DON’T KID YOURSELF – It’s a New World Out
There!
There is a new world out there. The business environment today is not the same as your
father’s world. Clients are more sophisticated and knowledgeable about the service
options available to them. Firms that are lacking a clear mission and vision are finding it
hard, if not impossible to compete against a new group of aggressive and professional
competitors.
Accounting firms need to become more transparent. Partners and employees need to
truly understand the firm’s vision and value proposition. They need to see how their
daily actions move the firm toward its goals. Mission and vision can no longer be vague,
fluffy statements that mean nothing to your clients, employees and partners, and
prospects.
This new environment requires firms to actually implement their goals by looking at
specific objectives and measures. Performance and execution are the key operatives.
The old measures, by themselves, won’t do the job anymore. They are still valuable, but
new measures are needed today. Firms no longer compete in marketing alone with the
firm down the street. They now complete in how they manage the practice, treat their
employees, win employees’ hearts and minds and provide a true learning environment.
What would it be worth to you if you had a system which could measure your business
development and management efforts? In short, measure how well you are
implementing your firm’s strategy.
The Balanced Scorecard
There are several systems that can help do this, but there is one that I want to discuss
provides the accounting firm with a balanced approach. In fact, the system is called the
Balanced Scorecard. Don’t think that the scorecard approach to managing your practice
is about keeping score; it’s not! It’s about implementing your firm’s strategy. And it’s
probably most effective at the practice unit level.
August Aquila is an internationally known speaker, consultant and writer.
He is CEO of AQUILA Global Advisors. He is also the co-author of "Compensation as a
Strategic Asset" and "Client at the Core."
August can be reached at [email protected] or 1-952-930-1295. For
more information see www.aquilaadvisors.com
Here’s how it works. Management uses the balanced scorecard to align the firm’s
strategy around five key basic areas – financial, client, marketing, internal business
processes and employee growth/ learning.
Key objectives, critical to the success of the firm, are then developed in each area along
with measures, targets and action steps. Key objectives need to be limited because the
more you have, the less focused you become on achieving any one of them. The
scorecard also requires you to do more than just set a bunch of objectives. You need to
determine how they filter through the organization. A goal set at the top will require new
and different behavior throughout the firm. You need to analyze the cause and effect
that each goal has on your firm’s strategies and desired outcomes.
For example, if your firm can improve staff and partner marketing and selling skills and
you provide them with access to a client relationship management system, we could
assume an increase in professional productivity.
Further if we create processes that provide more on-time delivery, we could expect an
increase in client confidence in our abilities and a higher client satisfaction level. This in
turn would provide us with a broader revenue mix and improve operating efficiency. All
this would ultimately improve profits.
Financial Objectives and Measures
Accountants surely know that production numbers must be monitored, perhaps even to
a fault. Most firms today develop annual and monthly budgets. Firms track billable
hours, realization, and utilization – all the standard metrics. At partner meetings,
partners then spend a great deal of time explaining variances, mainly shortfalls from the
plan. Common reasons that are overheard are – “We will get the work done next
month.” “The economy is really hurting us.” In short, they really don’t know why the
firm did not hit its numbers for the month. That’s the problem with financial objectives,
they can only tell you what happened but not why it happened. They are thus called
lagging measures. Financial measures by themselves don’t help management make
good decisions.
Client Objectives and Measures
Client objectives deal with identifying the client and market segments in which your
firm competes. Client satisfaction and retention measures are also included here. Firms
currently measure client satisfaction, but that in itself is a lagging measure. When you
August Aquila is an internationally known speaker, consultant and writer.
He is CEO of AQUILA Global Advisors. He is also the co-author of "Compensation as a
Strategic Asset" and "Client at the Core."
August can be reached at [email protected] or 1-952-930-1295. For
more information see www.aquilaadvisors.com
complete the annual client satisfaction survey, it is usually too late to save the
endangered clients.
Firms that measure performance drivers throughout the year, have time to make
corrections. For example, an increase in the number of redoes in your work products or
a decrease in the number of referrals received from clients would be leading indicators
of client dissatisfaction.
Marketing Objectives
Firms that just measure the number of new clients acquired or the increase in volume
may be missing some critical information. Individual client profitability is perhaps one
of the most important marketing measures. Here is a short list of some of the other
important marketing objectives. . .
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Number of pending proposal
Ratio of proposals won/total proposals made
Number of new clients inside target market segments
Number of cross selling opportunities created
Business Process Objectives and Measures
While there are countless business processes in the firm, you should focus on those that
have an impact on how the firm delivers its value proposition and how the processes
generate profits for the owners. These usually fall under the following three categories:
Innovation processes or how you go about identifying the size of your target
market, the market’s preferences, the creation of new services. You can determine
the success of your innovation processes by measuring the percent of new sales
from new services or the number of new services created in the last year.
Operations processes deal with how the client is treated once they sign the
engagement letter and how the work is produced and delivered. Traditional
measures include realization, utilization, standard costs, etc. Scorecard measures
would ask you to look at turnaround time or the number of on-time deliveries.
Post sale processes cover what happens after the service is delivered to the client.
What is your invoicing and collection process, the firm’s follow up on client
satisfaction, cross selling initiatives and requests for referrals?
August Aquila is an internationally known speaker, consultant and writer.
He is CEO of AQUILA Global Advisors. He is also the co-author of "Compensation as a
Strategic Asset" and "Client at the Core."
August can be reached at [email protected] or 1-952-930-1295. For
more information see www.aquilaadvisors.com
Employee Growth and Learning Objectives and Measures
When all is said and done, it is your people (along with efficient and effective processes)
that will differentiate your accounting firm from your competitors. To make team
members productive the proper infrastructure needs to be built. Professionals may
need to be reskilled in order to service the new target markets. In today’s environment
professionals need to change from order takers to order getters. Client relationship
management systems will help professionals perform at a higher level since everyone in
the firm will have access to key client information that is perhaps now found only in a
partner’s rolodex. Finally, firms need to measure employee satisfaction, turnover and
overall productivity. .
KISS A LOT
Writing instructors tell their students to “keep it simple sir” (KISS). The same applies to
the metrics you select since you will have to capture and monitor them. If you can’t
monitor and track it, it won’t be a worthwhile metric. It is only by tracking the right
metrics that you will bring about change in your firm. Every practice is different and it’s
up to you to determine what needs measuring and how best to do it. Remember, if you
don’t measure it you won’t be able to change it. If you focus on the true drivers of your
practice, you will see improvement in the financial results.
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If you need help, call me at 952-930-1295 or email at [email protected].
August Aquila is an internationally known speaker, consultant and writer.
He is CEO of AQUILA Global Advisors. He is also the co-author of "Compensation as a
Strategic Asset" and "Client at the Core."
August can be reached at [email protected] or 1-952-930-1295. For
more information see www.aquilaadvisors.com