[IMGCAP(1)]The world of professional services is changing.
The convergence of market forces—mobility, social media, the Web-enabled world and others—are all working together to make the professional services world a more level playing field in which competitors can come from anywhere at any time. That is a scary proposition, especially in a tough economy where there is significant pricing pressure and more firms chasing fewer dollars.
As expected, the accounting industry—a key part of the broader professional services landscape—is not immune to these market forces. Many accounting firms are built on reputation and years of providing services to a core group of customers, but the overall market forces have begun to erode this business model. Customers are starting to evaluate better, cheaper alternatives on a regular basis as a way to save money and gain the same
level of value.
The central question is: how does an accounting firm continue to prosper? If competition is increasing and if margins are being eroded, what strategies can one employ to retain their market-leading position? The answer is simple, even if the execution is harder: It’s time to act like a unified company. It’s time to manage the business.
The Changing Landscape
Accounting firms have historically been managed as partnerships. In the days of working as a local provider, this model worked well. Individuals ran separate parts of the company and maintained strong relationships with customers. After all, a strong relationship with a recurring customer is the firm’s biggest asset, right up there with those talented individuals that firms employ to do the actual work. The partner model accentuated the “personal touch” where a partner is the recognized leader of a firm’s particular discipline and is the face of the firm to that specific set of customers.
Accounting firms should continue that “high-touch” approach that has worked so well in the past. With the tougher competitive landscape, however, firms need to drive efficiencies and maximize every dollar they spend. To do this effectively, they need to manage the firm with a “one-firm” mentality versus managing five separate fiefdoms run by five different partners inside one company.
As firms move toward a “one-firm” approach, there are a variety of actions and technologies they can employ to become a unified firm.
Becoming a Unified Firm—Key Recommendations
1. Appoint a Chief Operating Officer
Appointing a COO who has the responsibility of running the firm’s operations, connecting the dots among functions and departments, and accelerating the revenue-generating efforts of the partners is the most important organizational change that can be made. By their very nature, COOs are cross-functional, meaning it is their job to manage the firm as one, and keep tabs on the revenue, costs and profits of each of the lines of business within an accounting firm. The COO should have the responsibility for managing the cross-functional elements of a firm that work to support the initiatives of the firm as a whole.
It is recommended that a COO’s scope of responsibility include marketing, IT, facilities, human resources and finance. Having this scope of responsibility empowers the COO to look across the business and make the necessary trade-offs—for the firms overall health—that might be counter to an individual partner’s needs. Finally, it is recommended that the COO be on the core management team of the firm. They should be at a compensation level that is equal to an equity partner, so the COO does not become beholden to the individual partners who run the firm. After all, the point of a COO is to look across the firm and do what is best for the entire organization, not to maximize the efforts of one domineering partner and that partner’s individual kingdom.
2. Manage by Metric
A famous catchphrase in the business community applies perfectly to Recommendation Three: you can’t manage what you can’t measure. If an organization is to be managed like it is one firm, it needs to be measured like it is one firm.
Implementing business intelligence tools that generate dashboards showing key performance metrics is a best practice to understand total firm performance. Business intelligence can broadly be segmented into two areas—performance management and business analytics. The former is all about measuring the past and the present, while the latter is about predicting the future. Since many accounting firms still live on spreadsheets, focusing on building a performance management framework (before predicting the future) should be the first business intelligence priority for many accounting firms.
A performance management framework needs to be grounded in the metrics that matter to a firm. Common metrics that forward-thinking accounting firms should measure include firm-wide profitability, firm-wide cash flow, firm-wide proposal win rates, resource utilization, project performance, project profitability and more.
Companies that use business intelligence to measure the business and make better, faster decisions will have a competitive advantage over their more traditional peers. This is especially true when companies combine business intelligence with cutting-edge tools for project management and resource planning, but that’s a topic for another day.
3. Show One Face to the World
Today’s growing accounting firms with multiple parts of their business should show one unified face to the world from a marketing perspective. Too often, the fiefdoms inside accounting firms develop and execute their own marketing campaigns. In addition, it has also been witnessed that different parts of firms use different methods of tracking customer engagements.
This can lead to the ever-present, but terribly embarrassing situation where one part of the firm—say, the audit department—goes to visit a potential client, and on their way out of the client’s building, they run into another part of their own firm—say, the personal property tax department. This type of situation is obviously unacceptable and can severely embarrass a firm as it tries to pursue and win new business.
It is recommended that firms take the following steps to provide one face to the world:
1. Have one marketing department that oversees the firm’s brand and leads demand generation efforts across the firm.
2. Standardize on one CRM system so all customer interactions can be tracked, and the aforementioned hiccups won’t occur.
3. Use one corporate brand with an overarching message instead of six different brands tied to individual partners and firm offerings.
4. Actively cross-promote the firm’s various services on all outbound marketing activities (emails, events, corporate Web site, etc.).
In today’s hyper-competitive environment, companies run as individual fiefdoms are at a disadvantage. To succeed in this flatter world, accounting firms need to start running their firms like for-profit businesses. Those that embrace the concepts above are in a better position to succeed than their peers.
4. Leverage Enterprise Software Systems
A prerequisite to managing as “one firm” is having common, scalable enterprise systems that unify the key operations of the firm. Many larger firms that have quickly grown organically or through acquisition have not adapted their infrastructure to meet the needs of a bigger, more dispersed operation. Many firms today use a hodge-podge of systems that manage the business in functional silos. It is not uncommon to see multiple spreadsheets, distributed databases, simple accounting/general ledger packages and rudimentary business development applications employed to manage business functions within large firms.
To avoid the kind of patchwork architecture that plagues bigger firms today, growing firms of sufficient size should look to purchase one integrated enterprise software system that is purpose-built for the accounting industry, and one that offers a unified technology platform for the important business processes within an accounting firm—including customer relationship management, financial management, human capital management, resource planning, project management, and business intelligence.
Hugo Dorph is Deltek’s EVP and general manager—professional services. He is responsible for managing sales and marketing for Deltek Vision, Deltek Maconomy, and Deltek People Planner, enterprise software solutions that power the businesses of accounting firms and other professional services firms around the world.