'Ready, fire, aim" is not a strategy most firms follow in good times, much less in uncertain times.
A sense of urgency is certainly needed, but firm management should focus on the firm - not just client problems.
The strategies that can positively impact a firm, its employees and its clients in today's economy are many of the same ones that the best-managed firms have utilized for the past several years. The actual challenges have not changed, but the runway has shortened and the time to act is now. Well-managed firms have a strategic advantage over those that focus only on short term profits.
The biggest challenges for firms that we continue to hear about are:
* How do we consistently provide profitable growth?
* How do we retain and attract the most productive people?
* How do we increase productivity (do more with less)?
Granted, there are other challenges - but these three are critical. Firms must focus on eliminating or reducing their dangers, maximizing opportunities and leveraging their strengths in order to grow.
Profitable growth is or should be on the mind of every managing partner in today's economy. Some firms might even go so far as to say that maintaining partner income is the primary goal. Great firms and clients find ways to grow profitably on a consistent basis. Growth is important for several reasons and has been relatively easy over the past five years. Obviously, firms must grow in order to retain quality people with opportunities for advancement.
In a no-growth firm, partner income will typically drop 12 percent in Year One, 14 percent in Year Two and 17 percent in Year Three. (See "The no-growth model," where the assumed increase in labor and overhead is 5 percent per year.)
No firm or partner wants to operate within this type of model. For many partners, the first reaction is to cut salaries and overhead in order to maintain average net income per partner. This strategy typically reduces investments in developing people and technology to maintain current profit levels. You may get by with this approach in the short term, but it will make your firm less attractive to quality employees and clients in the long term. Growth is possible even in difficult times, but it requires planning, focus, discipline and accountability among the partner group.
For many firms, a great deal of growth has come from mergers and acquisitions, rather than organic growth. This strategy made sense in the past, but values may have to be reduced significantly in the future if growth slows, or, worse yet, stops. While growth may have been a primary focus in the past, it is going to be more difficult in the future without significant changes in the thinking and attitudes of partners and managers. Quality people and productivity will also impact your strategies.
Let's look at retention and attraction strategies. In the past, firms have focused on attracting the most talented individuals possible and retaining them. The market was a "seller's" market. Quality people in greater numbers are available today, and firms should consider upgrading at all levels - including the partner level - if they expect to grow and compete.
Natural instincts, along with unique abilities, must be considered in the hiring equation. High-demand and high-profit services are changing. Does your firm have the right skills and talent to provide profitable services? Don't be afraid to eliminate services that are not profitable or could be better utilized with the proper training and development.
When times get tough, many firms are forced to make decisions that they should have made during good times. Lack of management and poor management are typically more apparent during tough times. There are several actions that your firm can take in order to retain and attract quality people with the right skills:
* Develop and communicate the firm's strategic plan to everyone. Help firm employees understand their significance to it and terminate those who are not significant.
* Implement a training and learning culture in which everyone gets smarter and more productive. You cannot allow your firm's collective skills and knowledge to spiral downward. The firm must get smarter, and partners should play an integral role in developing people by increasing their own skills.
* Individual learning plans and curriculum are a must for each employee - from the managing partner to the receptionist. Include soft skills and IT skills, as well as technical tax and accounting skills. Research shows that adequate learning requires about 150 hours per person, per year, throughout one's career. Those just starting their careers should focus on firm orientation and cultural issues, as well as technical skills, while partners and managers should focus on management and leadership skills (development of people and clients).
* Hold people accountable, especially partners. Accountability should be integrated into the firm's compensation system.
The majority of problems at the top of a firm are behavioral. While everyone may desire a higher level of productivity, few commit to the behaviors required to make it a reality. Firms must first define productivity consistently. The best definition I know is, "increasing output while decreasing input." I often refer to technology as the accelerator, and there's no doubt it fosters increased productivity. Still, many partners ignore the impact it has upon their pricing formulas. Plans that are communicated consistently and concisely are also integral to growth. Firms must hire well-trained and quality workers who are allowed to leverage their unique abilities. Finally, they must develop processes that are effective and efficient.
The following are principle ways to increase productivity in good times as well as in bad:
* Develop standards, policies and procedures - and enforce them.
* Train to those standards policies and procedures.
* Focus on the "big rocks" - prioritize activities, rather than just staying busy.
* Invest in technology and provide training that allows you to improve processes and reduce time.
* Price for value, rather than time.
THE NECESSARY INGREDIENT
Putting it all together requires management - a skill often forgotten or ignored in accounting firms. Effective management is essential to today's workforce. Younger employees desire and expect honest and timely feedback. Older employees (especially partners) need honest and timely feedback even if their generations don't particularly like it. Being left alone to act as a rugged individualist, rather than an important part of a unique ability team, is not healthy. Everyone benefits from management and coaching.
Great leaders ensure that the firm does not focus on "the same old, same old" and lets go of yesterday's breadwinners (people and services) that no longer create value. Your firm must focus on the future and creating value. Leadership provides direction, relationships provide confidence, and creativity provides new capabilities. All are present when value is created. These strategies are relevant in tough as well as in good times.
"Ready, fire, aim" may be a relevant strategy if you have confidence in your firm's ability to manage change while eliminating its top three challenges.
Gary Boomer, CPA, is the president of Boomer Consulting, in Manhattan, Kan.
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