Will Uber Kill Time-Based Billing?

Why would Uber’s business model impact the standard billing method of established professional firms?

An interesting observation was made on a radio program I was listening to last night.  Apparently a number of taxi operators in larger cities in the US are now doing all their pricing up-front for the passenger before they start the trip.  This means that the old  method of turning on the meter and charging what the end result was is becoming redundant as the taxi operators have worked out that the customer wants pricing certainty.  If the cabdriver doesn’t provide it, the customer will go to Uber…

The disruption Uber has caused within the taxi industry globally has been well documented, however, it did get me thinking.

With increased penetration of up-front pricing for work that used to be based on an set (arbitrary?) rate by time, customers from all segments of the economy are going to start to question the logic of entering a transaction with no known end price.  Where very other industry is going down the path of providing pricing certainty on commencement of a piece of work, why do the professions still believe they are immune from the impacts of the change?

In many respects, the taxi industry is similar to the professions – time by rate and it doesn’t matter to the provider how many hours (or miles) are spent on a job as they will know they are getting paid “for what they do”.  The sad thing is this has been ripe for exploitation (who hasn’t been in a taxi which “took the long way” to get somewhere?)  Unfortunately, it doesn’t create a great experience for the user of the services as they just have to grimace and wear it.

Disruption in pricing and business models is going to increase and roll through many other industries and professions that used to work on the time by rate model.  Customers are experiencing more of it and are going to demand more of it.

Those firms that start on the path to pricing on purpose will see themselves gain a competitive advantage – those that don’t will wonder what the hell happened.

Have a look around the Verasage site – there’s lots of rich material in here (esp recommend a solid listen to Ron and Ed on their “The Soul of Enterprise” podcasts).

The professions are going to become “Ubered”.  I hope they are ready for it.

Beware the Progressive Promise

With more firms moving to the Verasage pricing model (good on them – great move), we occasionally come across examples where firms haven’t really arranged their systems and processes to support the delivery of services.

idea

We are fortunate enough to be picking up a new customer (via referral) from a competitor who has “productised” their offering and built their model around cloud accounting.  Terrific.

The customer in question has been working with their accountant for many years and supported them as they moved the model to an agreed pricing platform (I don’t believe based on our discussions with the customer that the firm is anywhere near value pricing their services).  They had been paying the monthly direct debit to cover all the services required.  They had been providing all the information required to enable the firm to do what was required.

Now, put yourself in this customer’s shoes.  They’ve been paying a monthly amount to the firm for the various compliance obligations for the past three years.  However, they have only just now received the financials and tax returns for 2013/14 and 2014/15.  Are they frustrated?  Bloody oath.

To be clear here, they are pretty happy with the quality of the work they were getting – when they got it.  They were driven up the wall by the constant chasing up to get information from the firm.  They like the accountant they have been working with.  But they feel like they have been “left for dead”.  The experience they have had has been very unsettling for them. As they said – “we’ve paid for the work, why hasn’t it been done?”

Many firms are making the move to productising their offerings and moving more to an agreed pricing model.

They fall down badly though when their focus is on marketing and “brand building” rather than service delivery.

Having your customers pay into your account regularly is great for your cashflow.  When you’re not delivering the services agreed to under that model, you have a problem.

The firm our new customer was going to is widely lauded as a “leader” in its field.  It is held up as a paragon of virtue and “a major disruptor”.  The problem is, the lived experience of their customers doesn’t support the hype.

We will be making sure we deliver our agreed services to them on time and support them up hill and down dale.  We will also regularly check in with them to ensure they are happy with our delivery and service.  The great thing is, once they get embedded into our firm, they are wanting to refer a whole heap of their mates to us who are also with this “progressive” firm as they are all having the same experience.

The other thing is, we are value pricing the engagement with the customer.  They are wanting a heap more real-value services and they are more than happy to pay for them.  This is money the “disruptive, progressive” firm was leaving on the table by productising their offering.  The firm’s focus wasn’t on the customer, and that has created a marvellous opportunity for us.

When you do go down the path of changing your model, please ensure that you deliver what you agree to and keep the customer in the loop.  It’s no use being a “leader” in the industry/profession if your walk doesn’t match your talk.

You also need to have the value conversation with the customer and listen to their needs and wants.

Ends up being a far better outcome for all concerned.

Could not say it better myself!

Only just received the 2015 copy of the “Good, Bad Ugly” report on the Australian Accounting profession prepared by Business Fitness.  Makes for interesting reading.

head in the sand

There are a couple of points that are worth repeating:

  • revenue per partner has decreased by 8.9%;
  • average client fees have reduced by over 18% in the past two years;
  • for firms using timesheets, productivity is falling;
  • lower marketing spend over the past three years; and
  • 6% increase in firms using outsourcing (reasonable number, but not very many firms are doing it).

There is one very telling comment made in the introduction to the statistics in the report (my highlights):

When analysing the 14 years’ worth
of data relating to high-performing
firms, we can conclusively say that
productivity based on chargeable
hours has no correlation to
profitability.

Having just returned from the Verasage get-together in Boston, it has become even more apparent that the old models of firm management are not only redundant, they are dangerous.  Much of the discussion at the symposium related to the way successful firms focus on relationships – both internal and external.  This has to do with building, maintaining and honoring decent relationships.  Not relationships where everything is about flogging the crap out of your people and billing the hell out of your clients.  Relationships which are based on trust, accountability and common goals.

Having seen the damage done by the Almighty Billable Hour and looking at the impact this approach has on the cultures of firms, it amazes me that so many firms still use this model.

There is change already here in our industry and, as the GBU report reveals, this change is having an all-pervasive impact on our profession.  Either adapt or die.

Does this Really Work?

Ohhhh, the frustration!

I recently posted about a seminar I attended last week.  The feedback I have received from that post has been significant.  The responses have ranged from “Oh my Lord – that’s us” to “so, there is a way forward”.  Great, but I want to concentrate on the first type of replies received.

So many firms understand that the way they operate and their business model isn’t great, but it’s all that they know.  To try and move them to a new, more effective model takes a great leap in mental construct on behalf of the owners and managers in those firms.

One of the responses I received was from a bloke I know well who has just taken over as CEO of a professional knowledge firm.  Well established, reasonable size and “good, traditional” brand.  And he is frustrated up the wazoo!

It would appear from his email that the following issues pervade the organisation:

  • staff are rewarded with bonuses for hitting “productivity” targets;
  • The transfer from WIP into debtors (you know – actually billing the customer) is fraught in that, once the bills are raised, the customers get pissed off;
  • Consequence of this is that a lot of work remains in WIP as the senior people responsible for billing the WIP are too scared to raise the bill as they don’t want to have to deal with an angry customer;
  • Debtors ledger is out of control as there are a large amount of accounts “in dispute” which means that the whole thing is taking a massive amount of time and effort to clean up.

Now, from my view, this appears to be the antithesis of everything a professional knowledge firm should be.  Let me posit my view of the warped thinking that enables such an environment to exist, let alone continue:

Productivity

We want our people to be working – agree on that.  But, do we want them to be working on things that make a difference to the customer and are valued by the customer or do we want them doing things that waste a heap of time on customer accounts?  The behaviour you reward is the behaviour that continues.  By tying rewards (bonuses) to productivity targets, we are encouraging our people to bill as much time to the Holy WIP Ledger as possible.  The argument goes that, when we record everything, it gives us a basis for billing everything to the customer (more on this below).

But what is the real message that we are sending to our people when we bonus (often ridiculous) productivity?  Is it a message about effectiveness?  And is it really a message about efficiency?  Too many times, firm leaders sprout on about efficiency but the bonusing system actually penalises people from working more efficiently as their productivity targets won’t be met (the thinking goes: if I do this job more quickly, I won’t spend as much time and therefore, I stand less chance of getting the bonus).  Where is the incentive for them to be more “efficient”?

As part of this system, you get the inevitable build up of your Holy WIP Ledger.  Many firms see this as a “lead indicator” (as per last week’s post) when, in fact, it is a wish list that often bears very little resemblance to collection.

The other message you send to your people with the focus on hitting production targets as far as time spent is that they will only see a customer as something to be billed, not valued.  The training that occurs as a consequence is that the “up and comers” get taught that to get ahead, you need to focus on pleasing the partner/manager with high productivity rather than pleasing the customer by delivering great outcomes.

As an aside, it is often the case that the less senior people very rarely (if ever) get to meet with the customers.  How is this going to play out in their career development?  How is this going to assist them with understanding the file and the customer needs?  All information is “filtered” through the senior people before it gets to the actual “doers” of the work.  The outcome – they flog their guts out to get promoted and then have no experience in dealing with customers face to face.  I know of one firm in town here where the only people who see customers are the partners.  Talk about rate limiting factors!  An obvious outcome of this is that there is more rework required and heavier partner involvement in getting a file “customer ready” as the instructions are, more often than not, “lost in translation”.  This though, in the warped world of timesheet based billing, is good – more chargeable hours to bill, higher “productivity” and a bigger Holy WIP Ledger.

Holy WIP Ledger (HWL)

So, we have a whole heap of people billing the Holy WIP ledger as hard as they can as this is the basis on which they get rewarded.  The HWL is seen as a current asset in the books of the business and the financiers and owners of the business see it as “money in the bank”.  All that needs to happen is for it to be billed.

Herein lies a bit of a problem.  I have yet to meet with a firm where they state, honestly, that the HWL is fully recoverable.  I know of one firm I have been dealing with who ran a HWL that was a pure estimate.  They had timesheets to (sort of) back it up, but they knew that they were all rubbish so they just did an estimate.  It was probably as approximately right as the timesheet based one anyway.

I recently did some work for a customer in a professional knowledge firm regarding the exit of a Partner.  The HWL was obviously an issue to be addressed as the approach they were considering was one based on a mixture of profit and net assets.  To get a true picture of net assets, there needed to be a full review of the HWL as everyone recognised that it was not valid and certainly not all collectible.  In this circumstance, I suggested that we not go through this process.  Instead, we developed an approach which looked at what the exiting Partner was happy to receive for his equity and what the continuing equity holders were prepared to pay for the share.  As I said to the Managing Partner – “We can go through the whole process and get a result.  The real risk here is, whilst it might be very right as far as the number goes, someone is likely to be pissed off”.  The approach we used meant that my business didn’t get a whole heap of extra money for going through the valuation process, but, we did ensure that the Partners (exited and remaining) have kept very very good relationships and our customer very much values the creative approach we have adopted to solve their problem.  In short, we provided value rather than a number.  And we have further strengthened our relationship which will lead to more referrals and customer longevity.

The HWL is never right.  The term in most professional firms is “lock-up” – how many days the firm has “locked up” in WIP and debtors.  Often time, this number is horrendous – I know of some firms who have nearly one year’s worth of revenue “locked up”.  For what purpose?  You can’t spend it as it’s not real.  Why bother measuring something that is so subjective as to be useless?

Debtors

To get a bill done from your HWL, it needs to go through a process.  Often, it will be a senior person or Partner who goes through this process.  More often than not, they will sit down and agonise over the process “If I bill them what’s on the HWL, they will have a melt-down”.  So, what happens is that a bill will be raised against the customer for some portion of the HWL balance outstanding – in effect, what the person doing the billing believes they can get away with.  Conversely, if you do bill them for everything that’s on the HWL, you are almost guaranteed to get a pissed off customer on the phone three days later (or, worse, never – as they quietly leave and have no intention of using you again – or paying your bill).  There is no positive outcome that arises from this.  For anyone.

Now, the current thinking with regard to this is that firms should budget for “write-offs”.  In other words, they are saying (in words and deeds) that they know the HWL is crap.  But they then hold that the basis of their charging of the client is on time spent.  So, if the client has agreed to appoint them on time spent and they don’t bill the full time, are they really engaging them on that basis or on a “best estimate” at the end of the job?  This is where “estimated ranges” of accounts come in to it.  The client is told the cost of doing the work will be in the “range” of (say) $5,000 and $10,000.  The client hears “$5,000”, the Partner hears “$10,000”.  When the bill ends up being $8,000, both parties are pissed off.

What happens more often than people care to recognise is that there is a lot of “stuff” on the HWL that the senior guys are just too scared to bill.  I have seen some aged HWLs which record work done up to two years prior that is yet to be billed.  Seriously?  Is it ever going to be billed?  Or is it just there as a tacit admission that the system ultimately doesn’t work?  This then leads to other KPIs in firms about the ageing of HWL.  Most of these are there but not adhered to.  If the WIP isn’t billable, write it off – with all the “appropriate” consequences.

But, back to the staff posting time to the HWL.  How do they feel when the time they put in to a client is then written off?  Where is the feelgood out of this?  For anyone?  What is their thinking at the end of a job when, they are encouraged and incentivised to record all the time only to have it written off?  How will they think about the Manager/Partner who has “done this to them”?  What message does it send about the “system”?

So, after much navel gazing and internal brinkmanship, the bill is sent out to the unsuspecting customer.  The customer gets angry.  Now, one of two things happens.  The customer ring the Partner to have a whinge about the bill – the firms sends out a detailed HWL report to the customer detailing everything they have done (including the 15 minute phone call – billed as 18 minutes – where the customer recalls at least half of it was spent discussing the football results) for the period the bill covers.  Guess what, they get more angry “They’re charging me for what?”  Then they start to do the maths.  “If he is $500 per hour and he spent 8 minutes talking about the football, he wants me to pay him $100 for that?”  Not a great outcome.

Source:  geektoauthor.blogspot.com.au

Source: geektoauthor.blogspot.com.au

The other thing that can happen is that the customer simply doesn’t pay the bill.  So, they start to get harassed by the ever-vigilant accounts department in the firm.  The “friendly reminders” come out, then the “is there a problem” letters and so on until the letters get more threatening.  Really good, positive stuff about customer engagement through this whole process.

At the end of the day, it gets nasty and people start defending positions.  The firm will (usually) relent and write-off a part or the whole bill or, sadly, take the customer to arbitration.  On this note, I remember a number of years ago when Ron Baker did his “Firm of the Future” tour around Australia.  During this tour, I met with a number of the Legal Services Commissioners from various states around Australia.  Their major source of work?  Fee disputes.  Their fervent wish was that all firms priced up front as the firms that did this hardly ever had a fee dispute.

So, we have a debtors ledger that is somewhat suspect as to the real collectability of the balance.  Which means, when coupled with the HWL, the “lock up”metric used by a number of firms is inherently questionable.

After all of the above, is it any wonder why my firm dumped timesheets in 2007?  It has saved innumerable hours, it has reduced customer complaints and has meant that the team in here are far more focused on delivering positive customer results rather than inputs.  As stated above, the behaviours you get in your firm are the ones that you reward.  Is your reward program incentivising the right behaviours?  Is your firm business model one which is team and customer focused?

There is a better way of running a professional knowledge firm.  Far less stressful, more enjoyable and one where you actually want to come to work.  if you look after your people and customers, the profits will (generally) look after themselves.

The frustration of firm management can be reduced and/or removed.  There are a band of highly experienced guys and girls at the Verasage Institute who can help you make the move.  But you have to make the first step.  I strongly encourage you to do so.

The Pain of Old Firm Management

This week, I attended a seminar where, to be frank, there were some arguments put that had me considering the option of tearing my skin off and rolling in salt – it would have been less painful.

Hell

Consider some of the points made at in one of the presentations at the seminar (and this is not an exhaustive list, my comments/thoughts are in italics):

  • You should get your “star performers” and keep loading them up with work as they get in front of the pack.  In effect, reward them for their great performance by loading them up even more and putting more pressure on them – what an incentive that is!;
  • Apparently, your WIP balance is a leading indicator for your firm (!) – not sure how this works, but some in the room lapped it up – how exactly is the WIP report a lead indicator other than for the bills you are going to raise at the end of the month which will be the cause of the client complaints in the month following?  So, maybe it is a lead indicator – of client complaints – the higher the WIP, the more complaints;
  • The seminal approach to customer happiness: “If you touch the client, you bill the client – for everything”.  This phrase reminded me of a discussion I had the other week with a somewhat more visionary firm in Adelaide.  They have some folk who are not all that happy not recording the time they spend working on/for/with/around their customers.  I asked them during the discussion “Do you record the time you spend thinking about your customers over the weekend or at night when you’re at home?”  Of course they don’t.  However, according to the approach being promoted, you should.  Work that out, or, better yet – set a budget for it!;
  • You need to budget for write-offs each month;
  • References to “fixed price estimates” – what, exactly, are these? I have been racking my brain about this – if someone can provide some clarity for me around this concept, I would be grateful;
  • Apparently, client satisfaction is important, “but we do have to make a profit though” – in essence, the firm’s goal is profit first – if that has anything to do with happy customers, all well and good.  To me, this seems somewhat arse-about;
  • You need to ensure that your clients understand that their actions reduce firm efficiency – OMFG.  So, we should punish the clients for interrupting our work – actually laughed out loud at this one; and
  • Clients need to pay for the inconvenience they cause – as it would seem that they are the cause of all the problems that exist in the first place.

According to the sage presenting this, “clients don’t understand how accounting firms work”.  Really?  Do they need to?

It was argued that firms need to focus on productivity and efficiency at any cost as these are your major drivers for profit.  You need to ensure that you are flogging the be-Jesus out of your people (they will apparently love you for it) and encouraging them to work harder so that you can load them up even more.  This bit I found offensive.  People are volunteers in your business – they can choose to turn up or not.  I hear many firms complain about staff-churn and turnover – any bloody wonder!  If your culture sucks, you get the team you deserve.  Culture is the result of the language, behaviors and focus of a business.  If these are all based around profit at any price, then they get the culture that supports that.  Won’t be happy or contributory or collaborative, but it will be, well, there.

I have been a willing recipient of the famous “Verasage Headache” on numerous occasions.  They are positive, challenging and serve to help me grow.

Unfortunately, the headache I received from this session was entirely different.  It is a headache based around people being measured on productivity and chargeable hours rather than on effectiveness and customer relationships.  It is a headache that resulted from arguing that the customer is there to be charged heavily and charged often – this based on the theory that any bill they get from you will be a good bill (driven, of course, by your “leading indicator” WIP report).

So, at the end of the session, I felt sad.  Very sad.  There were owners and managers of accounting firms in the room who were assiduously taking notes – picking up tips to make them better at flogging the crap out of their people and not really giving a shit about their customers.

Tim, our GM, was at the session with me.  His words at the end of it summed the whole thing up beautifully – “Pretty scary shit actually”.

The salt room beckoned.

 

The Medical Approach – The 3 “Abilitys” (and Cheese)

Friday night last week was not a bad night – a bit cold and wet, but with a roaring fire and some lovely wine and cheese, the evening progressed very comfortably ( I can highly recommend the Tarago River “Shadows of Blue“).  One of my best mates came around to watch his football team get flogged – it was such an enjoyable spectacle that we ended up watching soccer and the Tour de France.

Over the course of the evening, we discussed many things and one of the topics we covered was the “ideal” approach that Doctors should have with their patients.  To provide some context, my mate is a specialist Surgeon and has built a wonderful reputation in his field.  He also teaches trainee surgeons and is on the examination panel for the Royal Australian College of Surgeons.  All this is very surprising considering he supports Carlton Football Club.

As our conversation opened up, he shared with me the three factors that make for better doctor/patient relationships.  His view was that where these three factors are in place and in order, the patient is happier, the health outcomes are generally better and there are fewer claims for adverse outcomes against the specialist.

The factors and the order?  They are:

  1. Availability;
  2. Affability; and
  3. Ability.

In precisely that order.

patient satisfaction

Expanding this approach through to other professions, it appears to me as though this might just be the most simple and easily understood “guide” for all of us.

Think about the customers whom you love dealing with.  They will be the ones you make yourself readily available to.  They are also the ones where you have a great personal relationship.  And, generally, they won’t be overly focused on your technical ability as the relationship is the thing that resonates most with and for them.  They respect your technical ability, but they value the relationship.

Over the weekend, I have reflected deeply on this approach and I believe it is something that we all should be aware of in our dealings with customers (in fact, everyone).

If you have a customer who is a pain and who you avoid contacting, nothing good is going to happen from the relationship.  This situation is one where you need to consider the real value that you are bringing to the relationship and determine whether it really is one that you should maintain.  Where you recognise that you don’t currently have the desire to be as available for a customer as you should be, is the relationship able to be recovered or should it be terminated?  I know that over my career, I have had numerous situations of this type.  They are really hard work and, even though you might get great results for them, there is very little satisfaction derived from the outcome.

Secondly, if you have a customer around whom you cannot be yourself and where you find your communication stifled and difficult, does this allow you to bring your “full game” to the relationship?  If you aren’t being yourself (or worse, if they aren’t being themselves), can this be rectified or should it be discontinued?  Again, there have been numerous occasions where I have had customers around whom I had to adapt my style and deliver with a very “serious” (so-called “professional”) demeanor.  This is hard work – for them and me and my experience tells me that the absence of this factor in a relationship makes the whole process less satisfying for all concerned.

The ability thing I am leaving out here as, if the first two factors aren’t present, it doesn’t matter how good your ability is, the relationship will be difficult to nurture and develop.

This is only a short post to introduce the approach to this forum.  I would love to get your feedback on this – it appears to be so simple, concise and to-the-point that you may wish to consider using it in your customer selection and retention process.  I will be.

Now, where has that cheese gone?

 

 

The Measurement Focus

In recent posts here, I have argued as to the effectiveness of various forms of measurement and their utility in managing outcomes.

I have just posted in further detail on our firm website (and, to keep Ron and Ed happy, I haven’t referred to cricket, but rather Aussie Rules football).  I encourage you to have a read – let me know what your thoughts are.

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.

apple

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!

Customer Service and Moments of Truth

Moments of Truth

            Each customer interaction is a “moment of truth”. And the savings bank of previous good works can be depleted with one poor interaction. One disappointment is all it takes. One gatekeeper that could have used judgment applied to a specific situation. One opportunity to understand that the happy customer tells few and the frustrated customer tells many.

If it isn’t clear by now, I was on the receiving end of a terrible customer experience. What is even worse, this is with my preferred brand.  A brand that I have had 2+ decades of great experiences and happiness with. And today – all of that is at risk. It is early enough in the year for me to make a shift and share my $50k to $100k annual spend on alternative options.

My frustration today is with American Airlines (www.aa.com)(twitter @AmericanAir). I was beginning my 2nd leg of 3 flights today spanning about 17 total hours and maybe 4,500 + miles. I have logged over 3.5 million miles with AA and its One World affiliates. I have been to each and every continent and I have been an Executive Platinum (One World Emerald) Member for about 10 years. I am a loyal customer with the singular ability to direct my spend. I choose where to spend my money and I may be choosing elsewhere.

If you have ever had the displeasure to fly through Miami International Airport (MIA) you already understand it is a challenge on good days and on bad days it is a nightmare. Customs lines are generally long. The crowds can be maddening. The inbound and outbound rush that is all too frequent in southern Florida all lead to a pressure cooker environment.

One reason for investing in the likes of Global Entry for speedier customs and immigration and AAdmirals Clubs for relaxation, work spaces, and snacks is to make the difference between a good day and frankly a frustrating travel day.

Today – the savings bank of American Airlines’ great work went flushing down the proverbial toilette. And it didn’t need to be that way. I will admit that I wasn’t in the best mood when I entered the club today. The immediately preceding phone calls had frustrated me. I was flying out the E terminal (which I detest) and on the US Airways part of the new American (which I am unfamiliar with).

AA in conjunction with its One World partners (BA and Iberia) now operate a Premium Lounge near the E Gates (this is an old Admiral’s Club location). – Note I arrived in D gates from Nassau, Bahamas and had to transit to the E terminal . There are two Admiral’s clubs in the D Terminals but those are, at best, a 10-15 minute walk to the E gates and I researched the usage of the E Terminal Priority Lounge prior to arriving in MIA. I did this because I needed some Internet time, a bathroom break, and a cup of tea. I was planning on spending my 20-30 minutes between flights being productive and relaxed.

Instead I received bitchy attitude from an AA Club Employee that only cranked me up and ultimately denied my wife’s entry that which should have been offered, even if the “rule book” didn’t think so. This is where that Moment of Truth arrives and in their moment – their truth frankly Sucked. It sucks so much I am concerned I won’t forgive and I guarantee I won’t forget.

As many of you already know, I (along with my colleagues) tour the world speaking and writing about customer experiences, great expectations, and the difference between a mediocre company and a brilliant one. The profit margins of airlines are so thin that disgruntled premier flyers are impactful. Frankly, at the amount I fly (2014 225+ total segments split mostly between Alaska and American and 2013 slighty more) they should treat anyone at my level special.   – As an additional aside, a colleague of mine who has flown more cumulative miles but not at my pace over the past few years was provided a Concierge Key – for gods sake I should have one those.

Today’s Moment of Truth has passed. A Scotch on the Rocks before takeoff has helped a little. Writing this has helped even more. Believing that you may read this and tweet about it so your friends will know to avoid AA Terminal E if possible, especially if they believe they should be invited into the Club, makes me feel even better.

It is funny, my wife who is traveling with me, and a genuinely nice person, even commented that the “lady at the desk had a bitchy attitude” – that is telling. If you want to share this – of course add #AmericanAir to your tweet. Maybe we can have them recognize this challenge.

For the record, here is the language from their website:

The AA, BA, IB Premium lounge is open daily from 1 p.m. to 9 p.m. and welcomes oneworld eligible International First Class, Business Class and Emerald and Sapphire customers. Customers traveling on an AA-operated transcontinental full fare First Class (F and Z inventory) or full fare Business Class (J and U inventory) ticket, as well as Admirals Club members departing from Concourse E, may also access the lounge

 

They would have allowed me in; but not my wife. What did they want me to do, leave her in the hallway? It isn’t like we were a dozen people. It wasn’t like we were going to drink them into bankruptcy. It wasn’t like they didn’t have the room. It was a bureaucratic response to what I truly believed was an earned and paid for accommodation. In fact she suggested at one point that she turned away another person and they quietly said ok. Well I am not that quiet especially when I believe I am within my standing. This is about the customer and not about the bureaucracy. I advised her that their website was vague and unclear. She argued with me. I launched my web browser – I read her the information – and she continued to deny my wife entrance and frankly that was a bad decision.

Her (the desk receptionist at the club) defenses were as follows:

 

  • We always have operated this way (who cares)
  • This isn’t the Admiral’s Club (like I am freaking stupid)
  • Yes your wife is on a F class ticket but is it a transcontinental flight (well if Miami to Portland via Charlotte isn’t at least a transcontinental flight at least I am crossing the continent and they don’t fly to Portland direct from MIA or I would have been on that flight.
  • Yes you are on an international itinerary but we don’t count Nassau as international (well whoop-de-do) your website conveniently omits that and by the way – the US State Department considers the Bahamas as international
  • Yes you are on an international itinerary, in first class, on full fare, but “this isn’t an arrivals lounge” – like no Shi* Sherlock. I never claimed it was an arrival’s lounge
  • Yes you are an Exec Plat member but these Premium Clubs only allow the “member” in. Really? Better check with the Marco Polo Clubs, the Qantas Club, the BA First Class Lounge – as I can guarantee that I (and a guest) are graciously admitted (not two guests by the way – so that is known).
  • I pointed out that their website was unclear. I pointed out that I was an Admiral’s Club Member. She acknowledged that. She said it doesn’t say “guest” and hence my wife of 20 years was not allowed in. This policy is stupid and their writing is unclear. And who’s responsible for that? Certainly not me as I didn’t write it.

 

She looked at me like I was an alien and she talked to me like I was a toddler – that only made my hair stand up and I can bark right back. Oh and remember, I am the customer. One should remember that. She could have said, let me call my supervisor or let me get you a cart to ride back to the general club. She offered nothing but attitude and my attitude can be loud too.

 

I tweeted about this via my twitter @morriscpa. AA has responded that they are “sorry” for my inconvenience – that and $4 will get me a Starbucks. AA wrote that they will have a customer service specialist reach out to me after my journey (yippee skippee but possibly helpful if future people can avoid this experience). At the moment AA is on probation. Because of this posting – it is not “double secret” probation. I will be the sole arbiter of the value of this relationship.   I will decide where to spend my money. I will decide whose loyalty program deserves my loyalty. I will decide if I forgive.

 

Unfortunately for them – it isn’t up them. It is always up to me.

 

Lessons learned and relearned. Your customers decide if the value exchange between their money and your service is worthwhile. Your team members, especially those on the front lines, represent the entire company in each and every interaction. That happy customers remember tell a few and frustrated customers tell the world.

 

The ball is in AA’s Court – how they respond will determine how I ultimately feel about this and how I evaluate how I move forward with my airline choices

CalCPA 2015 Honoree Dinner Keynote Address

Note:  –  This past Thursday, I had the pleasure of sharing a brief commentary during the annual CalCPA Silicon Valley/San Jose Chapter’s Honoree and Scholarship Dinner.  In attendance were the Past-Presidents of the Chapter (my year was 2002-2003), Several area university scholarship winners (each was very impressive, probably why the Big 4 have already hired them), along with their professors and family.  Also in attendance were CalCPA Members that have reached their 40 year mark and hence no longer pay dues (lucky them).  Finally, our Chapter awards a Lifetime Achievement Award to one member that has gone above and beyond.  Below is my keynote address (delivered after dinner – so maybe it should have been renamed, an After Dinner Speech;  next time).  I simply thought I would share it here.  I hope you enjoy reading it as much as I did writing and delivering it. –    Dan

Honorary Dinner

Is it an Is or is it Ising?

 Welcome:

Good evening past presidents, distinguished 40 year members, professors, scholarship award recipients, the friends, colleagues, and families of our Lifetime Achievement Award recipient, Stu Karlinksy, fellow members of CalCPA, and guests –

It is an honor and privilege to share some thoughts and comments about our profession, its past, its present, and its future.

            My favorite professor and mentor, Dr. Dominic LaRusso, once expressed his view of time: He said, “that for some…..Time Is   and for others – Time Is Ising”…..Is time a noun as is “time is” and hence inactive and merely present or is Time a Verb as in an action for which we, its benefactors, are able to harvest vast wealth? Including financial wealth, psychological wealth, social wealth, and family wealth?

            I believe that Time is a Verb and our ability to harvest is grand. And speaking of time, there are seconds, minutes, days, months, years, decades, scores, and centuries. Each, with its own cadence and its own rhythms. As children, time is fleeting, fast, and sometimes slow. As early adults we recognize that time, at least prospectively, speeds up – and as we crest into our AARP years – we wonder where it has all gone.

            Tonight’s message is for you: young and old, senior and junior, experienced and inexperienced; student and teacher. These are a maturing man’s view of things I wished I had bettered understood when I was younger and for which I believe are worthy of discussion.

  • I wish I had understood how much timesheets suck the life out of professionals and are at odds with the customer.
  • I wish I had understood that we serve Customers and not Clients. That while clients are recipients of what the service provider desires to provide with little control on either inputs or outputs, Customers receive “custom”ized services designed around them with outcomes they desire. Frankly, customers pay more than clients.
  • That when promoting and selling our services that we should focus on outcomes and not inputs. Time-based pricing focuses on the firm and the professional whereas focusing on outputs aligns the customer’s interest with what they want and what they need.
    • Landscaper – (share the lesson here)
  • I have learned that we do not compete with each other. Although we share the same profession, we are colleagues and not competitors. We do however, compete with any and all organizations that can raise the bar of customer expectations – from FedEx providing real time access to each and every package; to Nordstrom playing a piano while shoppers shop, to Google developing a driverless car, to the Ritz Carlton who’s entire mission is to exceed even their customer’s unexpressed wishes – Like taxi cabs of today, we compete in a marketplace driven by outsiders who desire to provide a superior solution to our customer’s challenge and while we labor to protect our monopoly, change is among us and if we forget this, we will be relegated to the role of the Scribe and soon to be forgotten.
  • I have learned that specialists are really valuable and firms that specialize produce superior profits; it is the Deep Generalist that has more fun enjoying each and every day, rain or shine. That ultimately it is our human spirit that drives our success.
  • I have learned that is always better to fire a customer than suffer a painful day providing services to the wretched, to the greedy, to the arrogant, and to the cheap. One doesn’t improve their life until they surround themselves with better people.
  • I have learned that there are 4 ways to spend money – and to never ignore the different quadrants
  • I have learned to price the customer and not product or service – just like an airline – different prices for different people provides optimal results
  • I have come to the conclusion that our future professionals need deeper studies in liberal arts and sciences, and less accounting, auditing, and tax work. The prior comprehensive learning platform provides the foundation for our technical prowess. We should control the profession’s education, like Law and Medicine do, through our own professional schools rather than being a part of a general business curriculum.
  • I have learned that CalCPA, its committees, its governance, its chapters, and its education foundation, together provide an opportunity to change the world of our members by creating an environment for connections and relationships beyond measure. That through this great organization, I have had the pleasure of impacting ten’s of thousands of fellow CPA and CA’s lives and livelihood. That much of that work would never had been achieved or if achieved would have been arrested in its development simply because I had the good fortune of saying yes when asked, being alert when listening, being brave when scared, and being resilient when resisted. I am who I am because, in large part, this organization, this group of independent voices, the amalgam of friends and colleagues, provides an environment like no other for each and everyone of you to grab those proverbial reigns and direct the horse you ride to seek the future you want.
  • I have learned a great deal – and my learning doesn’t stop. To our graduates and students, lifetime learning isn’t a mantra of the old, it is the formula for designing and living your future. Be the drive. Drive your time and make it a verb. Life requires action and you are the only one that can create the future you desire. To our professors and teachers – thank you for crafting our young. Thank you for investing in our future. Thank you for sharing of yourselves to those you touch to have the power to drive their future. To my friends and colleagues, thank you for being there even when you were trying to avoid me. Thank you for your support of my dreams. Thank you for giving of yourself so our profession has a superior foundation to for which to move forward, and thank you most of all of your attention.

May each and every one of you have a remarkable year and until we see each other again, remember to smile, take some time to smell those roses, and may the University of Oregon someday win the Big Game.

 

END