Boomer’s Blueprint: A formula for transforming your firm

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Leadership + compliance + advisory = firm transformation.

This is a simple formula, yet one that is difficult for most firms to execute. It also shows that transformation can and should include compliance and advisory services. This is not an either/or proposition.

I have written previously about how change simply isn’t enough in today’s rapidly evolving accounting profession. To change means to continue doing the same things but introducing some degree of variation.

Technology is disrupting and commoditizing many traditional services and, at the same time, providing excellent opportunities to firms willing to transform their thinking (mindset) and services (skill sets). Even the recent tax reform is not long-term protection for those in tax. It will simply bring more automation at an even faster pace to the preparation process and force the profession to move to advisory services if they want to sustain their success and be future-ready.

The key is transformation.

Transformation means doing something utterly and radically different. But can you transform yourself and your firm by continuing to do what you have been doing and simply add advisory services? Based on my experience and the study of innovation, the answer is “No.” I base this on what I have seen and heard in leading firms over the past several years. When we ask firm leaders why they are not growing advisory services, they basically give three answers:

1. We don’t have time.

2. Our technical professionals do not feel comfortable consulting and prefer compliance work. This will require a transformational journey, not a one-time event.

3. We don’t know how to package and price advisory services. Our current business model needs to change. We still measure value by the hour.

To me, these answers should be a wake-up call. Firms, like individuals, have needs and wants. The biggest difference between wants and needs is that you don’t have to justify wants. The following four factors will impact your ability and motivation to transform:

1. Stronger leadership is required and must provide the courage, commitment, capability and confidence to transform the firm. This also requires partners who want to lead and share the firm vision. Firm leaders see the need for transformation far in advance of when they can prove it to those who are happy with the status quo. Please don’t forget that “change” isn’t enough in today’s rapidly changing world.

2. A skills gap often exists in many firms because they have mainly hired accountants in the past and done little to provide training in consulting, marketing, sales, project management and collaboration. The larger firms are hiring non-accountants with finance, project management, data analytics, process improvement and strategic planning skills. Higher-value advisory services require a collaborative team. You can speed up the transformation process by simply focusing on “who” rather than on “how.”

3. You must give up something from the past for a transformation to occur. Many firms have continued on their existing path and tried to work harder, resulting in burnout and performance issues, while future-ready firms have consciously made decisions to filter both clients and lower-end services. Individual tax preparation for clients who pay total fees of less than $1,000 annually (significantly less in many firms) is probably the best example. H&R Block is teaming with IBM Watson for these services. Is this a viable long-term strategy for growth and sustaining profitability in your firm?

4. Finally, will firms be able to honor their deferred compensation agreements to retired and retiring partners if they don’t transform? If this becomes an issue in firms, it will become more difficult to attract top talent and perhaps limit the firm’s investment in technology and automation.

Over the past several years, the continuum of value has evolved, and it is easier to explain why compliance-related services increase in value when you package and price them with performance and strategic advisory services. We now refer to this as “playing through the line.” On the compliance side, you are limited by capacity, while on the performance and strategic side you are limited by capability.

In the past, many firms have approached project management from a scarcity and control perspective, rather than from an abundance and talent development perspective.

Shifts in mindsets, skill sets and toolsets are required to play through the line. Also, innovation comes from hindsight, insight and foresight. Who is responsible for innovation in your firm? Do you have filters? Do you have a budget and resources?

Firms that remain successful and future-ready must focus on five critical areas to have a distinct advantage in the market.

1. Leadership is required at all levels and firms must change their mindset to automate and push work down. This provides both opportunities for growth as well as time to think, plan and grow (transformation). It is difficult, if not impossible, for tightly scheduled professionals to transform themselves and their firms.

2. Processes are critical from both an effective and value-add perspective. It is as important to stop doing low- or no-value processes as it is to start adding processes that add value and improve the experience for the client and staff.

Think automation, elimination and one-way workflow to improve effectiveness and the customer experience. Reduce cycle times if you want to increase margins. Consider a Lean Six Sigma project for key services like tax preparation, audit, billing and collection, and client on-boarding.

3. Growth is necessary for sustainability as well as the attraction of talent and quality clients. Transformation requires a game-changer mindset, rather than a conventional success mindset. The game-changer mindset attracts talent and clients. Don’t get caught in the conventional success trap.

4. Talent that believes in the vision of the firm and who are life-long learners are the fuel for your future. When you think of talent, think diversity and inclusion. It will make your firm more innovative and attractive to talent and clients.

5. Technology is the accelerator and will continue to disrupt at an increasing pace. Base your strategy on the hard trends, like the exponential growth of processing power, bandwidth and storage. Make sure to integrate your technology plan with your vision and strategic plan. If you don’t have current plans, reach out to experienced consultants and visionaries. It will save you time, increase return, and reduce risk.

As you can see, the formula of “leadership + compliance + advisory = transformation” is simple, but difficult to implement if you don’t have the right vision and supporting culture to execute. It is easy for any organization, and especially accounting firms, to get caught in outdated mindsets and conventional success.

Think of your firm as a technology company with a market for business and financial solutions. Be a transformative leader and leverage your existing clients and staff by expanding your capacity and capability through technology and talent. Assess your resources and opportunities. Think outside your firm when it comes to available resources and collaborative opportunities. It is a great day to be a CPA.

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