Innovative Practice Management

Did you suck at ‘Economics’ in college.  I did.  So when my friend and mentor, Ron Baker, recommended that I read The Economic Naturalist by Robert Frank, I smiled politely, assured him I would, and then blew it off.  (I did buy it, just so I could document my intent and not feel entirely guilty for lying through my teeth.)  Last week, I again found myself in an airport, having mistakenly thrown this tome in my computer case, thinking it was an adventure novel.  With no other entertainment, besides trying to determine which passenger had the worst hang-over in the Las Vegas airport, I read the book.

It’s a great book!  Very entertaining.  The format is a series of questions, e.g. “Why do bars charge for water, but peanuts are free?”, or “Why do cleaners charge more for a woman’s blouse, than a man’s shirt even though they are both made of the same fabric?”, or “Why are brown eggs more expensive than white eggs?” (and it’s not a scarcity issue).  The answers postulated are supported with economic principles. 

On p. 62 he asked the question “Why does a worker’s wage often rise more quickly over time than his or her productivity?” 

One hypothesis was “employees in such firms are paid less than they are worth during the early years of their tenure, and more than they are worth during their later years.”  Is the logical extension then that staff accountants are underpaid?  And management is over-paid?  While this might be the case for laborers, it is not the case for knowledge workers. 

In my opinion, Adam Smith’s theory of compensating wage differentials in The Wealth of Nations is more appropriate.  That is ‘wages are higher in jobs that are more risky, require more arduous effort or are located in ugly or smelly locations’.

No, it’s not more risky, and hopefully neither more ugly or smelly. It’s more intellectually ‘arduous effort’.  Simply stated, you get paid for how effective you are at your job.  As your career progresses, productivity is not so much defined as how fast you complete your engagement, but how ‘effectively’ you complete it. 

The more effective you are, the more you get paid.  Being more effective requires being more knowledgeable.  And not just technically.  It can also include your skill in client interaction and supervision of subordinates which are both key components of effectiveness.  Hopefully your firm defines what constitutes ‘effectiveness’ at each level necessary for advancement.  If not, it should be the first topic you discuss with your mentor. 

I’ve posted frequently about the deleterious effect I believe time sheets have on professional knowledge workers and professional knowledge firms. Regardless of the origin, or the use for which they were originally intended they have become at once a measurement of productivity, value, worth and efficiency. And I don’t believe they do any of those things particularly well. Granted they can generate useful and important information for reactive decision making but the costs of that information to the culture of the user far outweigh any marginal benefit derived. They are a very efficient tool for micromanaging. There are other very efficient micromanagement tools as well. There are performance evaluations - which we’ve previously posted about. How about ‘checklists’?

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?

In my recent post, Beware the Jabberwock, I intended to suggest that as practitioners we always question what is the ‘common body of knowledge’ and accepted management philosophy we have been indoctrinated with over the past 50 years.  My comments were not directed specifically at Ric Payne or Principia, but rather at traditional thinking, while I did use one of Ric’s posts as an example.  My comments were apparently interpreted as a personal attack based on Ric’s comment which we have posted.  After again reading my post, I do see it could be interpreted as a personal attack.   That was not my intent, and I sincerely apologize.

Our purpose is to provide a forum where practice management theory and experience can be shared and discussed with the ultimate goal of improving our profession.  Personal attacks, intended or perceived, will not accomplish our goal of providing a forum for the exchange of ideas.   They are not acceptable and will not be published.

 That said, I don’t agree with some of Ric’s thought and it is my singular intention to ‘take him on’ and expose the fallacy and inconsistency in his logic, as I’m hopeful he will attempt to do with mine.  We will start in this space,  and as he has suggested we will continue ‘mano y mano’ in Reno when he returns.     Your participation is welcome, necessary and  encouraged.

After writing my first blog post, “Intern’s Corner: The Big Four Push” I began to think about how does one choose the right firm. I am lucky enough to have had to opportunity to experience different firms and different values over the past two years. I have been a member of Beta Alpha Psi (BAP) in that time period. By having those opportunities, I feel that I have been able to explore different options, and I know what is right for me. These are the steps that I took when choosing the firm I choose:

1. How does the office make me feel? BAP has given me the opportunity to tour almost every local firm within the past 2 years. Within the first hour there, I know if that is a place I would be able to work. Some firms feel more comfortable for one person than another. For example, I am a very laid back person, so certain conservative firms are not for me. However, some of my classmates are very conservative, so those firms work out great for them. Know yourself, and what you like.

2. What have you heard about the firm? It is true that you shouldn’t believe everything you hear, but do listen. Talk to people that are current employees there, and talk to employees that no longer work there. That will give you the feel for the office (the good, the bad, and the indifferent). Make sure to ask current and past employees about the overtime required by the firm. This will come back into play in step three and step four.

3. Does the firm support your core values? I know this might take some thinking and looking into, but it is imperative that you find a job that does this. For example, ethics has always been a hot (and grey) topic. Find a firm that has similar ethical values to yours. By finding a firm that supports your core values, hopefully you will not have to get put in a situation where you have to question yourself. Also, if family is a core value, look at activities the firm does. I cannot stress how important this step is. This step is the key to your happiness at a firm.

4. Look at the pay. Just coming out of college (with no experience for some people), $37,440 ($18 an hour) might seem great. But, is that what other qualified candidates getting? I know a girl who graduated last semester that was offered that. She took the job and was happy about the pay. That was until she heard that other graduates were starting at $10,000 more a year than her. That made her feel undervalued. And trust me, you do not want to have a career somewhere you feel undervalued. Also, make sure to find out if the salary offered is strictly for a 40 hour work week, or if it is a normal salary. There are many local firms that may start you out a bit lower than a big four firms, but they will allow you to bank your overtime. Take that into consideration.

5. Don’t quit interviewing after you get one offer. Make the firms work for you. You will not get stuck feeling undervalued if you get more than one offer.

Take these steps into consideration. Accountants are in high demand right now. There is no reason to take a job somewhere you are not 100% happy.

Our premise for this blog is that no matter how perfect the practice management model is in accounting, it can be improved by the collective minds, experience and efforts of the members of our profession.  No management model is perfect, and one that hasn’t changed substantially in more than 50 years, such as ours, certainly must have some room for improvement. 

 Change is always difficult if not traumatic.  It’s also inevitable if we want to improve our situation.  We freely admit that some of our theory is just that - theory.  Almost inevitably it flys in the face of what is traditionally accepted practice management philosophy.  To be validated it must first be falsified.  That is precisely the purpose of this forum.  If you want to contribute to our profession challenge the accepted - challenge the proposed.  We will publish all opinions not just those we concur with.  Give us a topic or thought, and we’ll find ‘experts’ to comment and debate with.

If this is your first day in the profession or your 35th anniversary, as it is mine, your thoughts are critical to formulating a positive change.

This is not a forum for our opinions.  It is a forum for an exchange of opinions and theory which will hopefully result in positive change to our profession.

Coming from the marketing side of our firm I spend some of my time browsing other firms sites to see what they are doing different, what information they have put on their sites, how they update them, etc. What is very interesting is that almost all of them have one thing in common, “They are different!” Different from the typical accounting firm. » » » more

The most recent Beta Alpha Psi conference occurred this past weekend in Los Angeles, California. The topics were very similar to prior years; Work/Life Balance, Your First Year in Public Accounting, and From Student to Professional. I’ve heard all of these topics before, but the last time I have heard them was about six months ago. » » » more

I love the fact that we don’t have to keep track of every minute of every day (one of the biggest problems with time sheets) because it frees up time to take care of the little (or not so little) things - like reading the latest tax updates (something that is not so little for me or our clients, but a necessity that has always eaten into my “billable hours”) and sharing information with clients and other people I know who may be interested (a “little” thing to me, that I thought about doing before, but never found the time when I was conscious of where all my “billable hours” were spent). » » » more

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?