Seems like a simple answer yet we truly have great people who have a passion for what they do. Employees who enjoy coming to work each day, are respected and know they are an integral part of the firm enable us to provide a work environment that sets us apart.

The Gen Xers I know are technologically savvy, intelligent, committed, professional, and innovative.  They are the young partners in the successful firms I am familiar with.  As an entrenched Codger, I’d say they rock. (Codger talk for they got it goin on.)

Last week I had the distinct pleasure of attending a conference sponsored by one of the top accounting firm associations in the world.  The International Group of Accounting Firms (IGAF).  Everyone I met – Codgers, Gen Xers, Millenials – was exceptional, but what absolutely blew me away was the insightfulness of the ‘young’ partners.  The 35 to 50 year old leaders.  The Gen Xer’s.

The estimate is that up to 75% of the partners in accounting firms will retire in the next 10 to 15 years.  Succession is a big concern in our profession.  More important to me is whether or not we have future leaders who will perpetuate the ineffective model we have now – a business model that is over 100 years old and substantially ineffective in many ways – or will someone pick up the torch and challenge the ‘common belief’ that is practice management?  Will the Gen Xers  pick up where we Codgers leave off and employ their ability, motivation, intelligence and most importantly insight and innovation to address what we haven’t?  Based on the group I met at IGAF, there is no doubt in my mind.

I hope they’ll let this old Codger hang out and provide a thought or two.  We’ll have a new progressive business model incorporating service based pricing; a flexible working environment geared to the needs of the professional knowledge worker and integrated with those of the Firm; while re-establishing the accounting profession as the guardian, mentor and champion of world business.

Most of my former coworkers whispered to each other about quitting from time to time, but someone always piped up with their own assumptions, or tales they had heard from their friend’s cousin’s ex-boyfriend or some other likekind form of twisted communication. I address just one common myth (of many) here:

I heard that working at a small firm would stunt your professional growth, as smaller revenue clients do not face complex accounting issues. HA! In my experience I have seen there is not much a large revenue client can do that a small revenue one can’t, including going public. They mimic their bigger brothers in both use of derivatives, usual debt/equity hybrids, and VIE’s as well as bring you back to old-school accounting practices which us newer accountants currently coming out of college were taught but told we would “probably never use” , such as valuing perpetual inventory and related LIFO challenges.

There are many other myths such as hours, compensation, limited chance for meaningful promotions, etc. which plague the minds of overworked accountants from the staff to manager level when they think of switching to small firms. Keep in mind during your search for a new position that “Big 4” or even the slightly smaller international accounting firms don’t hold all the challenging work in the accounting field. They (and their overworked staff) just like to think they do, which is why they perpetuate such myths.

The purpose of using checklists is to ‘standardize’. By standardizing our engagements we believe we can reduce risk and simultaneously improve efficiency. Checklists are tools for ‘control’ (micromanagement).

Six years ago during the exit interview for our peer review, the reviewer criticized us for not using ‘canned programs’ in favor of the custom programs we wrote for each client. He agreed our programs were better than canned programs but if we used PPC or Cch or some other canned programs we would by default be considered in compliance with all the professional standards. (I now realize he was just lazy). We immediately converted to canned programs.

In the mid 1970′s we had very few checklists. I recall a reporting checklist, an internal control evaluation guide (ICEG), and a post issuance review checklist (PIRCL). There were probably a couple more. We used them after the fact as a double check. We understood the audit process and the objectives very thoroughly. Today, even the simplest assurance engagement requires no less than a dozen check lists, each with up to 30 pages of single spaced, ubiquitous, multi-part questions, the vast majority of which are answered ‘n/a’ for any specific engagement. And they’ve replaced the necessity to analyze and understand. Correspondingly, I believe audit skills have degenerated as well.

We are evaluating the process necessary to eliminate canned programs and checklists – at least until the engagement is complete, and then using them as a ‘double check’ only. ( I’ll let you know how that goes. I can already hear the crying, moaning and gnashing of teeth by the audit teams at the prospect of losing their security blankets.)

It’s not just the audit process. Look around your firm, at the checklists you use. I’ll bet you lunch, that in most cases your knowledge workers would be more effective after a short period of time if they didn’t rely on them, because they would have to understand what they were doing and why, rather than just being able to check off steps.

You hire and pay for intelligent, motivated, conscientious, creative minds and then smother all those characteristics with a business model based on control and doom your professional knowledge workers to be only as good as the checklist they fill out. Does that make sense?

First, his question presumes time sheets are an accurate indication of individual productivity. I don’t agree with that assumption, and I’ve addressed my feelings about that in a previous post. Second, his question presupposes productivity is a critical factor in performance evaluation.

My response was to ask him if during his tenure as a partner he could rank the associates working for him. He, being somewhat offended, responded that of course he could. When asked if he looked at traditional productivity reports such as charge hour summaries or budget to actual analyses to do this, he responded that he didn’t have to. Checkmate! The most common measurements of productivity in our profession aren’t needed to know the relative effectiveness of your associates or peers. So is measuring individual productivity, at best, over-rated or at worst a waste of time?

Measuring productivity is a management tool which may or may not be relevant to your firm depending on your management style and your client base. For our firm we are more concerned with ‘effectiveness’ than with productivity. We don’t do ‘piecework’ nor are we a tax or accounting mill ginning out high volumes where efficiency may be more important than overall client service. Productivity is a measure of efficiency, and while efficiency is relevant, it is only one very small aspect of overall individual performance. As accountants we default to it because it is easily measureable – and you know how we like to measure. We have found that the attributes that are the most easily measured are also the least significant in achieving the strategic priorities we have set for our firm.

We agree with the concept of the importance of effectiveness over efficiency advanced in Ron Baker’s book, The Firm of the Future. The effectiveness of our associates is a function of how well they address the strategic priorities and mission of our firm, and not necessarily how fast they do so. The personal characteristics necessary to be effective include such traits as commitment, loyalty, selflessness, common sense, concern for client, concern for associates, professionalism, and more. All of which are, for the most part, subjective in nature and correspondingly not easily measurable. More importantly though pursuing effectiveness is frequently precluded by the never ending quest in our profession for efficiency / productivity.

Productivity is about efficiency and speed. Effectiveness is about quality – quality service, quality relationships, and quality environment. Certainly measuring productivity has some value, and it’s not always mutually exculsive of effectiveness, but in terms of evaluating performance because it is easily measured it receives far more import than is justified. In my opinion effectiveness receives far less consideration than it should. Yes, it’s more subjective and harder to quantify, but who said management of a professional accounting firm was easy?

The problem with performance evaluations is that they have tried to become too many things to too many people. On the plus side – they provide necessary feedback, career guidance, and evidence of “caring,” i.e., coaching and mentoring. On the minus side – they provide documentation to support subsequent dismissal, evidence of necessary counseling for poor work performance, and support for unbiased promotion and pay decisions. No single document could possibly do that many things!

Coens and Jenkins’ book “Abolishing Performance Appraisals” was an eye-opener. And the recent suggestion for “catalytic coaching” by Paul Rauseo of George S. May International Co. provided further support. The problem with performance evaluations as they currently exist is that they create an “us – the evaluator” versus “them – the evaluatee” which is a lose-lose proposition. We need a team approach in which both parties work together towards a common goal – improving the professional’s skills and knowledge and helping the professional accomplish his/her career goals.

I now agree with Mark and am working to replace our performance evaluations with something better – something that works.

It’s interesting they refer to “Team Members” in the title. I’ve been a member of many teams – high school and college atheletics, military, and most notably in my capacity of managing partner – and the most important underlying principle in every team I’ve been a member of has been based on concern for the welfare and success of each team member by every other team member. Competition among team members precludes, denigrates and erodes the cooperative effort necessary for a ‘team’ to be successful in my opinion. It promotes the individual at the expense of the team. In our firm we’ve done everything possible to eliminate competition between team members. We want each team member to unselfishly cooperate in making every other team member successful. Ranking potentially precludes that. And for what benefit? Motivation to do better? To be at the top of the ‘list’? Good professionals don’t need that kind of whip. If they do, the firm made a hiring mistake, and they need to correct it.

We’ve chosen a different direction. One that minimizes competition, micromanagement, and places responsibility on the professional knowledge worker for their own career and development. We have virtually no turnover; a waiting list of professionals who have applied to join us; and a professional staff that is unparalleled in expertise, committment, and personal development. Most came from national firms. I’ve heard their comments (and they are invariably negative) regarding published rankings of charge hours, realization, etc., and the culture it engenders.

I’d be interested in a blind survey of those ranked at Moss. Do they really think that published ranking is a positive tool? How about the partners? would they just as enthusiastically support publishing the ranking of the partner group?

Jeanne gave me that ‘ you must have a carbon monoxide leak in your office and you’re hallucinating’ look. She gave me ten reasons why we couldn’t quit doing annual performance reviews. In thirty years I’ve never won an argument with her, and she’s a PhD, so rather than argue I gave her a book. Abolishing Performance Appraisals by Tom Coens and Mary Jenkins.

We don’t do them anymore. Read the book and you’ll understand why. (Or if someone comments on this post, maybe Jeanne will post on this blog.) In place of annual performance appraisals we’ve implemented a system that is driven by the former ‘reviewee’ as opposed to the ‘reviewer’. Why would we do this? For the same reasons we changed the policy for forming our engagement teams outlined in a previous post ‘Choices’. While we will support your choices in every reasonable way possible, the success or failure of your career is your responsibility. It’s our attempt to take a step in eliminating micromanagement of our professional associates.

In a recent post titled Boredom, on her blog my good friend Michelle Golden related her thoughts on responsibility, and the importance that being responsible for yourself has for your personal growth. Yet it seems that, because we can’t give up control, we wrest responsibility away from those who it most effects at every opportunity in a quest to become more efficient, and therefore more profitable. Ironically this serves to make only one person or a small group responsible for all decisions, the welfare of each team member and the profitability of the enterprise. Does that make sense? Is autocracy more desirable and effective than democracy in business? Or is it just easier?

Why did we tolerate it? Simply speaking, there was a shortage of jobs and an abundance of candidates to fill them. If you weren’t willing to make the ‘sacrifice’ there were ten others who were. Did we have a different work ethic, ability or attitude then, than those ‘kids’ of today? I don’t believe so. We didn’t have choices that our employers had to compete with. That has changed.

In the past six years, since the passage of Sarbanes-Oxley, the amount of accounting work for professional firms has, by some estimates, tripled. The corresponding demand in industry has increased proportionately. Simultaneously, many states have stiffened the requirements for certification by implementing a 150 hour standard. So is the answer to increase compensation, improve flexibility or become more efficient as Rick Telberg advocates as our only solutions?

In the past thirty years I’ve reviewed the annual surveys done by numerous organizations, including the AICPA, and I don’t recall even one instance where compensation was the first priority of the respondents at the staff level . (Although it is generally ranked as ‘most important’ by the partner group responding.) So the exodus is not compensation related. Is it flexibility? Most professional firms have adopted flex time, and yet we continue to lose talent.

Efficiency is not the issue. We are certainly more efficient, technologically, today than we were even five years ago, yet the staffing crisis is worse than ever. Logically, with revenue based on hours worked, and time sheets, the more ‘efficient’ we become as service providers, the quicker our fees will drop, the less ability we will have to pay competitive salaries, and the faster we will all go broke. Can you improve your efficiency enough to have an impact?

In our firm we are concerned about ‘effectiveness’ over efficiency. Efficiency is a function of selling time. We sell knowledge. We are focused on the overall quality of the service we provide, rather than how fast we can provide it. So if it’s not compensation, flex time or technology what have we done as a firm that has virtually eliminated turnover; improved team member morale and client satisfaction simultaneously; increased revenue and allowed us to grow at an annual rate of more than 50%? Trust.
Thirty years ago, as a married twenty eight year old ex-Vietnam commanding officer my employer didn’t trust me. They set my schedule, and hours and forced me to report on them. I punched a time clock. Is that necessary with knowledge workers? Do we not trust our professionals to give their best and make every effort to provide quality service? Do we believe that, as management, we are more capable than our knowledge workers, of establishing and enforcing one agenda for everyone that meets the needs of our many clients and varied team members without their input? That would be ridiculous. Yet, as a profession, we have micromanaged our knowledge workers to the point where they are leaving the profession because they can’t stand the ‘job’, not because they don’t love the work. Nothing has changed in the way we were managed as knowledge workers forty years ago, or the way we manage knowledge workers today. We say we trust them, but nonetheless we try to dictate. It did not work then, and it certainly does not work now.

We hire because the desirable candidates are intelligent, committed, hard working, honest, energetic and motivated. And then we smother them with a system of micromanagement that limits all of those qualities. It is not surprising that within a short time they seek other opportunities. We are going to continue to see an exodus from our profession until we make it a desirable career. We have to quit micromanaging, (as hard as that is) and provide our knowledge workers with the opportunities and respect they deserve, if we want them to stay.

After over thirty years in the profession, shackled to a business model predicated on selling time and tracking it on time sheets, we finally realized we weren’t selling time, and abandoned the time sheet – the most insidious micromanagement tool ever employed. The impacts are summarized above. We have adopted a business model, outlined by Ron Baker in his book Firm of the Future. It is a radical departure from the way we had done business for so many years. Sounds frightening? It is, but what we’ve done in the past isn’t working; doing nothing isn’t acceptable; so what choice do we have?