Class of 2013: What Is Calling You?

It you have not already, you should really check out Ron Baker’s graduation speech post on LinkedIn: Class of 2013: What Is Calling You?

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.

DETalk–Jess Hadley–It’s Not Quantum Physics

In her DETalk, associate at John Chisholm Consulting, Jess Hadley posits that the only problem with value pricing is that not enough people know about it. It’s not quantum physics, in fact it makes complete sense even to people who have never read a business book in their life. So, how is it that many professionals don’t even know that there is a valid alternative to the dated and dehumanizing practices associated with the time-based billing model?

DETalk—W Michael Hsu-Struggling with Your Why

W. Michael Hsu of DeepSky talks about his personal struggle while searching for his (and his company’s) Why.

In this DETalk he explains the process that he went through to discover that his personal Why – to provide the younger generation the means and support to be great – was not just inline, but also inseparable, with his company’s Why – to provide entrepreneurs with the knowledge and confidence to be great.

He further suggested that the role of professional knowledge firms should really be seen as becoming the How to their customer’s Why.

The THRIVEcast – a Podcast Coming July 2011!

VeraSage is thrilled to announce that our own G. Robert Newhart Non-Value-Added Fellow, Greg Kyte is teaming up with friend of VeraSage Jason Blumer of Blumer & Associates, CPAs, PC and THRIVEal, LLC.

They promise it will be “a podcast like no other.” The THRIVEcast begins in July 2011, brought to you by the innovative people of the CloudSolutions Alliance.

Jason and Greg will take you on a journey of learning more about our profession, with a twist of dysfunction and humor.

For more information click the poster below.

Book Review: Technology, Management, and Society, by Peter Drucker

Someone once wrote that you should read Drucker just to learn how he thinks. Nowhere is that more true than this gem of a book: Technology, Management, and Society.

A collection of 12 essays, dating from 1957 to 1969, which are so evocative all I can say is we are still grappling with the issues Drucker was so prescient in foreseeing over 50 years ago. The essays are best summed up by Drucker himself:

…they stress constantly the purpose of management, which is not to be efficient but to be productive, for the human being, for economy, for society.

Drucker discusses the vital role of risk and profit in enterprise, as well as the brilliant observation that of all the institutions in society (family, church, government, professions, unions, not-for-profits, etc.) only the business enterprise is designed to create change:

Indeed, in the business enterprise we have the first institution which is designed to produce change. All human institutions since the dawn of prehistory or earlier had always been designed to prevent change—all of them: family, government, church, army.

Change has always been a catastrophic threat to human security. But in the business enterprise we have an institution that is designed to create change. It means that every business, to survive, must strive to innovate.

I can only provide a few examples of Drucker’s thinking, which do not do this little book justice. Here are some of my favorites:

But it should be said that in human institutions, such as business enterprise, measurements, strictly speaking, do not and cannot exist. It is the definition of a measurement that it be impersonal and objective, that is, extraneous to the event measured. A child’s growth is not dependent on the yardstick or influenced by being recorded.

But any measurement in a business enterprise determines action—both on the part of the measurer and the measured—and thereby directs, limits, and causes behaviour and performance of the enterprise. Measurement in the enterprise is always motivation, that is, moral force, as much as it is ratio cognoscendi.

This is another way of expressing [Ed] Kless’ Law: All measurements are judgments.

On youth, Drucker wrote this:

The young are always in the right, because time is on their side. And that means we have to change.

Executives who believe they can change one aspect of a company without affecting others are ignoring the reality of a firm being an interdependent system. Drucker explained the phenomenon this way:

There is one fundamental insight underlying all management science. It is that the business enterprise is a system of the highest order: a system whose parts are human beings contributing voluntarily of their knowledge, skill and dedication to a joint venture. And one thing characterizes all genuine systems, whether they be mechanical like the control of a missile, biological like a tree, or social like the business enterprise: it is interdependence.

The whole of a system is not necessarily improved if one particular function or part is improved or made more efficient. In fact, the system may well be damaged thereby, or even destroyed. In some cases the best way to strengthen the system may be to weaken a part—to make it less precise or less efficient. For what matters in any system is the performance of the whole; this is the result of growth and of dynamic balance, adjustment, and integration, rather than of mere technical efficiency.

This seems to be lost on advocates of Lean Six Sigma, whether in professional knowledge firms or factories.

There’s also an excellent discussion of why knowledge workers are different than manual workers, and why this requires leaders to change their thinking.

My only quibble is Drucker gives far too much credit to Frederick Taylor, who recent scholarship has determined was a fraud.

There is much else in this book to praise. Any leader would benefit from reading Drucker. A lot of his ideas maybe ignored, or unknown—like the concept of how knowledge workers are different, or the difference between efficiency and effectiveness—but that doesn’t lessen their relevance. You can be alone in your views and be right.

To paraphrase the late Senator Patrick Moynihan, “In unanimity one often found a lack of rigorous thinking.”

Good thing Drucker did the rigorous thinking for us. Read the book.

Sesame Street for Knowledge Workers

Last Sunday, my wife and I brought my son, Sean, and daughter, Cara, to the Imagination Movers concert at the Verizon Center just outside Dallas. To coin a phrase, a good time was had by all.

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For those of you not familiar with the “Movers” (as we in the hip-in-the-know-’cause-we-have-a-five-year-old crowd like to them) let me give you some quick background. The Imagination Movers are a kid-focused rock band that began when a group of four friends in New Orleans discovered they shared a similar distain for music groups oriented for children. (With this I agree with them. Barney, Teletubbies and especially The Wiggles are downright creepy.)

They achieved significant regional success, selling over 100,000 copies of their independently produced CDs. In 2006, they inked a deal with Disney and for the past three years have been one of the top-rated shows on the Disney Channel.

Aside from being a pretty darn good writers and performers, the messages they convey in their music and on their show is spot on for their audience of future knowledge workers.

Each show centers around a different customer (yes, they call them customers not clients) coming into their Idea Warehouse with a problem that needs solving. The four Movers than ask some diagnostic questions (notice they do not jump to a solution!) until they decide that they do, in fact, have an Idea Emergency (I love this term). This phrase always trips an alarm and begins the song called Brainstorming which is sung in every show.

Because there are “no bad ideas when you’re brainstorming,” the Movers always end up solving the problem for their customer. Now the exchange of money is never talked about, but a few of the shows have focused around the guys solving some of their own problems, including one episode in which they record a TV commercial to attract more customers. In another episode, Bad Hair Day (one of my son’s, OK, one of my favorites), they need to help Mover Scott get his hair under control so they can take a picture for the newspaper.

In the first season, there was a neighbor called Knit-Knots who always wore beige, played only one note on his tuba (b-flat because, “the b stood for boring and the flat made it extra boring”), and did nothing in his office but “staple, stamp and stack” papers. While I rather enjoyed this slam at the monotony of the office service worker, it was clear that after season one, the gag had played itself out and Knit-Knots is not in season two or three.

Knit-Knots’ niece, Nina, however, has continued on the show in part to bring some female presence, but mostly because the actress that plays Nina, Wendy Calio is quite a talent herself.  The live concert featured her in a cover of The Black-Eyed Peas’ I’ve Got a Feeling. Dare I say, she has a much better voice than Fergie.

 

I strongly recommend the Imagination Movers to any of you with children or grandchildren. Heck, maybe it should be required viewing for all current knowledge workers.

Why are Big 4 and Top 100 Firms Slow to Change Business Model?

Why hasn’t one Top 100 accounting or law firm adopted Value Pricing and replaced timesheets?

After all, Crispin and Porter, an advertising agency with over 1,000 employees, does not do timesheets and Value Prices all its work.

Further, Coca-Cola and Procter & Gamble do not look at timesheets or billable hours in compensating their thousands of advertising agencies.

This is one of the topics we discussed at our recent VeraSage Conference in Napa, California.

Kurt Siemers, CEO of Kennedy and Coe, was in attendance and gave us his thoughts on this topic as well.

At a major meeting of large firms that Tom Hood facilitated, changing the reigning business model was number 4 on the list of priorities, which is encouraging.

To be fair, Kurt’s firm is in the Top 100 and has made significant progress in the area of implementing Value Pricing.

Tom Hood conducted interviews with Kurt Siemers, and myself after the conference.

What About the Big 4?

Brent Uken is a principal at Ernst & Young, a friend of VeraSage, and a profound and deep thinker.

Unfortunately, Brent couldn’t attend the meeting, but sent us his thoughts on why the Big 4 are slow to adopt—and by adopt, we mean change their business models from “We sell time” to “We sell intellectual capital.”

The following analysis from Brent, we think, is absolutely profound and is illustrative of what we in the professions are up against in our Quest to change the dying business model of professional firms.

Ron,

On the “slow to adopt” topic, let me offer my perspective and opinions.

What follows are candid thoughts that represent broad themes. No doubt that in an organization of 100,000+ you can find exceptions to what follows, but I believe based on my tenure/exposure within the firm, that these are in large part accurate.

  • If it’s slow to adopt abolishing timesheets—I think that’s a non-starter. It will take firms/organizations outside of the Big 4 to effect this change, and they will migrate to it eventually—but only when forced to.

    There are several reasons why, but I believe the most compelling are that:

    1. there are decades of culture around the use of timesheets (it’s embedded in the stories we tell);
    2. timesheets are literally at the center of all financial reporting in the firm;
    3. there is too much investment in timesheets and related financial systems for senior management to move in a different direction.

    Specifically on the last point, as liberating and competitively advantageous as it would be to do so, our senior leaders know no other way, and it would be too threatening for them to discard what many have built their careers around.

    Case in point: we still measure revenue per hour to the dollar on a weekly basis, produce literally thousands of pages of metrics a month that are based on the “chargeable hour” as the denominator in the equation, etc.

    Case in point #2: Hours x rates x realization is how we measure revenue…revenue, arguably the most important measure of performance in the firm.

  • If it’s slow to adopt value pricing—I am much more optimistic. However, it is amazing to me that we continue with old/sub-optimal behaviors even in the face of concrete evidence that contradicts them.

    As you and I have discussed, I know that it is human nature to do so—to remain on the shores of the familiar, as the forces that draw us to the familiar are incredibly strong. Nothing new to you here.

    I think in the Big 4, however, the culture around timesheets and value pricing are linked (and if we can’t migrate away from timesheets/charged hours, by extension it’s going to be difficult to migrate to value pricing).

    We’ve literally been trained (indoctrinated) that we sell our time, that we bill by the hour, and that clients want/expect us to bill by the hour and will not tolerate any other arrangement.

    What perpetuates this is that indeed some clients, perhaps due to habit—perhaps because some are astute (they capture more of the value created by our services if they pay by the hour)—would prefer hourly billing (so there is just enough “evidence” in the market that supports our professionals’ views that it is the most appropriate billing arrangement for our services).

  • I don’t believe that we really understand the value equation, or maxims like “strategy dictates spend.”

    I think we’ve lost our relevance, and that the supply-demand curve for our services has shifted against us over the past decade.

    Not so long ago, there was more than enough work to be had, and not enough capacity in the industry (remember it wasn’t too long ago that Andersen was imploding, SOX was being introduced, etc.—heck, we were even firing clients!!).

    That resulted in strong financial results, but it provided zero incentive to think differently. In sum, we are not identifying and understanding our clients’ strategic objectives. Obviously, if we don’t even know what they are, it’s impossible to align with them, support them—or help our clients achieve them.

  • We haven’t cracked the code on structure, either. There’s a thought provoking book entitled ReOrganize for Resilience that powerfully drives this point home.

    We have been too internally focused for too long, and our structure doesn’t allow us to shift our focus to what is most important—the problems, initiatives and strategic objectives of our customers.

    Our structure and performance management metrics are barriers we need to reduce/eliminate.

  • We have trouble articulating our own strategy. We’ve allowed benchmarking to peers and operating efficiency to be our proxy for strategy for so long that I can’t say that there’s much that’s truly unique about any of the Big 4.

    And what’s implemented by one is quickly copied or adopted by another.

    I do believe that we have the potential to truly differentiate, but we’re not seizing it. We haven’t found our competitive advantage or created a “blue ocean” (reference to Blue Ocean Strategy).

    In my mind, the Big 4 is the epitome of competitive convergence (reference to Michael Porter’s HBR article, “What is Strategy?”).

    On a related note, to draw on Theodore Levitt’s work (“Marketing Myopia”), we don’t know what business we’re in, or what our customers truly value.

  • We’re over managed and under-led. We could benefit from revising the “Why?” question, as we’ve been differentially focused on the “What?” and “How?”

    It would be refreshing to have something that is truly bigger than each of us to rally around, and to have a leader(s) articulate a compelling vision and rallying cry.

    It is easy to get lost in the day-to-day activities that masquerade as importance. The advice Drucker provides is truly timeless, and unfortunately we aren’t heeding it.

These are some of the major forces at play that are top of mind currently. I’m still trying to flesh this out, however…and I need to, as I create/align the change management strategy required to move us forward.

Contrary to the tone I may have set above, all is not lost.

Instead of the foregoing truly depressing me, I am extremely hopeful/optimistic. Because if we (EY, TAS, CT, Valuation—all the groups I am affiliated with) can figure this out, we can make the quantum leap over our competitors (Big 4 and others).

The resources and talent are there, and we do have a strong base on which to build (we’re a large firm with strong operating results and strong client base).

I personally feel that it is my responsibility to make this happen. As campy as it sounds, I truly feel that I’m on a crusade to effect the change we need.

I have 15 years left with the firm until I am forced to retire, and the clock is ticking for me. I want my legacy to be that I was the one at the center of this movement.

I hope this helps further the dialogue this weekend. Have a most excellent session!

Regards,
Brent

I’ve talked to a lot of Big 4 folks, and outside of the marketing and talent areas, it’s nearly impossible to find someone who gets it as much as Brent does.

Samuel Adams was right:

It does not take a majority to prevail, but rather an irate, tireless minority keen on setting brushfires of freedom in the minds of men.

Allow me to close by quoting Peter Drucker on two points (from a masterful book, Technology, Management, and Society). The first is why professions are so slow to change:

Indeed, in the business enterprise we have the first institution which is designed to produce change. All human institutions since the dawn of prehistory or earlier had always been designed to prevent change—all of them: family, government, church, army.

Change has always been a catastrophic threat to human security. But in the business enterprise we have an institution that is designed to create change. It means that every business, to survive, must strive to innovate.

The professions are not exactly incubators of innovation. I addressed this topic in my VeraSage DET in Napa (note: We will be posting in the future all of the VeraSage DET talks given in Napa).

The second point is illustrated by the pithy line from physicist Max Planck:

A new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die, and a new generation grows up that is familiar with it.

This statement has often been interpreted as “science progresses funeral by funeral.”

This seems a rather pessimistic view of mankind’s progress, as if we had to line up our elders and shoot them in order to advance. Yet, sometimes it seems so.

Again, Peter Drucker said it best:

The young are always in the right, because time is on their side. And that means we have to change.

Among those young professionals is Jason Blumer and Michael Hsu.

Tom Hood conducted an interview with Michael Hsu after the VeraSage Conference, a young CPA who embraces our radical business model.

No doubt that young knowledge workers are going to be the main driver of change in the professions, since they are not overly invested in a business model that is already dying.

What do you think?

HSD: Young Professional from New Zealand Reviews Mind Over Matter

I received a wonderful email last week that reaffirms my faith that VeraSage is making an enormous difference in the professional sectors, around the world.

I’ve long believed that if we are going to get firms to adopt Firm of the Future practices, we must get in front of Young Professionals, the leaders of tomorrow.

One such leader is Art, from New Zealand, who sent me the following email, providing an enormous HSD—High Satisfaction Day.

Dear Ron

You may be surprised to receive this email but I felt compelled to write to you and pass on my sincere appreciation as I finished your book, Mind Over Matter, in one evening and it profoundly changed the way I view my future and see the world. I believe your book had a profound effect on me as George Gilder’s Wealth and Poverty had on you back in 1981.

The ironic thing is that I am also an accountant and am studying towards my final CPA exam in October. I stumbled across your book at the university’s library while I was wondering around, browsing Peter Drucker’s books

To top it up, Peter Drucker is also your favourite Management writer. No one here at my workplace even heard of Drucker while I have been reading his books since my university years. And as far as Drucker’s principle goes, the one that I have been living with on a daily basis is, “The best way to predict the future is to create it”.

Ron—I wrote a long email but my key message is to express my gratitude for your ideas and example. Thank you Ron and I wish you all the best.

Best Wishes,
Art

Art was then kind enough to write the second review of Mind Over Matter on Amazon.com, which reads:

I stumbled across a copy of Mind over Matter while studying for my CPA examination in the library. I borrowed it and finished it in one evening. I am a young professional who has been thinking about what he wants to do with his career and hence his future. This book, luckily, does not tell me “what” my future should be, but instead it made me think about the “why” of my future direction in life.

A young professional, particularly those who are serious about their careers and self-development, should read this book for many reasons:

  1. This book will challenge your current worldview about professional knowledge industry and the role your “intellectual capital” can enhance your capability as a future leader.
  2. This book draws from the world’s greatest thinkers and economists, combining with the author’s proposition, to provide a rich discussion about what it takes to be a first-rate knowledge worker in the 21st century.
  3. The author’s own life story will serve as an inspiration for many young professionals to “fly higher” and be brave enough to live their dreams and not settling for anything less.

I am so grateful to have found this little gem and I hope you will feel the same after reading it. The most amazing about being human is our mind, and this book tells you why our mind needs to be trained to achieve its potentials.

Thanks Art, I look forward to following your career path. I know you will make a dent in the world.