Andy: From what you are saying and what I hear from others, I agree that if not the top issue, the need for more value-added, non-traditional services is at least one of the top two or three. But unless I’m missing something, I believe we’ve heard about this issue for quite some time now. So why then have the strong majority of top fifty firms that should have the resources not reacted sooner?
Greg: Another good question that also has a few dimensions to the answer. As I answer this one, please understand I am not being critical of anyone or even the top 100 firms collectively as a group. I too have been guilty of some of the reasons–I am simply just trying to give you my open and honest perspective.
Why We've Fallen Behind
#1. Accountants not fundamentally wired for change
First and foremost, over the last twenty to twenty-five years, our ability to simply change as a collective group of public accounting firms has not kept pace with the change demanded by our clients. To begin to answer “why,” we first need to reflect on the basic core make-up of the strong majority of us accountants. We must remember that all of us bean counters were–and still appear to be–willing to spend four-to-five years earning our degrees learning how to become a “professional skeptic.” We also feel most comfortable with numbers and detailed black and white logical and linear answers, focusing more in the past and present than in the future. Our core make-up allowed us to succeed in delivering value since the inception of our profession, however, the accelerated rate of change over the past fifteen years has been just too much for us as a profession to keep up with. Just like old, strong, dependable Clydesdales when asked to become race-horses–just can’t do it.
#2. Technological advancements have been too much, too fast
Here comes this thing called “information technology” that surfaced in the mid-80s with the birth of the laptop, then the internet in the mid to later 90s. Then–the real disrupter–the iPhone in the later 2000s. It’s all just been too much, too fast for our generation of accounting firm leaders to get our partners to properly absorb on a timely basis to best meet the needs of our client.
#3. Not willing to welcome-in and treat non-traditional service leaders and team members as equals. Many non-traditional practitioners will tell you that quite often they feel as if they are treated as “second class citizens” when entering a firm. This significantly hurts retention as well as recruitment.
#4. Inability to attract and retain our best accounting talent
There are many reasons why this issue has escalated over the past fifteen-to-twenty-years, but it simply comes down to the fact that the real good ones have had much better professional choices put before them than what we within our profession have been able to offer. This shortage of top talent has put too much stress on our succession and growth efforts that are traditionally driven by our mid-thirties to mid-forties partners stepping forward to lead new efforts and take on more growth and leadership responsibilities. Again, no disrespect to this group of partners out there today, but at a profession-wide level, this group is not as relatively strong as they were in past generations. But again, it’s my generation of managing partners that could have collectively done a better job of making sure their firms were progressing to the point that would have at least slowed this top talent exodus down.
#5. Flawed career counseling, training and collective team building models
For the most part, we are not building the collective team talent needed to succeed in firms today and in the future. Today, more than ever, the public accounting “game” is a “team game” needing players that are quite diverse with different talents that can play well together–like well-oiled college and pro football teams today. If you’ve been a fan of this sport like I have for many years, it’s amazing to see how their team building model has advanced. No longer do the leaders of these teams recruit, train, coach, feed and build the athlete’s career progression model the same. Yet, for the most part, our profession has not evolved to this more diverse progression model. We basically recruit, coach, teach and train to build one type of professional. Our inability to embrace this more customized diverse team member model has definitely hurt the advancement of our diverse integrated client service team approach.
#6. More than enough traditional work
For the most part, firms have had more than enough work to handle over the past twenty-to-twenty five years. This has been compounded by the fact we’ve not been able to keep our best and brightest in the fold, which forces those remaining to simply keep their heads down and pound the work out that's in front of them.
#7. Enron
This was a serious and sad event that caused our profession to make needed independence adjustments to our services at the public client level. At the private client level, it was a warning shot to remind us to simply be careful. However, I believe this event created more of a scapegoat for most top fifty firms to back away from the needed stronger pursuit of building the much-needed integrated non-traditional services. This event simply put those of us serving the private sector further behind.
#8. Overly concerned about shorter-term profitability
In order to maximize future retirement payments for the escalated number of accounting firm partners entering retirement over the past ten to fifteen years, firms have placed a significant emphasis on current profitability. This shorter-term focus on profitability has hurt the often-needed investments required to attract and retain new and different types of talent.
#9. And finally, the accelerated level of smaller firm acquisitions
The accelerated number of smaller firm acquisitions made by the top fifty firms over the past ten years has definitely slowed the progression and integration of non-traditional services. Yes, I understand the temptation that swirls when an acquisition surfaces with all the “wide-eyed” aspirational benefits envisioned, however, reality is there have been many more not-so-good post-acquisition experiences than good ones. Let’s be honest with ourselves. The majority of partners a firm brings in with an acquisition really struggle trying to “raise their game” to the needed next level. And when this occurs, the speed of the acquiring firm’s overall progress slows down, and quite often, significantly.
Andy: So Greg, I concur as to why we as a profession are behind on bringing more valued, non-traditional services to our clients. However, what’s most important today is what leaders in firms should begin doing differently in order to close this value expectation gap with their clients. With that said, what do you suggest firms begin doing more to close this expectation gap?
Greg: No matter where a firm is today in its evolutionary journey, there are six basic foundational steps I recommend firms go through to begin this building process.
The Six Basic Foundational Steps to Begin Building & Integrating Non-Traditional Services
#1. Understand where you are in the evolutionary journey as a firm today
See my Evolution of a Firm diagram. How a firm goes about building new, non-traditional services as a two-office firm with fifty people will be different than a firm with five offices and three hundred people. Each firm’s type and size of clients, as well as the talent level of its people, will also be different–so what you begin to add, how much and at what pace can differ significantly, too. Also, how aligned by industries you already are can have a significant impact as well.
#2. Obtain a basic understanding of the Integrated Client Service Team Model as well as what services are normally included in the core non-traditional services of People, Process, Technology and Strategy (PPTS).
Once you understand the basics of this client service approach and what services are possible, determine which services might work best in your targeted client base of today and within the next five years. I strongly suggest a firm go through a basic client tiering exercise to best determine their most lucrative and opportune clients to begin working “deeper and wider” with. If a firm is aligned by industries either currently or will be in the future, consider the industry needs and demand as well for a place to start.
#3. Obtain a high-level understanding of all factors within a firm that have a significant impact on the ability to build a sustainable integrated non-traditional services practice
See my Pyramid of Success diagram that shows all the qualities and/or characteristics EVENTUALLY needing to be present if a firm wishes to realize long-term success in this area. PLEASE NOTE… all of these factors do not have to be present to begin building these services, however, they will need to be addressed and in existence at some point in this building journey.
#4. Identify a couple of your “Early Adaptor” traditional service partners and/or managers that are highly respected in the firm and help them align and launch your most opportune new service practice
I cannot emphasize this very important step enough. The strong majority of traditional accountants are, at best, “curious followers” that are most comfortable embracing new things when they see others they highly respect having success. So don’t beat yourself up. Build early success, “celebrate” your successes with strong, consistent messaging and you will be pleasantly surprised at how fast the “curious followers” will jump in and begin participating. So much easier and faster than trying to get everyone involved trying to figure it out before you really know what you are doing.
#5. Hire and align the leaders of one or two new non-traditional services you wish to launch and help them align with your “Early Adaptor” traditional service partners and/or managers
This, too, is a very tricky and important step in this early-launch process. I will not cover the new hire and integration process here, but will simply say that if these first one or two early lead hires do not go well, it is easy for all the “curious followers” in your firm to become naysayers and rain on your parade. Again, this step is not easy, but if you do your homework on culture fit and the new leader’s ability to coach and teach others as they offer, build and integrate their new services, the rewards will be bountiful.
#6. And finally, as you begin realizing early success, begin coaching and teaching your traditional staff AT ALL LEVELS on how to have more meaningful client conversations, which eventually helps them become better “general contractors” of relationships.
Once again, this is a very important step in gaining early momentum with building and integrating new services. This should include professionals at all different experience levels. You can tie this coaching and training directly into a person’s “career path” as well, which helps them focus on growing-up to become better “general contractors” of client relationships–the lifeblood that integrates and feeds the non-traditional service practices. When this begins to happen and early success realized, you will be amazed at how fast your firm can gain momentum in this new more valued services movement.
There is another very important point I need to mention here. I strongly believe the building of what we refer to today as non-traditional services is really the foundation for the redefined wider definition of the firm of the future’s traditional services. And I am not talking about twenty to thirty years from now. More like ten to fifteen. When you build these new services of People, Process, Technology and Strategy (PPTS), and bring in new and different talent to do so, it simply catapults the energy, excitement and learning process of your typical accountants from entry level through manager that want a different future profile to model themselves to and are excited to learn and grow by doing new things–many of them that are being done by the non-traditionalists today. You are seeing in firms today that are really figuring these new services out how their traditional accounting staff are picking up and taking the lead on strategy, operations, metrics, dashboard and analytics work–all work that is really engaging them and widening their horizons for the future.
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