Market conditions are changing. There's a shortage of talent, regulation is increasing, and competitive forces are on the rise. How should firms position for the future when many have just experienced their most profitable year? What is the motivation to change?Advancements in technology and retiring Baby Boomers must also be considered. How do firms transform, and what are the steps that great leaders go through to ensure success? Paralysis often comes from having too many senior partners and not enough great leaders.
Firms of all sizes face these same issues. Organic growth or growth through mergers seem like answers to some. While it is true that firms cannot retain and attract quality people without growth, this is only part of the solution. Let's look at the steps leaders must follow in order to transform their firms and position them for significant growth.
CREATE A SENSE OF URGENCY
This is easier said than done, and typically requires the threat of a loss or the anticipation of a significant gain. Most people do not like to change for the sake of change. In today's market, labor costs are rapidly increasing, yet many continue to bill by the hour and utilize the same multiples as they did 10 or more years ago.
Driving people out of their comfort zones is more difficult than most realize. Many leaders skip this step because they detect urgency and want to move quickly. Most partners and managers are more methodical and take the approach, "If it's not broke, don't fix it."
One way to create a sense of urgency is to demonstrate how the firm's business model and margins have changed over the past three years and how they are projected to change in the future. Increases in labor, training and technology costs should be enough to get partners' attention. Continually remind partners and managers to maintain margins. Otherwise, they focus exclusively on client services and forget about the business side.
CREATE A TASK FORCE
A task force should think "future firm," rather than "current firm." Its mission is to answer the questions, "What will our firm look like in three years? In five years? What new services and skills do we need to remain competitive?" It is also a leadership development experience.
Don't be afraid to involve clients and outsiders during task force meetings. Ask them to describe their most significant dangers, opportunities and strengths. Their answers are your best source for future services. We spend one day each month in this process with five leaders and an outside facilitator at Boomer Consulting Inc. If this is too often for you, begin by holding quarterly meetings.
Creating a task force with this kind of focus may only require a single leader in some firms. For others, it will necessitate a group of future thinkers throughout the firm. Keep in mind that departmental changes may result from leadership at lower levels, but firm-wide changes will only happen with the support of the managing partner or chief executive.
CREATE A VISION
Let's return to the question, "What will our firm look like in three and five years?" The answer involves much more than a five-year budget. Instead, the answer must be a clear and concise picture of the future - one that is relatively easy to communicate and appeals to clients, partners and staff. It should state the direction a firm must move to accelerate its profitability.
The idea may be a bit cloudy at first, but it will become clearer over time. (Don't be alarmed if it takes your task force up to a year to finalize the wording.) Though some may want to include individual areas of focus, keep in mind that the most effective vision statements are simple and concise.
Next, get people talking. Everyone should know and understand the vision - and easily communicate it. In fact, it is every employee's responsibility to incorporate the vision into everyday work. Firms that share a vision reap the benefit of having a great culture.
COMMUNICATE THE VISION
Failure to share a vision or plan outside the task force or partner group is the biggest mistake we see in planning. This is why we recommend a laminated, one-page (front and back) plan that is clear and concise. It should include objectives, measurements of success, initiatives, due dates and those responsible. People don't read 20-page plans, and they don't throw away or lose a document that is laminated. The point is to capture attention and buy-in quickly.
Consistent, ongoing communication of the plan is important to the success and transformation of a firm. Many managers and partners think tactically and fail to see the big picture. You cannot over-communicate a clear and concise vision, because you will continue to hire new employees and gain new clients. In addition, regular communication serves as confirmation to those who have heard it before.
Many firms outline great strategic plans on flip charts, but fail to execute them because the ideas are not presented in an easy-to-understand document, and no one is held accountable. Firms should consider multiple employee task forces assigned to key initiatives. This leverages talent within the firm and develops leadership and management skills.
Responsibility must also be assigned along with authority. Partnerships are notorious for individual partners holding court after a decision has been made. This does not happen as often in firms that have adopted the corporate form of governance, and task forces are assigned both authority and responsibility. Taking no action on a task force recommendation is a waste of time and a sign of deficient leadership.
PLAN FOR SUCCESS
Because transformation is a long-term process, people need to experience success. Therefore, it is important to create initiatives that have a high probability of success, especially in early stages. Include initiatives that can be completed within a few weeks, and celebrate successes whenever possible while giving public recognition to those who do a great job.
Competition among task forces can also be healthy when firms are simultaneously accomplishing multiple initiatives. Compensation based on the success of a task force is appropriate, and corresponds to the Balanced Scorecard approach.
UPDATE THE PLAN ANNUALLY
As the vision becomes clear and initiatives are accomplished, spend time updating the plan annually, becoming more aggressive with new initiatives and restructuring task forces based upon member performance.
Hiring, promoting and developing people who can implement the vision are important. Those who do not support the vision should be terminated or retire as soon as possible. While they are often ignored or simply not included in the process, this is not unlike ignoring a disease. They generally are not going to go away or conform. Furthermore, they often waste a significant amount of time and emotional capital.
DEVELOP LEADERS AND SUCCESSORS
Change is part of a successful firm's culture. Leadership should consciously demonstrate how new approaches, behaviors and attitudes help improve performance. This requires communication and public recognition. Innovation and change should become core values of any progressive firm. The next generation of leaders must be developed with an appreciation of these and other core values. If not, they may undermine decades of hard work and allow the firm to become stagnant and decline.
Change invariably presents obstacles, surprises and rewards. Firms must define a relatively simple vision in order to ensure that it is clearly and consistently communicated. Also keep in mind that strategic byproducts are often of greater value than initial goals. Members must get a grasp on the process of change.
Transformation is not easy, but it does reward firms that have the leadership, vision and culture to carry it out.
Gary Boomer, CPA, is the president of Boomer Consulting, in Manhattan, Kan.
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