In the years since I began practicing, our profession has changed radically. I do not want to sound like my parents and grandparents who lamented the passing of the nickel candy bar, 1 cent stamps, and walking to and from school ( up hill, both ways in the snow of Southern California), but are we progressing or regressing in terms of advancing the profession of public accounting and making it an attractive career? What are the underlying currents that influence or even drive change?
Certainly there are many factors that influence the strategic direction CPA Firm leaders will choose. Legal considerations, staffing concerns, regulation, marketing opportunities, lifestyle options, technological ‘advancement’, financial motivation, and competition just to name a few. Some we can influence. A few we can actually control. Most we can only respond to.
So how have we responded? In the only way we’ve been indoctrinated. By trying to improve efficiency. By demanding ‘more hours’ from our team members; by marginally increasing our hourly rates; by adding technology and hopefully cutting overhead costs. All things to make us more ‘efficient’ and thus improve our profitability. Ultimately we can only attain a finite level of efficiency.
By focusing solely on efficiency we are commoditizing (my word) our services. We’ve already done that with taxation services in large part. The key to improving profitability in a mature firm is to focus on effectiveness, not becoming even more efficient. Ron Baker in his book, The Firm of the Future has several excellent discussions on efficiency versus effectiveness.
To improve your profitability, I believe you have to differentiate your service so that you can charge more for it. You have likely controlled your expenses as much as possible so to improve your ‘bottom line’ the logical alternative is to increase the ‘top line’ – Revenue. Guess what! You’re not going to do that with time sheets. Not significantly anyway. Time sheets, are by their nature, tools of efficiency. You must become more effective, because you are likely already as efficient as you are going to become.
How well you manage an engagement; how effectively you’ve priced and bundled it – in advance; how effective your client relationships are. These are a few of the areas that can help you differentiate. We’ve all hit optimal ‘efficiency’. It’s time to focus on ‘effectiveness’.
Excellent observations! It seems that focusing on infinitely improving efficiency (a reduction of unneccessary cost approach) will drive your staff into an early grave whereas the focus on effectiveness is really more related to increasing revenue as a means to increased profits. There is only so much that can be done to minimize costs, even to the point of self-detriment, and not enough consideration is usually given to more creative ways to grow revenue.
Comment by Shane Eloe — October 27, 2008 @ 9:53 am
I found The Firm of The Future to be incredibly inspiring. When I discussed it with some managing partners, they quickly dismissed the need to make these kinds of changes. That was before Sept 08. Now, business development skills are a must, not just a nice idea.
Every avenue to cultivate and preserve relationships with prospects and clients is under heavy consideration.
The need was always there, the attention was not.
I would love to feature a blog written by an accountant (such as yours) on a new online community I’ll be launching soon, bringing lawyers, accountants and bankers together. If there is interest, please write to me at the designated email address, nfox@bizdevsuccess.com.
Comment by Nancy Fox — April 13, 2009 @ 4:20 pm