As firms struggle to retain good staff, I haven't seen an increase in internal communications. Too many firms are still under the old thinking - staff doesn't need to know. Given the recent turmoil in the profession and the difficulty in keeping good people, you would think that an increase in internal communication would be paramount.
Why, we must wonder, do partners fear sharing information with the very people that make them successful? The No. 1 reason that staff are leaving firms today is that they don't see how they fit into the overall direction and strategy of the firm. When asked if they know what to do to help the firm achieve its two or three main goals for the year, they frequently reply, "No."
Just issuing an annual report won't cure all the internal communication issues in a firm, but it will be a step in the right direction. Partners should communicate monthly via an internal newsletter or e-zine, hold quarterly staff meetings where important issues are actually discussed, and prepare an annual state-of-the-firm report.
A handful of CPA firms already issue such reports.
Think about any annual report you have seen from a publicly held company. Yes, they are glossy and slick. And yes, they are marketing-oriented. No matter how poorly the company performed, the annual report always summarizes the progress - strategic and financial - that the company made toward achieving its goals. Chairmen and chief executives take advantage of the annual report to share and reinforce their vision, the company's core values and goals for the coming year. It is merely one way to re-engage your people and communicate with stakeholders.
What to include?
The distribution of the report will dictate what information you will want to include. At a minimum, the report should be distributed to the partners, staff and administrative personnel. It can also be delivered to existing clients, prospects, your lending institution and referral sources.
Remember, clients are like shareholders - they want to be affiliated with winning organizations. The partners' version and the one sent to your lending institution would include more financial information.
1. Introduction by the managing partner. The introduction can take several different approaches. If it's the first one, the managing partner will want to prepare a brief overview of the firm and explain why the firm is doing a report.
If you have sent out reports in the past, then this section becomes an open letter from the managing partner. She can highlight the successes and shortcomings of the last year, the state of the accounting profession, the changing nature of the local marketplace and what the firm is doing to stay relevant.
2. The firm's strategic direction. This section can cover many different areas of what transpired in the firm during the past year. Let's look at some of the more important ones.
Vision. Let's assume you have a strong vision and it's one that wins the hearts and minds of your people. You could have quotes here from staff discussing the vision and what it means to them. Just remember that a vision is really an internal document, not an external one.
Strategic direction. If you have not mapped out a strategic plan for your firm, this section is going to be difficult, if not impossible, to complete. Let's assume that you have developed an effective strategic plan. You will want to outline your key strategies in this section.
One way to address your strategies is to place them in categories: Staff strategies (training and development, diversity efforts, etc.); client strategies (retention, satisfaction, service quality etc.); marketing strategies; and internal process improvement strategies
Goal achievement. Describe in this section your key goals for the past year and your success or shortcomings in achieving them.
Department reports. If the firm has departments, each department head should submit a report on the highlights of the last year and plans for the future. Your human resources director can report on training and development programs.
3. Core values. Core values are what keep the firm together. If you haven't identified and defined behaviors in your firm that reflect your core values, you should do so immediately. You know you have a real core value when the firm is willing to take a loss in order to uphold one or more of its core values.
4. Firm economics. Depending on who receives the annual report, this section can contain everything or selected financial information. Below are some ideas as to what to include.
* Gross fees for the five previous years. Both dollars and yearly percentage changes should be highlighted.
* Sources of income from service types and industries or niches.
* Actual-versus-budget figures for the five previous years.
* Billing and collection results, such as average days outstanding for work in progress and accounts receivable.
5. Future goals and plans. This section gives you the opportunity to discuss the future of the firm - growth goals, employee programs, new services or markets, changes in the firm's organization such as retirement of partners or changing of department heads, and any other initiatives the firm plans to undertake.
Is an annual report for you?
Obviously it's not for every firm. If you have a clear vision, develop true measures for your goals and achieve good results, you should be proud to report your achievements. If you wondered, "What would we report?" take a step back and make strategic planning the topic of your next owners' retreat.
Just make sure that it's a plan that you implement and not merely place in the bookcase. Have a goal to issue your first annual report in 2005, even if it's an internal one.
August J. Aquila, Ph.D., is a director at The Growth Partnership (www.thegrowthpartnership.com) and author of Client at the Core (John Wiley & Sons, 2004). Reach him at (952) 930-1295 or aaquila
