Imagine for a moment that your accounting firm is on board a luxury passenger bus headed to an important retreat. A fierce thunderstorm has popped up, and circular winds are starting to form a powerful tornado nearby. You are five miles from the nearest exit, and the twister is gaining on you at frightening speed. The full force hasn't hit yet, but the winds are picking up and you can see debris and tree limbs beginning to fly by. As the driver of the bus, you are responsible for navigating your team through the storm. You can't outrun it. You can't avoid it.
What do you do next?
That's the challenge faced today by accounting firms of all types and sizes. A supercell of technology-fueled disruption is headed our way, and we must figure out how to plot safe passage through what promises to be rapid and radical transformation.
This gathering storm has inspired me over the past three years to seek advice from some of the top leaders in our profession and, in the process, develop a routine of considering key questions regarding the future I'm charged with leading.
For at least an hour a week, I stop to consider what I have found to be the most important questions regarding our firm's future. This article explores those questions and explains why they are so important to consider as you plot your firm's course forward.
1. Are we really moving fast enough?
For years, the prevailing thinking has called for leaders and teams not to move too fast. Don't change too many things at once. Go slow and find your way. Don't rush into mistakes.
That approach made sense for a long time, but that was before exponential advances in technology transformed all aspects of our lives. How much different is your day-to-day today than it was 20 years ago, or 10 years ago, or even five years ago? Rapid change has become a constant in all aspects of life, and the pace of change only continues to increase.
I like the question "Are we really moving fast enough?" because it forces me to look at change from a different perspective. Truth is, we incur more risk today from moving too slow than we do from changing too fast. In fact, I believe we will find that in some areas of our businesses, we can't move fast enough. And that's when disruption will catch up to us.
2. What would have to be true for us to change our direction, mind, or assumptions?
A mentor and friend, who also happens to be the CEO of a major firm, shared this question with me, and it hit me like a ton of bricks. I now use it to think strategically about our direction and decisions. The best thing about this question is that not only is it a great follow-up to the first question, but it also helps me identify and understand the assumptions that we have made that are driving our decisions. Even better, it has forced me to test those assumptions — a process that has made me more open-minded.
Consider the following examples from my firm. Once, when bidding for work, we assumed that the client would value a response to its request for proposal that focused on some of the complex technical matters to be addressed in the engagement. We lost the bid, but we came to realize that the client's leaders actually valued a step-by-step process that demonstrated a pathway they could also envision. We changed our approach to emphasize simple steps with clarity, and we soon began to win more business.
Another time, we assumed that if we trained our performance advisers to give better feedback, we could develop leaders faster. When we tested this assumption, we found it was more impactful to train every team member on how to receive feedback, which transformed our leadership development and also made our performance advisers better at giving feedback.
3. What legacy KPIs are we measuring that slow us down?
Are the key performance indicators (KPIs) we are using still relevant today? Do they conflict with the new behaviors that we need to retool or transform our services? Do they focus team members on the right things or distract from where we need to go?
My experience is that most CPA firm KPIs were developed during long, sustained periods of success accompanied by incremental change. How can these historical KPIs move us forward? Remember, what you measure is what you'll get. For example, does measuring realization per hour or turnaround time for client deliverables provide the most value for us today? Which of the two do we measure the most with data and dashboards? It's time we do the hard work to develop new measurements and dashboards that help drive rapid retooling and change for our firms.
4. Does our pricing reflect the impact or worth of our services and advice?
The AICPA's 2018 Private Companies Practice Section Management of an Accounting Practice survey, among other reports, has found that while accounting firm profit margins are solid, they are trending downward. If they slip too far, firms won't have the resources needed to retain our best talent or make the significant investments into technology, partnerships, and resources to be successful in the future.
Regardless of which side you take in the debate over whether it's appropriate for time to be the profession's primary revenue driver, pricing has to be continuously assessed for the appropriate return on investments, risks, costs, and rewards to be a high-performing organization.
5. Will our present business model survive exponential change by new competitors?
We are all familiar with companies that have used technology to power new business models that disrupted entire industries. Think of how Netflix impacted video rental companies, Uber upset cab operators, and Airbnb rattled the lodging industry. Our profession is not immune to this type of disruption. We are already beginning to see new competitors from outside accounting that are bringing creative and innovative ways to deliver services that we currently provide. We do not want to be the Blockbuster of accounting.
These are the five questions that we use to help us continually monitor and change our direction and strategies. I hope that you also find some value in them as you reflect on your business today. I also encourage you to comment or provide our followers with other guiding and probing questions that we can use to provide a better future for our firms and team members. Together, we can meet the challenges of exponential change and seize the abundant opportunities on our horizon. Relevance is hard work and it takes hard questions. What are yours?
— Joey Havens, CPA, CGMA, is the executive partner at HORNE LLP, where he leads the 500-employee firm's strategic visioning for culture, growth, and client experience. Learn more at hornellp.com. To comment on this article or to suggest an idea for another article, contact Jeff Drew, senior editor, at Jeff.Drew@aicpa-cima.com.