Regrets? They’ll have a few

OK, so we’ve all got them.  You know, those things that we look back on and think “what the hell – why did I do that?” or, (even worse) “why didn’t I do that?”

I’ve had plenty – more of the former type than latter, but it all forms part of the rich tapestry of life that we humans form part of.  And, much as we may regret things, it helps us develop into the people we are and forms the foundations of who we will be.  Great.

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BUT, what would happen if you knew that something was going to happen and, despite every nerve in your body screaming at you to do something, you didn’t “do it” (whatever “it” might be) – is that really a regret?  If you adopted a stance of denial, does that turn into a form of regret?

How is it that, even when confronted with massive amounts of evidence supporting a reality that is going to occur (and I’m not talking “consensus” here) – I am talking incontrovertible facts – you still don’t make the moves that are required?

I’m not going to launch into semantics here (I will leave that to my far more learned colleagues in Verasage), I am just trying to posit the argument that often times, people do not do what they should and don’t take action when they should or find a million reasons not to do something they know they need to because, well, they have lost something.

What is the loss they have made?

Consider if you will the current state of the accounting profession.  We are seeing massive changes set upon us – mainly from technology/cloud solutions, but also from offshoring operations.  Did you know, for example, that most of the Big Four have established offices throughout Asia to which they “in-source” their compliance work at (about) AUD10 per hour?  I know of an Australian example where a large corporate has moved a significant volume of their processing/admin work to a Pacific nation as the effective wage rate there is AUD1.20 per hour – a bit better than the award rate over here!

This is all happening now.  Today.  To our beloved accounting profession.  And what are the vast majority of our colleagues around the world doing about?  Nothing.

I posted some time ago about the changes that were occurring to our profession.  The changes that were coming then are rolling out even more quickly than I anticipated.

So, what is the profession doing to adapt to this change?  Not much.  Some of us a screaming to all who can be bothered to listen that there needs to be a change in business model.  Hardly anyone seems to be listening.  Or caring.  And we are not, by the way, being “chooky looky” – the sky is falling in!

What are most accounting firms doing to try and combat the inevitable?  They are trying to be more efficient.  Making better time recording platforms and putting greater emphasis on staff productivity.  Anyone recall Danny DeVito in “Other People’s Money”?  Buggy whips.

To make the process more precise isn’t what’s required in the accounting profession today (or tomorrow).  As Ron Baker is fond of saying – “I’d rather be approximately right than precisely wrong”.  Bravo Ron!  But tell that to the Luddites who persist with a 1950’s business model 65 years after it was made common place and 64 years after it became redundant.

The time-sheet is an anachronistic tool that does not fit with today’s requirements.  Staff hate them, admin hates them, managers hate them and Partners/Directors hate them.  The people who hate them most however, are the second most important people in your business – your customers.

In some respects, I am advocating a “back to the future” scenario – get rid of time-sheets – but with some important changes.  Changes like agreeing the scope of work and price up front with your customer.  The change which includes and involves your people in determining scope – and price!  The one where you truly empower your people to shine rather than record their misery in 6 minute increments.

Ed Chan of Chan & Naylor last week posted on Linked In.  Chan’s argument is that accountants sell time.  No.  We don’t.  We sell solutions to our customers’ problems.  His argument is that the “solutions” (I am expanding his argument a little here, but I believe it is in the same vein as what he has written) are all compliance-based whereby all we are doing is the “same thing” for each client.  As I have illustrated above, the basis of a lot of the compliance work is going to be automated or off-shored.  So scalability only applies if you’re doing basic, processing and bookkeeping work.  Not exactly what we’re trained for is it?

Similarly, setting an arbitrary hourly rate to charge them for your time isn’t reflective of their need or the value that they place on the work to be done.  Using the same rate for everything you do makes you pretty “average”.  And remember – average is where the best of the worst meets the worst of the best.

My belief is that every customer is unique and have their own set of fears, needs and the like.  To try and put them all in one basket is to demean both them and the people who work on their files.

Chan’s argument is also based on the premise that all you have to do is to hire more people and more customers will come to you.  Oh, to live in such a wonderful world!

From my experience (such as it is), the only way you can achieve this is to discount your offering to a level that drives people to you.  And then, what happens to “the margin” that Ed believes is the Holy Grail?  That and the fact that you’ll generally get the bottom-feeding clients who don’t value what you do anyway and will bring a whole heap of their “friends” along with them – High School Chemistry – like attracts like.  You will also not exactly engage your people as they merely become cogs in a never-ending grind out of tax returns.  Inspiring isn’t it!

So, in Ed’s world, where “you build a business to prepare a tax return”, I believe there will be regrets.  Lots of them.

Customers don’t want tax returns.  They want advice.  Support,  Counsel.  Encouragement.  SOLUTIONS.  The tax return work is only there because the government stipulates it.  Nobody really “values” it in the true sense of the word.  And the ultimate disruption?  I know of at least one of the Big Four that will be offering their clients compliance work for $0 in the coming years.  How’s “the margin” on that?

Getting the business model right for accounting firms is critical given the disruptive times we are in.  Making a bigger or cheaper version of what exists won’t answer the challenge – it merely cements in a race to the bottom for those firms that don’t adapt.

Regrets?  Yep, I have them.  A number of them.  One I do not have however is getting rid of time-sheets and moving to a business model that will sustain our business, our people and our customers for a long time.

Oh – the loss they have made that I referred to above?  It’s a loss of self esteem and belief in why they do what they do.  And that, my friends, can be scaled!

And meanwhile, on the Beeb…

Gucci HandbagLying in bed last night having a listen to the World Service on the BBC (as you do when you’re an exciting accountant), I happened across a very interesting program on pricing.

Being a rampant technophobe, after about 5 minutes, a link to the broadcast was sourced and it is available here.

I recommend you have a listen to it as there are some worthwhile observations through the broadcast – particularly when it comes to Gucci pricing their new handbag. It may surprise some readers to find out that the cost of manufacture had little (nothing) to do with eventual sales price which was set by the customers! The reporter on the job seems to take some umbrage at this, however the earnest Gucci rep explains it quite simply.

Shakespeare was Right!

Latest blog post about communication and how being more effective at it (which involves taking responsibility for ensuring the message is received) can make a big difference. It can be found here.

Candy Crush Management School

My most recent post about what I have learned from playing Candy Crush.

How is your Quality Adjusted Life Year?

imageWhat is a “Quality Adjusted Life Year”?

Last night I heard a discussion on the radio regarding oncology treatment where they were discussing this new-to-me concept.

Based on what I heard, it would appear that a “Quality Adjusted Life Year” is an assessment based on the following question:

Is life economically viable when you consider the cost of cancer treatment against the enjoyment you get out of the extra years of life you obtain for having been on the treatment.

This is obviously a highly ethically challenging question from a medical perspective and it would be very interesting to find out what the KPIs are for such an assessment.

However, when we take this concept a few steps away from the cancer ward and into business, the discussion and assessment is still just as difficult. Mind you, I believe it is an assessment many people make (often subconsciously) every day in their consideration of where they are voluntarily going to give their effort (at work, home, family…).

How do we rate the effort that we put in against the return we get from it? This is a highly personal assessment that will follow, in many ways, Maslow’s Hierarchy of Needs. Most of the “base line” needs are met with salary.

The higher needs are however unique to each individual and the level to which they are engaged in the business for/with whom they work.

The culture of a business is directly responsible for much of this and this in turn is (in very simple terms) created by the ethos, vision and values of the people already in the business and who own and manage the business. If the business has a great culture, people will put in the discretionary effort to build and prosper whereas if the culture is toxic, the reverse is true and they can actively sabotage efforts to improve things.

The process of determining your and your staffs’ own “quality adjusted life year” when it comes to work is therefore one which needs to be directly addressed by owners and managers in any business.

Is the effort you are putting in actually assisting the business and are you getting the return you require from this effort? And, by the way, who makes this assessment?

I know in my business, I have regular discussions with one of my crew about “are you whinging to [your spouse] about work when you get home?” This was one of the major reasons they left their previous job and we were very lucky to have them join our mob. Their quality adjusted life year at their previous employer just wasn’t worth the effort.

So, when you look at yourself and your crew, consider whether the Quality Adjusted Life Years are worth living. If they are, fantastic. If they aren’t then you could be headed to the morgue earlier than you want!

How would Charles Darwin see you?

DodoIt isn’t about survival of the fittest. Darwin actually held that the most adaptable were the survivors. So, are you and your business adapting or are you heading down the path of the Dodo?

The current environment is one where there are so many changes taking place that the firm of 20 years ago will find it hard to compete. I know looking at my business and the work we do that to produce our current output, 20 years ago we would have required a heap more people and resources. Thankfully, technology has developed and enables us to create the results etc that our customers want and need.

But, there are two other components that are vital – your people and your customers. Unfortunately, a lot of firms “out there” have taken on (some very grudgingly) the technological change, but they have made few, if any steps, toward adapting their approach to their people or their customers.

Most of my thinking here comes from the “Growth Curve” approach which looks at “Three Gates” – people, process and profit. The technology has helped us deal with and adapt to the process gate, but I am seeing very little in the way of adaptation to the profit or people gates.

The profit gate needs to be adapted to by looking at the way that you engage with your customers, the service you offer them and the methods by which you price and they value what they get from you. The arcane approach that is the timesheet is becoming less and less popular (as can be evidenced by a brief review of other posts on this site) and customers are demanding more certainty, clarity and comfort that they are not signing on to an annuity stream for the advisor whereby they are being charged and billed for the advisor’s inefficiency or learning. In effect, given the timesheet places the customer and the advisor in directly opposed positions, the customer is now waking up to the fact that they want to know in advance what the price for the work will be. Those firms that do not adapt to this emerging reality will find it very difficult to retain or attract customers where other firms out there offer this as an alternative.

The people gate is the other area where firms are finding it difficult or are not wanting to adapt. The blunt object that is the timehseet that is used for performance management in many firms is rapidly becoming redundant. As an example, we recently advertised for an accountant and one of the headlines in the ad was “no timesheets”. We have had some sensational applicants for the role who are currently working in accounting firms in town where they are managed and measured by the timesheet. I don’t know about you, but if my performance is being measured in 6 minute increments, it is going to be fairly meaningless to me. I want to be judged on results and outcomes. Inputs are irrelevant. Hence – particularly with our Gen Y guys – our people want to be and remain relevant and highly valued based on what they have added to the business, not how much time they have spent doing it.

Many of the firms with which I speak are afraid of moving from the timehseet and adapting their business model to what the world is slowly going to demand of them. These poor bastards are going to be wondering what hit them in about 5 years’ time when it will be all to late.

They will have few staff and fewer customers but they will be able to account for every single minute of their day.

They will be preceisely irrelevant.

And a future Charles Darwin will wonder why they chose not to adapt.

Are You a Diamond Cutter?

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Do you cut diamonds in your role? No, I recognise that we’re not really jewellers – we’re dealing with far more valuable and precious things than they ever do.

When someone comes into your business, they can be seen as either an uncut diamond or an unset gem. How you manage their induction and culturisation within your business will determine the sparkle and presentation that they eventually offer to you and the customers they deal with.

Many firms have the archaic concept that they can just give someone a computer and a phone and “let them at it”. With respect, they will then wonder why they have staff turnover issues and the morale and culture in the firm is not great or even toxic.

Selecting the uncut diamonds to bring into your firm is both an art and a science. It requires a deep knowledge and understanding of not only where you are but also where you want to be – as a firm and as the whole team within the firm.

Recruiting someone merely because they have a pulse and a degree/experience ain’t a guarantee of success. Getting to know what motivates them, what matters to them and letting them see the same about you (both at firm level and as individuals who make up the firm) is going to enable a far more successful/less stressful introduction.

I know in my firm, we take at least 3 meetings with other team members before I even get a look at the candidate! If anyone has reservations, they are tabled and addressed. We need to remember that everyone needs to work together and the new hires will either add to or detract from the culture that you have worked hard to establish (or are working hard to improve!) – getting it wrong can be a disaster.

The process of taking an uncut diamond (or even a rough diamond) to a sparkling gem as per Wikipedia – take the following and apply it to how you deal with your people – from initial assessment through the process of refining and cutting to produce a valuable gem that people want:

Mined rough diamonds are converted into gems through a multi-step process called “cutting”. Diamonds are extremely hard, but also brittle and can be split up by a single blow. Therefore, diamond cutting is traditionally considered as a delicate procedure requiring skills, scientific knowledge, tools and experience. Its final goal is to produce a faceted jewel where the specific angles between the facets would optimize the diamond luster, that is dispersion of white light, whereas the number and area of facets would determine the weight of the final product. The weight reduction upon cutting is significant and can be of the order of 50%. Several possible shapes are considered, but the final decision is often determined not only by scientific, but also practical considerations. For example the diamond might be intended for display or for wear, in a ring or a necklace, singled or surrounded by other gems of certain color and shape.

The most time-consuming part of the cutting is the preliminary analysis of the rough stone. It needs to address a large number of issues, bears much responsibility, and therefore can last years in case of unique diamonds. The following issues are considered:

The hardness of diamond and its ability to cleave strongly depend on the crystal orientation. Therefore, the crystallographic structure of the diamond to be cut is analyzed using X-ray diffraction to choose the optimal cutting directions.
Most diamonds contain visible non-diamond inclusions and crystal flaws. The cutter has to decide which flaws are to be removed by the cutting and which could be kept.
The diamond can be split by a single, well calculated blow of a hammer to a pointed tool, which is quick, but risky. Alternatively, it can be cut with a diamond saw, which is a more reliable but tedious procedure.

After initial cutting, the diamond is shaped in numerous stages of polishing. Unlike cutting, which is a responsible but quick operation, polishing removes material by gradual erosion and is extremely time consuming. The associated technique is well developed; it is considered as a routine and can be performed by technicians. After polishing, the diamond is reexamined for possible flaws, either remaining or induced by the process. Those flaws are concealed through various diamond enhancement techniques, such as repolishing, crack filling, or clever arrangement of the stone in the jewelry.

When having a read through the process outlined above, it occurred to me that the way we treat our uncut diamonds is vitally important to the outcome of the final gem. We also need to recognise that the setting into which the gem is going to be placed needs to be carefully considered – this has a big bearing on the design of the cutting process.

But, do we really adopt this process in the firms we run? Do we really value our people as potential gems worthy of admiration and even as objects of (for us vainglorious types), envy?

Or do we treat them as rocks – a commodity which is generally processed roughly (if at all) and not valued?

I know how I view this process. The jewellery bench is a wonderfully creative and deeply satisfying place to work. Far better than a quarry.

Why Accountants and Lawyers Suck at Learning

I have just put up a post on my site relating to the behaviours that we professionals can adopt in our businesses that can seriously impede us from learning (and contributing).

It should make you think.

It can be found here.

Ego is a Dirty Word

Do you treat your people like mushrooms?

I was speaking to a firm recently where the Partners would not let their staff meet with customers. They would not let anything go out of their office without the Partners reviewing it and signing off on it. In short, they were putting a lid on their people and effectively “bonsai-ing” their growth. Unsurprisingly, they were having trouble identifying people who could develop and create a succession plan for them and their firm. There was also an issue with staff turnover.

We have just been going through the Growth Curve X-ray process in our business and one of the aspects that we have identified is a deliberate “personal brand” development strategy for everyone in our business. This will see us work with each person individually and collectively to build their personal brand internally and externally. We are doing this because we have a fantastic group of people working with us and by investing in their development they and we will reap far greater satisfaction and engagement.

Many Partners and managers in firms seem to be afraid of developing the people they work with from a fear that these people might actually be better or more capable than the Partner/manager. Their ego is controlling the business and stultifying the firm as a whole. Effectively, the personal “issues” of the leaders of these firms will restrict the opportunity for the firm to flourish. I view this as akin to abuse.

How do you treat your people? Are you working with them to develop their “brand” under your brand and reputation? Or are you sitting on them and restricting their development?

I know which approach will create a happier, healthier and more successful workplace. And it will then mean that the only mushrooms you have are in your salad or the sauce on your steak.

Slow Down!

How quickly do you feel you have to reply/respond/react to an email? How quickly do you expect your people to reply/respond to emails?

I have been thinking of late about how we are working. The constant pressures of email, social media, texts, phone calls and the like mean that we are “always on”.

This has a number of side effects which I believe are unhealthy and lead to a a range of issues for firms and the people in them. Recent posts by my fellow Fellows of Verasage point to increased incidence of depression amongst lawyers. To be honest, I am seeing a lot of this in other professions as well.

Due to the constant pressures we have now to be available 24/7 and respond almost immediately to customer/staff queries, we have lost access to one of our most powerful offerings – considered and developed advice based on wisdom and experience. By not having the time to fully think about the issues at hand, we aren’t allowing ourselves the best opportunity to create and offer value.

Think about many of the requests you get – most of them aren’t really time critical but we have developed a self-imposed obligation to respond asap. This is dangerous and unhealthy.

The other issue that comes from this is that we no longer have the “peace and quiet” available to think freely and create innovative stuff. Consider the success of “Google Time” and other approaches taken by businesses that are renowned as great places to work (eg: Atlassian) – much of their success is directly attributable to the time they allow their people to create and innovate. Imagine what would happen if they changed their approach and required their people to report their efforts based on time spent?

With all of the above in mind, I was heartened to read a recent post by Richard Watson. He argues that the 24/7 lifestyle we are currently living is unhealthy and does not lead to what can be great, human outcomes.

It is incumbent on all of us as business owners, leaders, managers and team members to encourage ourselves and the people with whom we work to slow down. Quicker is not always better. Considered is better. Reply properly, do not react.

Next time you get an email, think about when you will respond and what you really need to think about before you respond. Otherwise it will just be a reaction.