They Just Don't Get It

The number one issue facing the accounting profession, according the all the Management of Accounting Practice (MAP) Surveys conducted for years, is retaining and attracting talent. All sorts of faddish ideas are tossed around by consultants to the profession to help ameliorate this issue, such as: understanding Gen X, Y, Z and how they are different from the Baby Boomers and prior generations; offering more attractive benefits; higher salaries; more educational opportunities; and of course the biggest fad of them all, work/life balance.

But I've come to believe that these are just all effects, not the root cause of the problem. I truly believe the root cause is that firms don't understand that their people are knowledge workers. Oh, they might use the term human capital investors, or even knowledge workers, but do they really understand what that word means? It means this:

Knowledge workers, unlike manual or service workers, own the firm's means of production in their heads.

In the old days, if I worked for Ford, Henry Ford owned the means of production, and I had to show up and work to the rhythm and cadence of his assembly line. Today, if I work for KPMG, I own the means of production in my head, and their offices are simply there to help me do my job. I don't work to the cadence of an assembly line, but rather through a process of iteration and reiteration—a process of the mind.

I may even know more than my superior about the particular job I'm doing. Otherwise, why would they even need knowledge workers with high levels of expertise if their superiors could teach anyone everything? Further, I'm only going to invest my human capital—which is approximately 80% of the world's wealth according to the World Bank—in a firm that pays a decent return on investment as well as attractive psychological rewards—room for growth, challenging work, great customers, life long learning.

Also, a knowledge workers' value is not measured by the time they spend, but rather the value they create through ideas, innovation and creativity. Ideas are always and everywhere more valuable than their mere execution. I rather be the guy who designed the pyramids than one of the many who built them.

There's much more to this knowledge worker paradigm, which is why I wrote my forthcoming book, Mind Over Matter. Peter Drucker coined this concept in 1959, it's not exactly a new idea. But if you listen and watch how firms treat their talent, you'd never know this concept exists, especially in the accounting and legal professions.

Mark Bailey, one of our Trailblazer firms from Reno, Nevada, sent me an email the other day which illustrates how endemic the idea that people are simply service workers is, especially in the big firms:

Dear Ron,

Last week I was invited to participate in a roundtable discussion of problems facing Nevada accounting firms. The event was held in Las Vegas and sponsored by the Nevada business Journal. The participants included the managing partners of several larger Nevada firms, and of course members of the "Big 4"and other national firms. Given the first opportunity to speak, I expressed my opinion that attracting and retaining professional staff has become a crisis in recent years. This is a problem, we as a profession, have brought on by remaining steadfast to management principles that are not responsive to the needs of today's young professionals. It has been compounded by the increased workload brought on as a result of Sarbanes-Oxley, both directly and indirectly. (In Nevada we've also adopted the 150 hour requirement for candidates to sit for the exam, which has served to further limit the work force).

In our firm we've attacked this problem aggressively, by attempting to create a work environment with a work/personal life balance. Everyone at the round table seemed to agree that this was the key, and several shared what they had done. One Big 4 managing partner said they'd resolved the problem by going to flex time. At that firm they can set their own hours, but they still have to meet the standard of 55 hours per week. I am hard pressed to see how that "improves" lifestyle, although I guess they are free to use those hours between 1 and 4 a.m to meet the quota. He said their retention was much better as well. Just as many people were leaving, but the feeling was that now more were coming back!

Great logic. "We may not be doing things right, but some other companies are doing even worse, so our staff will quit and come back." Another managing partner said the way to attract and retain staff was to "pay more." He apparently doesn't read the AICPA surveys related to staff motivation and satisfaction, which allude to such things as being respected, trusted and having interesting and challenging work to do, over compensation. Another felt that it's a generational problem, and "young people today just don't have the same commitment and ethic us old guys did." Even if that was the case, which it isn't, are you going to address it or just tear your hair and throw your hands in the air? And still another seemed to believe it was just a local problem and the Nevada Society needed to advertise for employees in other states. Nobody gets it.

My advice. Get rid of the timesheet. Value Price. Reduce (or eliminate) overtime. By doing so you have the basis to create a healthy, trusting work environment that is reasonably balanced with the personal needs we all have. I did get some interest from two larger regional firms. Nothing from the "Titans" of our industry however.

In keeping with our philosophy of trusting our associates and team members, our next project is to implement a system to fill the needs left by "eliminating the annual performance evaluation."What was absolutely apparent to me, was that there is recognition that the billable hour culture is fatally flawed, and many practitioners are ready for change. I believe that given a mechanical system that fills the void, they will embrace Value Pricing. "If we build it, they will come." And I think we're very close in my firm to having it built.

Regards,

Mark Bailey

Mark understands that we at VeraSage have issues with work/life balance, and think it's just a symptom. But he's absolutely right when it comes to Value Pricing, dumping the timesheet, and eliminating the annual performance evaluation, another cancer in all firms that needs to be cut out. His firm is making incredible progress on all these fronts, and more.

But I don't share Mark's optimism that "if we build it, the big firms will come." We have built it, and they remain impervious to outside ideas and influence. And that's a huge problem, because most young professionals pass through the Big 4, and certainly the Top 100 firms, at some point in their career. They are being taught the same nonsense I was taught by KPMG in 1984: you sell time, and here's a timesheet.

When is this going to stop? The AICPA, state societies, and other professional organizations are not to blame. Certainly, they perpetuate some of this nonsense, but it is up to the firms to innovate and try new things. But the large firms are hermetically sealed to creativity, new ways of doing things, or even an idea that dates back to 1959.

In a follow-up email, Mark made this cogent observation:

My experience is that our knowledge workers will find the equilibrium of work/life balance without sacrificing either if given the responsibility and trust to do so, and not micro managed as you point out. I absolutely agree. Micromanagement leads directly to an imbalance. Interestingly our biggest problem with eliminating timesheet was knowing when a particular associate was working more than we feel is healthy in the long term. It forces better communication since we don't have that timesheet crutch.

Because "micro-management" is defined differently by those who are most guilty of it—because of course they don't do it—I have a tendency to focus on the "symptoms," e.g. work/life balance (the effect) rather than the cause, micromanagement. Pointing out the "symptoms" makes it harder for them to deny they are guilty. Regardless, you are correct. I try to reinforce with our knowledge workers that each of them is a "business." Each day when they come in they "rent" their knowledge and experience to us, and they are responsible for providing maintaining and improving what we rent from them. It's their responsibility to provide that product. Each evening when they leave, they take it with them. They are compensated what it's worth, and if they make it more or less valuable, that's entirely up to them. We of course support them in their efforts. I know this is simplistic, but I think it has communicated some very important philosophy. I'd welcome your criticism of this analogy.

Until we reach a critical mass of firms throughout the world that share Mark's philosophy, young professionals won't have any choice to pursue a career in a firm that treats them like real knowledge workers. I dream about putting leaders like Mark Bailey, Chris Marston, Brendon Harrex, among others from our Trailblazers, in a room with each CEO of the Top 100 and let them all do a pitch to a group of 100 young professionals about why they should work at their firm. As Lenin said [regarding emigration], "voting with your feet" is a tell-tale sign of your real values.

Perhaps then these leaders might wake up to an alternate reality—what we at VeraSage now refer to as a Black Swan—that to this day they either deny exists, or think it's mainly on the fringe and hence too small to be important. Much like the Big 3 automakers thought about the Japanese in the 1970s, and they are still playing catch-up.

Yet VeraSage is a Black Swan, and so are all the Trailblazers out there. We are creating the future, and it is very disruptive. Eventually the big firms will have to acknowledge it, and then play catch-up.

I only hope I live long enough to see it.