Marshall Goldsmith famously wrote, "What got you here won't get you there."
In public accounting, that statement defines the moment we're in.
For over a century, firms have built their success by exchanging time for money. Along the way, they developed a consistent scorecard to measure performance: leverage, utilization, margin, billing rate, and realization, collectively known as LUMBR. These indicators brought structure, discipline, and a common language to how firms operated and improved.
But the same metrics that built the profession are no longer sufficient to move it forward.
They were designed for an era defined by linear workflows, predictable labor models, hourly billing, and a steady pipeline of talent.
Today's environment is fundamentally different. Automation is compressing compliance work. Talent is scarce and more selective. Clients demand insight, not just deliverables. Private equity is reshaping firm economics. And artificial intelligence is accelerating efficiency and expectations.
In this environment, continuing to manage by LUMBR does more than fall short, it creates risk. Under the old model, firms become increasingly efficient at activities that matter less.
As Peter Drucker noted, "If you can't measure it, you can't manage it." The challenge today is not a lack of measurement but ensuring firms measure and manage the right things.
From inputs to outcomes
This shift requires a new scorecard and one that reflects how firms create value today. Public accounting is shifting from an input-based model (hours) to an output-based focus (value). From selling time … to delivering outcomes.
Firms must begin measuring, managing and improving what truly drives performance in this environment: value creation, automation, leverage, organizational strength, and client relationships.
1. Value creation. The most important question a firm can ask is simple: "Are we creating meaningful value for our clients?"
New metrics include:
- Advisory as a percentage of total revenue;
- Value captured (revenue) relative to value delivered;
- Value per FTE; and,
- Value per engagement.
Firms that lead in these measures are no longer viewed as vendors. They are positioned as essential and valued advisors (not just trusted).
2. Automation. Efficiency is no longer primarily driven by people and the time it takes them to complete an audit or return; it is driven by systems.
While human expertise and involvement remain critical, the modern firm must understand how effectively it leverages technology to scale its work.
Firms should measure:
- Automation rates;
- AI adoption by service area/line;
- Manual hours per engagement; and,
- Hours saved per engagement.
Automation is not simply about reducing cost. It is about expanding capacity and elevating the level of value delivered.
Leverage
Traditional leverage was built on a pyramid: partners at the top, staff at the bottom.
Today, leverage is increasingly defined by how well a firm scales its expertise through systems and processes, as much as people. The shape is changing.
Key indicators include:
- Revenue growth relative to headcount growth;
- Revenue and profit per FTE;
- Partner involvement in delivery; and,
- Clients per manager.
The question is no longer how many people support each partner. It is how effectively the firm scales its expertise.
Organizational strength
Historically, firm performance was measured without directly assessing the health of the organization producing the work. That is no longer sustainable.
Organizational strength is now a leading indicator of both performance and long-term viability.
Measures include:
- Regrettable turnover;
- Successor development;
- Burnout risk index; and,
- Manager retention
Firms with strong organizational health attract better talent, deliver stronger outcomes, and sustain performance over time.
Client relationships
As compliance becomes increasingly automated, relationships become a primary differentiator. Firms that build strong, valued relationships are not easily replaced.
A few clear markers:
- Client retention;
- Revenue per client;
- Meeting frequency; and,
- Cross-sell and advisory penetration.
The future belongs to firms that deepen relationships, not just complete engagements.
Intentions
No two firms are the same. And no framework should assume they are. Each firm must define its own strategic intentions and measure progress accordingly with firm-specific metrics.
Examples include:
- Revenue from ideal clients;
- Revenue from new services;
- Time to value (for the client); and,
- Revenue predictability.
These intention-based indicators ensure that measurement aligns with long term strategy, not just short-term performance.
A new scorecard for a new era
These indicators are not just a new way to measure performance; they are new ways to shape behavior.
LUMBR optimized firms for efficiency and production. Today's environment demands optimization for value, scalability and sustainability.
Some elements of LUMBR will remain relevant. But relying on it alone anchors firms to measurements that no longer reflect how value is created (or earned).
The firms that will lead the next era of public accounting will not be those that perfect the old model.
They will be the ones willing to measure, and manage, what actually matters.
