Innovative Practice Management

The keystone of practice management for the accounting profession and most law firms has long been the billable hour. We rely on hours accumulated on time sheets in six minute increments to drive most every aspect of our practices » » » more

Several years ago we discontinued using time sheets as a basis for doing our billing, and began pricing our services based on our conviction that the amount of time committed had absolutely no relationship to the value of the service being delivered. » » » more

I never dreamt of pursuing a career in public accounting. I chose the major because the classes actually challenged me and I thought it would provide the most initial job stability out of college while in search of my “dream job.”

Like many accounting graduates, my first “real” job out of college was as a staff auditor at a Big Four firm. Everything looked good: my paycheck, my resume, my wardrobe. It didn’t feel very good though, and I don’t think there could ever be enough training week “hospitalities” or late night firm-sponsored meals hunched over my laptop in a crowded audit room to ever make it feel good.

When you’re surrounded 12 hours a day by “like-minded,” “career-driven” people all rationalizing that a 60 hour work week makes perfect sense; it becomes hard to think for yourself, or see that there is more out there. As tempting as it was to have $800,000 in annual compensation dangled in front of me as my future earnings potential as a partner in a Big 4 firm, having the message delivered by a 50 year old, overweight man going through a divorce was kind of a deal breaker.

I could see the attempt at creating and marketing “work-life” balance programs dreamt up by HR departments no where to be found after 4:59pm, but there remains so much stigma attached to participating in these programs that they remain little more than propaganda for recruiting purposes.

I don’t believe the purpose of this blog is to criticize the Big Four, but to promote positive change and idea sharing for the entire profession. So rather than encourage additional Big Four alumni to pitch in their two cents on why they left and why they’re glad they left (there’s already enough of those websites out there), I welcome stories of people who have chosen to stay and how they make it work for them, or at least ideas that they think could work in larger firms to retain the talented professionals that these firms hire in the first place.

If the large, public accounting firms took all the time and energy they spend convincing their employees that their firm’s status quo is the greatest bureaucratic creation of all time and threatening that by leaving before being promoted to manager, you were bound to end up in a cardboard box down by the river, or worse, in a cubicle for the rest of your life, and devoted that energy to conducting an open dialogue with their staff on ways to make the culture better, I don’t think we would have quite the “talent shortage”. In some instances I believe people choose to stay not because they are happy, but because they are afraid to leave and then perpetuate the negative culture. In other instances, I fear this “talent shortage” is being worsened by “talent wastage” via the exodus from public accounting to industry where brilliant minds are performing repetitive accounting clerk tasks in exchange for some personal and family time. For the most part, I liked my coworkers, liked my clients, and liked the work in the Big Four … I just didn’t like being labeled lazy or stupid for wanting to enjoy all that life has to offer, so I took my chances with the cardboard box.

I’ve been with my new firm for 5 months now, and have reached the point where I can’t imagine working anywhere else. I can’t imagine finding a place with more flexibility, respect for individuality, and personal freedom combined with the daily tasks and challenges that keep my mind engaged. Public accounting could quite possibly be my “dream job.” Now how do we make it this way for everyone?

Rick Telberg in his article titled Four Steps to Getting the Fees you Deserve gave four tips I believe were directed to certified financial planners (CFP’s), but I believe apply equally to all engagements of service providers.

1. Don’t procrastinate – (when discussing fees) Not only for CFP’s but for all of us. Always discuss the fee up front. Establish the value and scope of the service up front. No one likes surprises. Especially clients.
2. Present the fee structure clearly
3. Put your fees in context – “This might be a good time to explain what you are delivering for the fee”. I couldn’t agree more. By defining the scope you’ll avoid misunderstandings and establish each party’s responsibilities.
4. Put it in writing – “Make it clear you’re not hiding anything”. We use a fixed price agreement which defines the scope, performance guarantee, responsibilities, and the fee. It is an addendum to the engagement letter for specific services.

While I am not aware of Rick’s position on ‘Pricing’ (establishing an agreement for the value for services in advance) versus ‘Billing’ (sending an invoice as a surprise after the services are performed) with regard to other traditional accounting services, e.g. tax and assurance, his principles for CFP hold true nonetheless.In closing he hits the nail on the head: “In short, don’t be afraid to talk about fees. Use it as an opportunity to build trust. If you’re open, honest, specific and unapologetic, your clients will trust you, and that trust is the support system of a productive and long-term relationship.”Shouldn’t this apply to all services, and not just those of the CFP’s?

It’s the little things that make “work” an enjoyable place to be. Since the average American spends more time at work than at home, I think it should! So many companies “budget-cut” the small things and perks that many employees enjoy. Is it really worth the happiness of the staff to save a little? Some little things I appreciate having at work:

• coffee with “flavored creamer”
• as many “post-its” as I need, or other office supplies
• snacks
• flexibility in coming and going to work
• wearing what I want to wear
• no time sheets/ punching in, punching out
• good health benefits

What makes it worth it for you to spend most of your life at work? What “little” things do you appreciate?

We have two staff rooms in our offices in Reno. One on the accounting and assurance side of our house, and the other on the ‘Dark Side’. The refrigerators in each are bulletin boards for pictures, insults, jokes and matters of other significance. Typically you hope not to find comments, pictures or references to yourself or something you’ve done.This week, a Senior Assurance Manager posted an article that appeared in the December issue of the Journal of Accountancy Tax Corner titled How to Ease the Burden of Busy Season .The focus of the article is on what some firms have done to make the busy tax season more ‘palatable’, e.g. paying for dinner on Mondays, Tuesdays, Thursdays and Fridays. (Apparently Wednesdays are required family nights.) While lunch isn’t paid for, they do have a delivery service so you can eat at your desk. And my personal favorite ‘vending machine snacks reduced to twenty-five cents’ ! Are you kidding me?!!These are not the characteristics of a career. They are the characteristics of a job. Who among us is looking for a job? Until we make professional accounting an attractive career instead of the job it is in most firms today, we will continue to experience the exodus of professional knowledge workers to industry. Retention will continue to be only a concept and not a reality.The comments on this article posted on the refrigerator by my associates would keep Jay Leno in material throughout the writer’s strike. I’m glad I didn’t see my name up there!

This week I had the opportunity to interview a five year senior from a national firm, who is interested in altering her career path and coming to work for us. During the course of the interviews (we always do at least three) the normal questions arose regarding compensation, benefits, and continuing education, and what types of clients she would be assigned.

We typically have moved away from ‘assigning’ staff to client projects. Alternatively, once our pricing committee accepts a client, the engagement partner will select the manager or supervisor he would like – manager / supervisory senior / senior. After defining the engagement to them, he will then invite them to be a part of the engagement team. They can decline without prejudice. They in turn will invite other associates to be a member of the engagement team. Why would we do this?

Typically, we all are much more likely to take ownership of projects we have personally committed to, which equates to better client service. We are more stimulated by projects that interest us, and hopefully, therefore, more satisfied professionally. Ultimately, we have a more effective engagement team and a happier client. Equally as significant, we have more highly satisfied and motivated associates, who have been given the responsibility of maintaining their own work / life balance, and not micromanaged by a ‘scheduling coordinator’ who can’t possibly know what everyone’s needs, prejudices and demands are, at any given time.

Our belief is that professional knowledge workers are conscientious, committed and motivated, just as we were when we were ‘baby accountants’. We wouldn’t have abused our freedom of choice, and neither will the young professionals of today.

When I was a child (longer ago than I’d readily admit) my parents buying choices were significantly impacted by retailers who gave trading stamps with each purchase. For a new retailer, S & H Green stamps guaranteed an automatic approval from my mother, faster than the Good Housekeeping seal of approval, and almost as fast as my four brothers, sisters and I could disappear when we heard the buzzer on the clothes dryer go off and new someone would be conscripted to fold under wear.

For you youngsters, who’ve never experienced the thrill of licking trading stamps until you were nauseous, the customer received a predetermined number of trading stamps based on the amount spent. These stamps, (similar to postage stamps) were then carefully and diligently pasted into books of roughly 30 pages. Once enough books were accumulated they could be traded for an almost endless array of merchandise. (When my grandmother died several years ago, she still had the brushed aluminum salt and pepper shakers with the matching grease can, sitting on her stove, that I traded for when I was 14.) Individually, the stamps had virtually no value. Collectively, they had impact. I mention this because this dynamic happens in multiple ways in every office every day. The accumulation of many small seemingly insignificant things that together become significant.

Recently, one of my associates entered my office, and closed the door. (Closing the door typically seems to indicate something ominous or of great import is afoot.) In this case, she advised she would not accept another engagement with a certain peer. (We do not assign staff – we invite them to join an engagement team. That is discussed in my post titled ‘Choices’.) When I asked her why, she summarized several encounters that led her to believe there was an inherent lack of respect shown over the previous six months, and then a ‘straw that broke the camel’s back’. I asked her how she responded. Her responses had apparently been acquiescent, and therein lays the problem, a total lack of communication. Not uncommon for young associates.

While each unpleasant encounter wasn’t in and of itself significant enough to cause a bigger problem, over time, the accumulation of these Brown Stamps became a problem that could have easily been avoided. The lesson I hope she took away, was when seemingly minor irritations arise in either your personal or professional life, deal with them before they accumulate into something greater.

In the December 17, 2007 issue of Accounting Today, Gary Boomer asked three questions in his article titled Pricing and Partner Compensation. (1)Does your firm have a documented strategic plan; (2) Does our partner compensation system integrate with the strategic plan, and; (3) Am I still pricing by the hour?

Ignoring the first two issues, Gary nails the significance of pricing in the service professions when he clearly states, “The hours x dollars (or cost-plus ) formula does not work in today’s results-based economy.” In my opinion this is true in establishing firm policies for both client satisfaction and even more importantly in associate / staff satisfaction and retention.

Further in the article he refers to author Ron Baker, one of my mentors and unquestionably the leading voice in burying the billable hour. He goes on to outline what he considers important considerations in partner compensation. Notably all are characterized by effectiveness, not efficiency. Damn! You mean the things easiest to measure are not the most important?!

I’ll bet you can name ten!