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MBC Captured Learnings 2015

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MBC Captured Learnings 2015

  1. 1. “Coaching you to do the things you won’t do on your own...” Captured Learnings
  2. 2. Overview The Captured Learnings contained within this document is a brief summary of the critical points of learning achieved over the past 15 years of working with various accounting practices. This document is intended to become a regular ‘work in progress’. The purpose behind this document is to serve as an ‘acid test’ to validate Practice Strategy, Operational Objectives & subsequent Tactics prior to implementation. My personal and business opinions are detailed here within a range of business result areas so that no miscommunication can exist. I think it’s important that you understand my rationale / philosophy behind what I coach in order that you can understand how to best apply my material to your practice. If you find yourself in agreement with my notions, then you can use this summary for it’s intended purpose, that is to say, as an “Acid Test” when making major structural or purchasing decisions. If you find you are not in agreement with my notions (and I encourage you to challenge all that you read in here for yourself) then amend the relevant section to reflect your considered opinion and retain the revised learnings as a document you can refer to going forward. All learning is relevant, but wasted if not considered in future endeavours... Enjoy!
  3. 3. Result Areas  Strategy  Structure  Organisational Theory (Best People – Best Role)  Culture  Selling & Business Development Deliveries  Measurement & Internal Reporting  HR Development  Operational Objectives
  4. 4. Strategy I firmly believe that skill creates demand. In every instance that I’ve observed a roll-out of a product based service delivery that is not supported by an adequate skill set (that is knowledge converted into skill via practised & coached rehearsal) it results in failure on two levels. The first is failure to achieve client expectations and the second, is the loss of confidence and momentum of the individual attempting to grow. I also firmly believe that any organisation that seeks to make improvement by focusing internally does so at it’s own peril. All engagements start with the client, therefore, the strategic expectations of the client must be defined from outset and must drive internal behaviours & organisational structure. (This is simply matching your service offer to market demand – when you think about it...) By doing this, you will learn exactly what you need to do to keep your clients happy, you’ll learn the skills your practice requires now and in the future, you’ll learn the technology requirements of your practice (that talks your client’s language), you’ll learn how your organisational structure could best serve expectations of service time, dealings consistency & price without appearing cumbersome or bureaucratic from the outside, you’ll get far greater engagement from your team because they will see the purpose behind their actions (and will therefore be more purposeful) and you’ll learn exactly how to budget financially for your practice since you’ve learned what your clients are willing to pay for by way of the engagements they’ve agreed to.
  5. 5. Structure Corporate structure models would be a fine thing in an accounting practice, if only they worked! The purpose and intent behind a structured practice is to provide clarity of purpose for the individuals within said practice. Financial management and governance are sound principles to support a business but they will never replace the business improvement gained by having fully committed directors that are in their best ‘state of flow’ and focused on increasing the ‘group collective intelligence’. All too often I’ve observed groups attempting to force change on individuals via structure, this simply results in a wider spread level of disengagement and ineffective daily practices. Build your structure around the typology of your people, establish external ‘sounding boards’ that can provide impartial observations and creative suggestions but above all, develop a willingness. A willingness of directors to be honest with themselves and honest with their peers about what they are willing or not willing to do to achieve growth. A willingness to put aside their fears and attempt the self improvement that always, always comes before business improvement. Only then, can willingness be developed within the team. Understand the massive power of the individual and collective psyche you are dealing with. The combined influence of the Instinctual Drives and the Super Ego shape and guide all within your practice. Ignore this at your peril. (By the way, the most impressive culture I have ever observed was developed by a ‘practice partner’ that was almost invisible in his actions. He identified strengths & weakness within his people, he challenged yet supported them, he empowered & encouraged but above all, he started with the right people at the top. He took a long term vision, identified those from within and head hunted those from outside. The result? A practice of directors that truly want to work together and grow together. I ran a series of seminars with this practice and personally observed the unity and focus that grew as individuals challenged themselves to venture way outside their comfort zones)
  6. 6. Organisational Theory My father often said, “You can’t make a silk purse out of a sow’s ear”. So it is with the development of people. In my early ideological days of “empower everyone and you’ll get a return” I would have happily recommended coaching for all. I was wrong. The trick is to identify those that are ready for development and guide them towards the activities of the organisation that is best suited to their personality type. Failure to do this will create greater strain on the individual and overload managers with repetitive monitoring rather than ‘empowered learning’. This requires a major ‘moral mind set’ shift as this theory starts at the top and works it’s way down from Director to Graduate. Let me explain... Malcolm Gladwell (in his book “What the Dog Saw”) raised the community issue of homeless people in New York, research showed that of the quarter of a million people that were homeless at some point in the previous 5 years, only 2500 were chronically homeless yet the full cost of health care & social services to this minor group was at least $62M annually! The dilemma is that by treating these people ‘by the normal rules’, society was burdened with a massive financial expense ,yet if treated specific to their condition, society was taking a moral position that a chronic drunk should be given free food and accommodation whilst other hard working citizens get no help at all. Society’s inability to rationalise the unfairness and identify that you can’t “paint everyone with the same brush” wasted millions of dollars which could serve many people more effectively.
  7. 7. Continued... So it is with Accounting partnerships. The moral position that “we must all contribute in the same way” or “We should all be responsible for equal fee bases” locks people into defensive positions and inhibits growth across the entire practice. Such an expectation is driven by an ignorance of the need to play people to their strengths at best, and at worst, by an arrogance of “this is how it’s always been or My way or the Highway”. The sooner a practice accepts the need for a balance of skill and perception, achieved by various personality types, the sooner they can set about to meet the three reasons they went into business for themselves; Time, Control & Money. The two key objectives of an accounting practice is “Get the Job & Do the Job”. The three domains of focus is “Finder, Minder & Grinder”. I believe people can excel at Finder-Minder and Minder-Grinder roles, I have never seen anyone excel at Finder-Grinder roles unless they are forced to by virtue of being a sole operator. (and in this instance they don’t excel, they cope) Everyone has a dominant personality type, this type surfaces at times of stress by way of predictable behaviours as part of their ‘coping mechanism’. If you place someone in a role that requires them to be assertive (selling) and they are naturally withdrawn (grinding) then you expose both the individual and the practice to risk. The risks are that the individual fails to deliver on sales targets and therefore starves the firm of work, whilst simultaneously overwhelming the individual such that they become ineffective not just in the Finding arena, but the Grinding arena also, due to guilt. The order of creating an organisational structure which best serves the practice and those within it, is to identify the operational tasks that are required to be completed in order to meet (your) clients expectations. Then, match people to those tasks by the following attributes; Typology – Skills – Style – Focus. Your practice HR development then sits underneath but must be matched to the Ethos of “The practice is best served by the best person for the role, if such a person doesn’t currently sit within the practice, go find them”.
  8. 8. Culture I believe you can’t “work on” culture, that in fact culture is “what’s left over when you’ve finished working on the people”. I believe that Leadership & Culture amount to the same & are best summarised by the statement “Culture is a reflection of the business owner’s activities being consistent with the stated business objectives”. Meaning, if your team see you do what’s right, for the right reasons, they’ll follow suit. My personal favourite (as a culture metaphor) is “Team in a (long) row boat”. You need the right amount of people on the boat, you need to balance the boat & fit people where best suited, you all need to be facing the same way but most importantly, once underway, everyone must actively row! Those that don’t, upset the rhythm of those that do. (Yes, from time to time each rower needs a rest & should be able to rely on their teammate but this can’t be abused since failure to contribute fairly means the ‘inactive rower’ is effectively dead weight. In this instance, the boat should be brought to shore and the inactive rower exchanged for someone fit & healthy...)
  9. 9. Selling & Business Development Deliveries The notion of value pricing is a fine one but with it comes the responsibility of ethical selling. By way of example, if I negotiate to purchase a diamond ring based on my interpretation of what looks good and agree to pay a price without fair understanding of what represents “market value”, only to learn that I paid $8,000 for a ring with a common market value of $3,000 I would have reasonable cause for discontent. In the eyes of the law “Fair price as fixed by willing seller & willing buyer” has been established & whilst no law has been broken (unless at point of sale I was given misleading information) the moral injustice is a little more difficult to deny. If I were only interested in a single sale and not concerned with market reputation, I may consider this to be a profitable way of doing business. However, real profits are generated within an accounting practice by way of yearly renewable fees (Lifetime Customer Value) & if a practice does not consider the value of market reputation and managing the downside, then their growth will be very short lived. I have personally been in many meetings where “value based accounting services” have been sold prior and in most every case, the feedback from the clients is far from flattering and is in fact, outright damaging. The reality is that in order for a client to contribute to the establishment of a ‘value priced’ service offer, they must fully understand the complexity of the service, the associated risks that have been mitigated by your experience, the measurable upside and the direct return as a result of your direct involvement. This is simply not able to be established (in my opinion) in core compliance services [other than paying a premium for quicker turn around of year end accounts which I wholeheartedly endorse]
  10. 10. Continued... The types of services that can attract ‘value based billing’ are defined engagements such as; 1. The negotiation and or introduction (on behalf) of sale of business or long term work contract. (and therein measurable improvement of profit achieved or, time saved or, reduction in complexity & stress for the business owner.) 2. The ‘risk shared’ success fee on a tax opinion and subsequent re-structure whereby you are basing your opinion on a current view that may or may not have a current binding ruling & you agree to defend the position (at your cost) should the IRD take issue within in a defined future period. I don’t like 50% up front and balance of fee on work completed. I like mthly billing with variations to scoped engagements. {where the term of the engagement is 24-36 mths} (Unless you pay your team quarterly in advance or risk the loss of capital items or expense in your client dealings) My reason for this is simple. Every time we transact with a client we set a precedent on how future engagements will follow, if I charge up-front I’m creating a barrier to entry that is unnecessary. I would rather condition the client to believe that if they have a problem, come see me, we’ll scope the variation fee & spread it (mix it) with the current mthly fee & that current cash-flow should not interfere with their decision to act right now. It’s much easier to gradually “upsell” a client on a ‘total needs approach’ than constantly negotiate on a ‘point of sale’ basis. My tactics strive to reduce sales tension, not increase them!
  11. 11. Measurements & Internal Reporting What are the daily work habits that you want your people to focus on? These are the things you should measure and report on. Sounds simple but the key is to remember the rogue element within any ‘human system’. Peter Senge (Author of The Fifth Element) describes this in his ‘circles of causality’ theory, you might know it as “Everything has an opposite and equal reaction…” meaning, if you ask a team member to ‘put their head down and get their chargeable hrs done’, don’t be surprised that they fail to notice added value work opportunities within the task they’re working on. I hear plenty of Directors saying they want their team to highlight work opportunities but how many firms measure the amount of ‘added value’ opportunities that a team member can find per week? If you remember the two key objectives of “Get the Job and Do the Job” (and are committed to ensuring that they are achieved) then you need to understand the ‘lag’ between ‘putting your foot down and enjoying the response’. The best way to reduce ‘lag’ is to make the connection more direct. This works both in a mechanical engineering and a human engineering environment. Skills (not knowledge) drive the connection between your team and your clients. If you want more regular and consistent work (you win by not losing) then measure the ‘connecting tactics’ of your team. Reporting is essential, but only to those who have accepted that the continuous cycle of learning requires the individual to drop their internal defences and welcome the feedback as a necessary part of improvement. I doubt there’s a single world champion in any sport who ‘made it’ by ignoring good coaching when it mattered. As the saying goes.. “The human mind is like a parachute, it only works when its open…” If your team isn’t open to the feedback, don’t bother giving it to them. Instead, fix the cause not the problem; find out why they are disengaged then re-engage them with tasks ‘bigger than themselves’.
  12. 12. HR Development I believe the most cost effective training comes from developing team members within their current range of engagements. (It’s not too far from their comfort zone) I call this “Engagement Relative Templates’. The focus should be on coaching, not presenting, which means Instruction, Demonstration, Focused Direction, Observation and Re-direction. Once coached effectively, the team member should be encouraged to focus their selling efforts within the domain of ‘client permission’ so they build stronger relations and sound confidence and experience. You’ll get an idea of what I mean by the graphic on the next page...
  13. 13. Continued... Compliance Fundamentals Core data input G.S.T – F.B.T basics Systems / verification Basic financial reporting (Field Visit) Cashflow discussions with client incl’ budget vs. actual. Working Capital Cycle Cash-Gap Graph Data Entry Process Review Finance Reviews O.D Facility reviews Term loans & Debt service ratios Lease vs. HP purchase Stock levels & Rotation cycles Worst Case Valuation Small Bizz Mktg. Helicopter Story Mkt Diffusion Boston Model Pdct’ Lifecycle Revenue Streams Advanced Bizz Development Capacity Analysis Volatility Analysis Strategic Planning Risk Management Scenario Analysis Due Diligence Succession Planning Bizz Structure Advanced Tax Liason Upper Deck Formal Board Governance Facilitative templates such as; Force Fields 6 Hats Thinking Brainstorming Enneagram Basics Acquisition & Negotiation skills Litigation & Support Services
  14. 14. Continued... Typology Skills Style Focus  How many team members needed per level?  Who should/could go where?  What else needs to ‘Tech’ support these people?  Who coaches who/what?  Timelines.
  15. 15. Operational Objectives There are two operational objectives that I believe are critical to the success of any accounting practice. The first, is to scope the top 200 (business) clients to understand the services they require going forward over the next 12, 24, 36 months. This allows you to fully understand what your client expects from you, and how to organise yourself going forward. The second, is to convert at least you’re top 50 clients (fees basis) onto monthly billing arrangements. This will remove the bulk of your monthly cash flow and lock-up issues. Both of these objectives are consistent with the strategy of being client focused. I believe that 50% of most accounting practice write-offs are due to lack of forward scoping and can easily be fixed with a minimum of effort, provided the templates and the skills have been developed at both Director and Senior Manager level. Achievement of these two (relatively straightforward) objectives would transform most accounting practices.

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