Think back to the 2008 busy season.
My guess is that your biggest concerns were staffing, growing your firm and maintaining client relationships. Now fast forward to today. What are your primary concerns and dangers?
The answers will vary by region within the country, but most will be significantly different from 2008, with a focus on tactical, rather than strategic, initiatives.
The top three concerns I hear are:
* Partner compensation;
* Expense reduction; and,
* Cash flow.
What the profession and clients need right now is confidence and a long-term perspective. Firms should address the above issues on an ongoing basis. Poor management shows up more rapidly during recessionary times than it does during periods of growth. I think most consultants to the profession have been warning firms for years that their partner compensation systems are often outdated and reward people for mediocre performance, rather than integrating with the priorities of the firm's strategic plan. Given the current economic stage, firms are serious about cost reduction and may be over-reacting in certain areas.
I believe firms should focus now more than ever on planning x people x process.
Granted, growth will be significantly lower in 2009 for most firms, but your core values and strategic objectives should not change. The initiatives supporting those strategic objects may change or have different priorities. Therefore, it is important to update your strategic plan if you haven't done so in the last six months. You may ask why - the answer is that it will provide focus, consensus and team building. Avoid the "rugged individual" tendencies and focus on having the right people on your team.
In the long term, each team member will be more successful as a team than as an individual.
Let's briefly consider 10 strategies for 2009 that will allow your firm to grow and profit even in difficult economic times. Remember, the No. 1 priority for you, your firm and your clients is to maintain confidence. I do not say that will be easy, but clients and staff members are watching your reaction to the scary times - and leaders need to remain positive. This is one reason that firms should continue involvement with peers through associations, meetings and online communities.
The following 10 strategies will positively impact your firm.
1. Communicate with clients. Talk to clients on a regular basis. Call them; don't wait for them to call. Ask them about their dangers, opportunities and strengths. You are their most trusted advisor, and they need your support. Getting them to talk positively about negative things is the first step out of paralysis and into positive action.
Most clients are not concerned about their financial statements or tax returns. Make the conversation about them and let them know how much you care. My prediction is that you will get additional work in the consulting area. Remember that you will offer some services in five years that you don't today. Obtain the required skills and take care of your clients' requests. Innovation is an important core value.
2. Update your strategic plan. This is as much about the process as it is the ultimate plan. It will build consensus, focus priorities and improve accountability. Too many people get enamored with elaborate plans. My experience shows that the most valuable and executable plans are those that are no more than one page and are updated and communicated on a frequent basis. This can be done more efficiently by an outside facilitator. We bring someone in annually to assist us at Boomer Consulting.
3. Utilize a chief value officer. Ron Baker was the first person I heard refer to a CVO, but for years in practice and consulting I have witnessed that all partners are not created equal when it comes to pricing and collecting fees.
Partner personal value systems are generally lower than what clients are willing to pay if the client enjoys the experience. This requires planning and upfront communications, which are often not the strengths of technical partners. I strongly believe in value billing and getting away from the effort-based economy (hours times dollars). The CVO and a pricing committee strategy will benefit your firm even if you are still using hours multiplied by dollars as your primary pricing strategy.
4. Tie partner compensation to the strategic plan. There is no single compensation system that will work in all firms. The best systems are those that people believe are relatively fair and have trustworthy people managing them.
In today's environment, there is certainly pressure on partner compensation systems. Changes generally require independent evaluation and innovation. The biggest issue for many firms in this area today is that they focus on strategies that will maintain current levels of partner compensation. This is not a reasonable approach. As most firms evaluate rightsizing options, partners should be evaluated and terminated like other under-performers.
5. Provide a training/learning culture. Training is often one of the first investments that firms eliminate, but I caution those pondering such a move. According to the Gartner Group, training investments net five hours of increased capacity for each hour spent in training. Retaining the best and brightest employees requires a significant commitment to training.
Information technology and management training are two areas in which I see most firms struggling. They give managers a title without adequate management training. In a training/learning culture, the entire firm gets smarter and increases its capabilities. Firms without this culture tend to spiral in the opposite direction.
6. Get digital - implement, leverage and train. Technology is the accelerator, and firms must be careful in making large cuts and deferring investments.
For those who are not knowledgeable in this area, let me try to explain why you don't have room for reduction without risk to performance and production. Software costs increase as more of the firm automates and integrates with technology. From our recent studies, software amounts to about 30 percent of the total IT investment. Many firms use "peanut butter accounting" - spread it thin and no one knows how much you spend.
Network infrastructure, software, communications, support, data storage and protection must be maintained. Most firms still maintain internal technology, but many IT departments are staffed at the maintenance level, rather than at the capacity to implement strategic projects.
Once a firm is digital, people can work from anywhere at any time. Firms should reduce office occupancy costs and continue to invest in IT, partner training and workflow. Compliance with records management, privacy laws and improving e-mail management are all immediate requirements.
7. Retain quality - "cull the herd." If you are required to make cuts, planning is critical and you should engage human resources professionals in the process. The laws are complicated and protect the employee.
Ignoring cuts at the partner level is one of the biggest mistakes firms make - along with trimming so called "administrative personnel." To a knowledgeable person, this means cutting people who are non-chargeable. Consider contributing team members in your pricing model. Having accountants perform administrative functions is short-sighted and a bad business strategy. The No. 1 comment I hear from firms that have made cuts is, "Most were administrative and non-essential personnel." Firms need both backstage and front-stage professionals. Some of the most important management positions in firms are in training, technology, sales and marketing, human resources, and operations.
Firms that utilize a good performance management system find the process easier and considerably more defensible.
8. Let managers manage. Jim Collins in Good to Great refers to the five levels of leadership: capable individual, contributing team member, competent manager, effective leader and executive. The lack of training for those moving from contributing team member to competent manager creates a significant disconnect within firms. While firms often encourage the development of technical skills, people are too often left to figure out soft skills (including management) without any guidance. Leaders at this level must be developed if firms are going to grow people into effective leaders and executives.
9. Communicate with staff and partners. Lack of communication is always a criticism I hear in firms. When pressed, most will say it is not the lack of communication, but the inconsistency of it, and that partners are not on the same page. We refer to this as a shared vision versus a shared services firm. In a shared vision firm, partners are committed to the vision. In a shared services firm, partners often have individual visions and simply use the firm to share overhead.
A strategic plan that includes core values forms the foundation for communications. There are many technology tools today that can help in this process. One is the use of an online community. This model replaces intranets and includes new features such as forums, wikis, knowledge management, resource libraries and training.
Communities are also becoming important to clients and their firms. The technology behind Facebook, LinkedIn and Twitter offers innovative firms the opportunity to create filtered networks that can directly impact marketing, sales and the client experience.
10. Re-engineer your processes for efficiency. Many firms have re-engineered their audit practices over the past five years. Have you done the same with tax preparation, time and billing, and content management? These are all areas that technology can accelerate and improve client service. Portals, electronic billing and collection, e-mail management, and Software as a Service all provide firms with stronger capabilities, increased compliance with state and federal laws, the ability to work from any place at any time, and the capacity to share resources across the organization.
I recommend that you take a few minutes and review the 10 strategies outlined above. Consider rating your firm using an A-B-C-D-F scale. Chances are that your firm isn't failing or making straight As. If it was failing, your firm probably would not have survived until now.
After completing the grading process, reflect on your firm's scores and determine which strategies you could eliminate if economic times were healthier. My guess is your answer will be "none."
My advice: Start implementing these strategies today, so your firm will be a survivor and long-term winner.
Gary Boomer, CPA, is the president of Boomer Consulting, in Manhattan, Kan.
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