Some 30 years ago, Peter Drucker proposed that the purpose of a business (or accounting firm) is to create clients. Today, it's more important to do more than just create clients: We need to create the right types of clients for our practices.To accomplish this, most firms will have to dramatically change their management systems and business model for running the firm.
Today, some firms are starting to take seriously the concepts of mission, vision and core values. And once they have these down so that they actually mean something to the owners and employees, they then begin to align their strategies to their mission. While this would appear to be a logical thing, many firms do not have such an alignment. If they are not aligned, I'm not sure that a firm truly knows where it is going.
Several firms, both Top 100s and smaller ones, often look to a Balanced Scorecard to help develop such an alignment and remain relevant and competitive. Here are four basic questions that the Balanced Scorecard asks the firm to answer:
1. From an employee growth and learning perspective, how do we continue to improve and create value in our firm? What new skills do our people have to learn for us to remain competitive?
2. From an internal systems approach, in what processes does the firm need to excel in order to deliver value to the clients?
3. From a client perspective, how should the firm appear? Who are our core clients and market segments?
4. To be financially successful, how does the firm have to appear to its owners?
Rather than making snap decisions, the above Balanced Scorecard questions force us to take a longer view of what we do and why we make certain investment decisions.
Behind all these questions is the underlying belief that any firm (or business) needs to align itself around the needs of its clients. If firms do this successfully, then they are successful in creating clients.
I recently heard a fellow jogger on a treadmill bemoan, "I'm running as fast as I can, but I'm not getting anywhere." There is no doubt in my mind that many of you as firm leaders and your partners are feeling this way. There is tremendous short-term pressure to:
* Hit billable hour targets (emphasis on production);
* Collect receivables (cash helps);
* Bring in new business (let's not forget about new clients);
* Try to service the client (yes, that too!); and,
* Keep all your stars aligned (keeping peace at home).
Perhaps it is time to consider a new way to manage the firm and direct our energies so that we don't have to run faster in order to get farther.
As we enter the 21st century, we are faced with many of the same challenges as before.
First, we must learn how to run smarter, not necessarily faster, and we must get farther down the road (i.e., become more efficient and more profitable, provide better client service, develop better internal systems and increase the skills of our owners and employees). But more important, we must know who are clients are. It is easy to get a client. It's much harder to get the right client.
The second challenge, and one that has been around since the beginning of time, is to determine what type of firm we want to be. This may require many firms to turn themselves upside down before they can move ahead. You may remember Joel Barker, the author of Paradigm - The Business of Discovering the Future. He writes:
"What's the difference between a pioneer and a settler? It is the settler who always is calling toward the horizon, 'Is it safe out there now?' The voice calling back, 'Of course it's safe out here!' is the pioneer's. That is because the pioneers take the risk, go out early, and make the new territory safe."
How would you describe your firm: pioneer or settler? The new business model approach is for those firms that want to lead, rather than follow. For those that want to excel in client service, attract the best professionals, gain a true competitive edge and be among the most profitable firms. For those firms that are open to new ideas.
In the second part of this article, I'll provide you with a list of changes to consider.
August Aquila is CEO of Aquila Global Advisors and Chantrey Capital Advisors. Reach him at firstname.lastname@example.org or (952) 930-1295.
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