Prune, Then Grow!

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CPAs are often characterized by a propensity to cut expenses, butare they good at pruning? New growth comes from pruning, whereas deathcan result from cutting. Some firms are resorting to making cutswherever possible, while others are finding quality personnel andskillfully managing overhead.

At our Boomer Technology Circle meetings and otherconferences, I often hear managing partners, chief operating officersand firm administrators state, "I wish the partners would just get outof the office and meet with clients, rather than tell me how we can cutanother service unit's budget."

Reduce, cut, shrink and eliminate are all prominent wordsin the accounting profession's vocabulary. Pruning sounds like asimilar concept, but it has a different meaning. Merriam Webster'sdictionary defines it this way: "to cut off or to cut back parts of,for better shape or more fruitful growth."

Pruning is different from cutting. Partners are typically a "protected class" within almost all firms, but this cannot continue.

In many firms, revenues and even profits are up during thefirst four months. Nevertheless, I have observed about a5-to-10-percent reduction in staffs at larger firms, and most admitthat they should have done this last year or even earlier. They weregrowing at full speed, and it took too long to change directions andmake tough management decisions. This is not surprising in an industrywhere management is not valued as highly as personal production.

Some firms are failing to recognize some critical realities:

* Underperformance is different from a staff reduction.Many firms have done a poor job of documenting performance andconducting formal performance reviews. Therefore, they run the risk ofpotential litigation when they say that they eliminated thenon-performers.

* Skills of the future will differ from skills of thepast; however, attitude, motivation and intelligence will continue tobe important. IT skills and cost of production are important factsmoving forward in a competitive market. The tendency is to cutentry-level and lower-paid employees, rather than managers andpartners. Underperformance is not limited to a particular level. Theeconomic model of the future is much better when you prune and plan forgrowth, rather than just cut in order to maintain net income beforepartners' salaries. The ability to change and develop talent iscritical. Firms with this culture have a significant advantage overcompetitors that lack a training/learning culture and resist change.

* Team members and the firm are more important than ruggedindividualists in a shared-vision culture. The demands of today'sclients require a team, rather than a rugged individualist, approach.Teams require a diversity of unique abilities and the attitude that thewhole is greater than the parts.

Here are some characteristics of accounting firms that prune but see green sprouts from making the tough decisions:

* Leadership has an edge. The firm's leaders possess theability and willingness to make decisions, even when unpopular - and ina timely fashion.

* A strategic plan - with a strong vision and unchanging core values.

* A vision of organic growth with acquisitions that fitculturally and can be linked through standardized technology. Thisvision provides opportunities for quality people.

* Accountability - where everyone, including partners, is held accountable.

* A training/learning culture where knowledge- and wisdom-sharing are two-way streets.

* A sales strategy that includes movement toward larger clients that fit a defined profile and have expanding requirements.

The common message I hear from firms across the globe isthe prevalence of work and new revenue opportunities. More regulationappears certain, providing accounting and auditing opportunities. CPAsare the most trusted business advisors. Use this perception to youradvantage in today's uncertain markets.

Relationships are vital, because they provide confidence.Leadership provides direction, and creativity provides newcapabilities. In today's environment, clients and even accountants canget caught in paralysis because of feelings of confusion, isolation andpower loss. Entrepreneurs know how to take people out of paralysis modeand into action. Once they are in action, good things start to happen.This all transpires through a process of communication (talking aboutlosses or potential losses and bad things), clarifying what is reallyimportant (planning and focus), and developing or acquiring newcapabilities.

The prescription for helping clients avoid paralysis (it also works for accountants) is being in motion, interested and useful.

Most firms recognize the importance of talking to clients,but are your partners and managers doing it regularly and are youholding them accountable?

For many firms, new "green" is starting to appear.

Gary Boomer, CPA, is the president of Boomer Consulting, in Manhattan, Kansas.

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