Your firm's culture produces the results you are getting! Not happy with your results? Don't blame it all on the economy. Perhaps your firm doesn't have the right culture to produce the results that you envision.
In their new book Change the Culture - Change the Game, Roger Connors and Tom Smith address the connection between culture and results. This is very applicable to CPA firms and their clients in today's rapidly changing environment driven by the microchip. Your firm must be on the right side of technology and ensure that your culture aligns with the desired results.
You will notice that I use the term results, rather than goals. Goals give the connotation that a firm is going to try, while results are more confident and action-oriented.
The economy and the Internet have exposed the fact that firms are playing a different game today than they were in the past. Change management and accountability are two of the primary challenges that firm leaders face, along with growing revenue. Accountability is generally misconstrued, and especially by accountants, to indicate punishment for under-performance, rather than enabling talent to excel and utilize their unique abilities in a team environment.
Simply changing attitudes and beliefs can foster new behaviors that will produce improved results. Connors and Smith offer a simple model, which explains how most firms operate. According to Dan Sullivan, founder of The Strategic Coach, simplicity is the key to breaking through the level of complexity in order to reach a level of higher performance.
The formula is based on experiences, beliefs, actions and results: Experiences drive beliefs, beliefs drive actions and actions drive results. Therefore, it is very important for everyone in a firm to understand the vision and desired results, if the firm expects its talent to perform at a high level. From my consulting experience, often the majority of staff, managers and partners are out of alignment with the leader's vision. In fact, it is quite common for many partners and managers to not even understand the economic engine (or model) of the firm. Too often they only see a portion of the entire operation.
One of the tendencies we have seen, especially in the past two years, is for firm leadership and management to focus on actions through increased accountability in hopes of improving results. This is referred to as focusing above the line. First of all, "hope" is not a strategy, and focusing on actions, rather than beliefs, tends to provide short-term or transitional change, rather than long-term change and sustainable-transformational results.
The key for the future will be the firm's ability to rapidly develop talent and provide them with relevant experiences that align their belief systems with actions that produce high-level results.
One of the flawed beliefs that many CPAs are operating under is that "time is money" and effort produces value. The accounting profession has been in a results economy for some time, yet many accountants continue to operate under the "hours times dollars" model. For long-term results, firms must change this belief system in order to change the actions that produce the desired results. This belief can only be
changed through educational experiences.
FOCUS ON DEVELOPING TALENT
Firm leaders continue to say that they are in the talent business and that talent is their No. 1 asset. However, their focus is generally on retention and attraction, rather than on development of talent.
The "Best Places to Work" awards have become so prevalent recently that they are becoming less meaningful, and in some cases are nothing more than ploys to gain advertising dollars or attendance at conferences. An award for the development of talent is far more relevant, important and transformational. Think about it: Employers who have a reputation for developing talent don't have to worry about attraction and retention. They are able to attract and retain the best and brightest. Their employees remain employable throughout their careers.
Some firms are starting to wake up to the fact that the abundance of people will be short-lived and many of the people currently on the market do not have the skills required to meet client demands. Other employees are becoming obsolete due to the fact that they have not maintained their skills, especially in technology and management. I did not say they don't have the capability, but rather the focus has not been on lifelong learning and talent development. Firms should become training and learning cultures where everyone is a teacher and a learner. The training/learning culture promotes excellence, rather than mediocrity.
A CULTURE OF ACCOUNTABILITY
Let's go back to the importance of accountability and how it is the major factor in determining results and is vital to your culture. Your firm's culture produces your results. The most effective culture is a culture of accountability. The change process breaks down quickly if there is not accountability. With accountability, people will embrace their roles in the facilitation of change and demonstrate ownership of their responsibilities. The attitude of "It's not my job" will be replaced with "What can I do to make the firm more successful?" It is the firm leadership's responsibility to shift the culture based upon the defined results. The chief executive or managing partner's biggest challenge is managing and holding partners accountable.
Clearly articulating the expected results in a clear, concise and consistent manner is extremely important. When it comes to metrics, accountants tend to over-complicate the message by providing too much information. A few clearly stated results will improve thinking, actions and results.
Here are some of the more important results firm leadership should communicate to the entire firm:
Net revenue growth over the next three years. (This can be fluid, but should be defined.)
Revenue per full-time equivalent (defined as 2,080 total hours).
Organic growth.
Growth from mergers.
Individual learning plans with a clear link to compensation.
Individual marketing plans with a clear link to compensation.
This requires thinking, planning, communications and considerable management time. The Balanced Scorecard approach to compensation is a relevant way to clearly define expectations in advance. Top-performing firms and partners value management, while non-accountable people do not. I have sat through too many partner meetings and strategic planning sessions where there was confusion about the results. As the facilitator, it is often a challenge to get firms to document results in writing. This is why a one-page strategic plan is the foundation for a performance-based system.
CULTURE DETERMINES RESULTS
It is not unusual to get different versions of the truth based upon which partner you talk with. I believe that this happens in many firms due to the attempted avoidance of accountability. On the other hand, the above approach clearly defines expectations in advance and values planning and management. It promotes excellence, rather than mediocrity.
The good news is that many younger partners are demanding accountability and putting pressure on those partners who are not accountable. Culture determines results and accountability impacts both the culture and the results. It balances production, client development and personal development. With the above information, performance can be evaluated on an ongoing basis and separated from the annual compensation meeting. Don't misunderstand - compensation must be tied to performance. The annual compensation meeting should not be part of the performance review if you want honest communications.
The leader's primary objectives should be to achieve commitment, rather than compliance; investment, rather than involvement; and performance, rather than progress. Creating the right firm culture is not an option; it is a necessity if you wish to profitably compete. Without profits, firms tend to underinvest and depreciate their culture, rather than change their culture. Frankly, this is one of the primary reasons many firms are looking at upward mergers due to the fact that they have not invested in their culture and their current culture is no longer capable of producing the results they desire. Don't be afraid to seek outside assistance. It is difficult at best (if not impossible) to change a culture if you are part of it.
The first person that often needs to change in a culture is you!
Gary Boomer, CPA, is the president of Boomer Consulting, in Manhattan, Kan.
