approximately 40 percent don't even care about IT and 57 percent rely heavily upon what they read.
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The challenge of IT leaders and professionals is to better communicate and educate these leaders. By doing so, opportunities and strategic advantages are gained. From my experience, these findings hold true in most multiple-partner accounting firms. Few firms have a functional IT committee, spend adequate time on IT strategy, or focus on innovation, rather than IT maintenance. Too many firms employ a defensive, rather than an offensive, strategy. This approach increases stress and reduces the return on investment. Why and how can this be changed?
The research points out several challenges for businesses and their IT leaders. Most boards or partner groups seek the counsel and reporting of their IT professionals in brief segments (typically no longer than 30 minutes), and many admit that they really don't understand what the IT leaders are saying. This is risky and generally inefficient. CIOs need to become leaders who teach other C-level executives and board members how to tell time and not how to build the watch. A high level of trust in an organization can reduce both time and the amount of the investment. Low trust produces the opposite effect by increasing time and the investment.
Another challenge is how to integrate IT strategy with the business strategic plan. This is especially tough for firms and business that don't have a current strategic plan. From recent research and polls at major conferences, the majority of firms don't have a written strategic plan or an IT plan. If they do have a plan, often it isn't shared beyond the partner group. Many simply operate from a budget and priority project lists. The process of developing these plans is as important as the plans. It forces communication among the leadership, management and IT professionals. Getting buy-in, project champions, and focus are all results that come from the planning process. The consumerization of IT has caused firm leaders to realize that they need to pay more attention to IT.
Firms can resolve their own issues and then utilize their experience and resources as part of packaged services to clients. We have seen tremendous advancement of IT professionals who have been part of our CIO Advantage Program. Three years ago we started this program focused on improving communication, team-building, project management, business savvy, marketing, sales and leadership skills. We have utilized "Ignite presentations" to hone communication skills, introduced them to the Kolbe index for team-building, and provided access to leadership resources. The results have been exceptional for those IT leaders who are committed and have the support of their firm's chief executive officer. Several have advanced to COO duties and one is on the verge of becoming a CEO.
Clients are experiencing similar IT issues. They do not feel comfortable speaking with an engineer or programmer. They relate and prefer to communicate with someone who understands their business and technology - the trusted business advisor. The cloud provides collaborative solutions that allow firms the opportunity to efficiently capture transactions (Level 1) as well as offer higher-level CFO-type services (Level 2) and planning services (Level 3). When packaged, these services increase in value and margins.
Systems that capture transactions in real time, rather than after the fact, produce significant results:
Accurate and timely data reducing workflow compression during tax season;
- Time to focus on higher-level services such as cash flow, budgeting and business intelligence with automated reporting; and,
- High-value planning services such as succession, strategic and IT.
Another opportunity is to standardize and privately brand the cloud-based platform. This reduces the investment, training time and implementation. Firms are having fewer challenges finding a suitable cloud-based platform than how to package and deliver higher-value services. Too many firms are caught in the old paradigm of compliance services and pricing by the hour.
Today's challenges call for a team, rather than a rugged individualist, approach. These unique ability teams create value through relationships (confidence), leadership (direction) and creativity (new capabilities).
Businesses and firms that manage technology as a strategic asset, rather than overhead, receive a much higher return on their investments. They also focus a higher percentage of their annual investment on innovative services, rather than just maintenance.
For the past 20 years, firms with excellent management and tech leadership have outperformed those without these capabilities. Last year, the average firm spent approximately 6.5 percent of revenue and $10,000 per full-time equivalent on technology (includes labor, hardware, software, communications and depreciation). Where this investment is made is more important than the amount.
Remember that average is where the best of the worst meets the worst of the best. Most firms view themselves as above average. Factors such as multiple offices, size of firm, and type of practice are important, but the investment continues to rise as more areas of the firm leverage technology.
PLAN OF ACTION
1. Establish an IT committee with representation from all areas of the firm (tax, accounting, consulting, administration, marketing etc.). Limit the number of partners on this committee if you want the best results. Several firms are utilizing outside members to provide broader perspectives. I know of a few firms where their CIOs participate on each other's committee.
2. Develop a strategic plan for your firm, and an IT plan that integrates with the strategic plan. Each plan can be completed in a couple of days with professional assistance and facilitation. Focus on strategies that will allow your firm to leverage the cloud and provide a secure collaborative platform available from anywhere at any time. This will provide efficiency and scalability.
3. Participate in a peer group such as the Boomer Technology Circles and the CIO Advantage. These groups provide access to expertise, leadership development, and access to peers and best practices. They also provide IT management metrics and a library of policies and procedures. Make sure your IT professional gets training that focuses on communications, team-building, project management and marketing of their ideas.
4. Utilize your CIO as part of your management team. This will provide a distinct strategic advantage to your firm. Based upon the research done at PwC and our own experience, tech-savvy leadership provides distinct advantages in the ability to retain and attract talent.
Remember, all progress starts with the truth! Is your firm as tech-savvy as it needs to be?
Gary Boomer, CPA.CITP, is the president of Boomer Consulting, in Manhattan, Kan.