We've just finished putting together our annual Top 100 Firms and Regional Leaders report (which should have accompanied this issue, unless someone in your office snagged it first), and so we're suffering from a bit of number fatigue here at Accounting Today.
As is only appropriate for a ranking of accounting firms, our T100 Firms/Regional Leaders report is intensely focused on quantification -- it's full of revenue figures and staffing stats, growth rates and percentage changes, fee splits and numbers of offices. It's very handy for benchmarking, and is full of figures that you can add to the statistics that most accounting firms are already tracking, like billable hours, realization rates, staff turnover and so on.
While we were compiling the report, however, I found myself wondering if, for all the value of these concrete statistics to the running of an accounting firm, we might be ignoring other, less tangible measures. So I thought I'd lay out some of these less well-known but nonetheless important key performance indicators.
Take, for instance, the Awkward Conversation Avoidance Rate. This measures the number of issues you and your partners are successfully not meeting head-on, covering everything from compensation to accountability to succession. Or there's its corollary, the Crossed-Fingers Co-Efficient, which is the severity of the situations where your solution is to hope that they get better with time (knock on wood). Related to these is your Percentage of Exit Blocked, which can tabulate the number of partners who must leave before an up-and-comer can hope to join the firm's leadership, or the number of years that a practitioner has to put off their retirement due to "market conditions."
Important-but-underutilized staff statistics include the Intergenerational Incomprehension Index, which counts the number of times anyone at your firm combines a generational title (Boomer, Gen X, Gen Y, etc.) with an expletive, as well as the Poaching Diameter, which combines turnover rate, the number of months since your last round of promotions, and the proximity of competing firms to tell you how quickly you will lose qualified staff. And then there's our favorite, the Clearing the Field Rate, which tracks how many young accountants leave your firm and public accounting at the same time.
When it comes to your current clients, are you measuring Groan Volume? This is the loudness of the groans heard around your office when a particular client calls; the louder and more distraught the groans, the more you should fire that client. (You can also substitute the Outside-of-Office-Hours Call Rate, or the Average Age of Undelivered Source Documents.) And when it comes to future clients, you might consider keeping track of the Prospect Gap, which is the difference between the number of prospects you need to contact to hit your growth goals, and the number of prospects in your pipeline, or the number of prospects that actually exist in your market or niche.
For technology, we recommend the Average Age of Opportunities Foregone, which is a chart of the time lost between hearing of a revolutionary idea and deciding you should adopt it, and then the time between deciding to adopt it and actually doing so. (Ideally, each should be lower than the other.) Following that is the Adoption Realization Rate, which combines the hours you spend planning the rollout of a new software solution or platform with the hours of staff training undergone, and then divides that by the number of partner carve-outs and the general level of staff enthusiasm to tell you by what percentage you should discount your expected ROI on the project.
These obviously just scratch the surface of the many different things you can measure at your firm -- the trick is to take a look around with as fresh a set of eyes as possible, and realize that you can put a number to just about anything. Now if you'll excuse me, I need to go tally the Average Age of Overused Cliches for this issue, and see how far we strayed from our Optimal Rate of Hyphenation.
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