Exploiting technology to create new business value now trumps efficiency as the chief focus of information technology. Leadership and governance of IT in your firm must change in order to exploit new opportunities.The printing press changed the world, as did the telephone. We are currently in the middle of the Internet evolution. What worked five years ago no longer keeps up with client demands and internal requirements.
Our industry is part of an emerging global economy, and owners must understand how rapid changes will impact their firms. Concurrently, they need to document strategies and a plan to take advantage of the Internet in order to grow.
Running IT like a business is different than running IT as a business. Your IT department isn't a business.
Some firms have allowed IT to be a "choke point" between the firm and increased client opportunities. We operate in a digital world, but many firms are still entangled with the inefficiencies of paper. Once a firm goes digital, it can leverage its resources and provide clients with increased value and more timely service.
The accounting profession spends less than 6 percent of net revenue on IT, while the financial services industry spends 10.5 percent. Accounting firms employ one IT person for every 34 end users, while financial services have one for every 16 people, according to CIO magazine and Boomer Technology Circles surveys. The CIO survey is based upon 588 reporting entities represented by financial services, health care, wholesale and retail, and manufacturing. The lowest, manufacturing, spends approximately 3.4 percent and has an IT to end-user ratio of 1:41.
Contrary to what you might believe, dollar investment is not the primary problem. I believe the most significant challenges result from the following issues:
* Inefficient processes (many are based on paper);
* Lack of training (IT, management and soft skills); and,
* Little or no enforcement of standards, policies and procedures.
Confronting these issues with effective leadership and an intentional attitude will greatly enhance a firm's return on its technology investments.
Firms do not often promote IT professionals to principal or partner because these individuals lack a book of client business. Technology's ever-increasing impact upon all areas of operation is causing many to rethink this position. Progressive firms are developing strategic leaders - CIOs and IT directors - to participate on the firm's management team. Sadly, this initiative has not yet spread across the industry.
When firms fail to develop and promote IT professionals, they often "burn out" or "move out." In other cases, they settle for mediocrity. IT positions in accounting firms are high-stress and high-demand, and typically receive little or no recognition from partners. A new type of IT leader is emerging and is in high demand: the business analyst who has strategic IT skills as well as business acumen.
The pace of change will not slow to help firms catch up. They must prepare for five realities now:
1. Ever-increasing workforce diversity.
2. Client demand for new services that require additional IT skills.
3. New space requirements and office configurations.
4. The need for firm leaders to possess strategic IT skills.
5. An emerging economic model that is quickly supplanting old initiatives.
Baby Boomers are starting to retire, and the number of new individuals coming into the workforce will not keep up with attrition. While enrollment in accounting studies at universities may be up, don't be misled. Two facts impact this reality:
* The majority of accounting students now enter through industry, rather than public accounting; and,
* They are at least five to seven years from having an impact in your firm.
Attrition is not only a problem for the accounting profession. Firms are in competition with other industries for future employees, and the workforce grows more diverse with each passing day (e.g., age, gender, race, etc.). In addition, the shortage of skilled labor is heightening the need for dynamic solutions in technology.
The nature of work is also changing. The efforts-based economy has given way to the results-based economy. "Work" is now something you do, rather than a place you go. Technology allows most anyone to work anywhere, at any time. Young workers want to control their time - not be controlled by work.
Whether partners like it or not, significant changes in the workforce require different types of space. The spike in fuel costs has prompted some firms to reconsider where they will locate in the future - downtown or in suburbs close to where young workers typically reside. In addition, more people are working from home or client offices.
Not all business problems can be solved by technology. Nevertheless, future leaders will need a more thorough understanding of IT strategy and skills. Many of today's CEOs and managers lack in these areas, and most IT professionals do not have the business savvy required to lead a firm into the future. Firms must focus on developing leaders who understand and can execute IT strategy.
Finally, the economic model (hours x dollars) is broken, and has been for many years. Clients demand results and are not interested in the amount of time a project requires.
These challenges pose a critical question: How can a firm transform from what it is today into a firm of the future - and what role will technology play in that process?
The answers are not difficult to discern, but execution is difficult because old paradigms have been drilled into firm owners throughout their careers.
The five-step program outlined below will help your firm maximize cash flow while positioning itself for the future.
1. Identify future managers and leaders early in their careers (between 25 and 30) and invest in their development.
2. Develop a CIO who has strategic technology skills and firm knowledge with the idea that they will become part of management within the next one-to-three years. This person should participate in peer organizations that focus on IT and management skills.
3. Invest in a training/learning culture that enhances the knowledge base of the entire firm. This will require hiring a learning professional (internal or external) and should include soft skills and technology, as well as traditional continuing professional education. (We just completed a study revealing that people entering firms need at least 150 hours of annual training.) Firms must get beyond 40 hours of CPE.
4. Assign a chief value officer and a pricing task force. Centralize pricing and take it out of the hands of those who are not good at it. Implement strong engagement letters, including change-order clauses. Don't be afraid to collect in advance.
5. Communicate these changes via a strategic plan that has input from all levels. Plans without buy-in and that are difficult to communicate are useless. Focus on your top three strengths, dangers and opportunities. Ensure execution of the plan with increased accountability, starting at the partner level.
Taking these steps will take care of growth and succession. It is about progress and not perfection. The biggest risk your firm faces is doing nothing to address the challenges facing our industry. There will be winners and losers. Your firm can be or will remain a winner. This is how the best get better!
Gary Boomer, CPA, is the president of Boomer Consulting, in Manhattan, Kan.
