when you take a value-based approach to your firm, you measure success in two ways.
by alan anderson, cpa
transforming audit for the future
those firms that value the chargeable hour above all risk losing their best team members. the ones who want to think, innovate and come up with creative ideas that add value to the client and the firm will leave.
more: empower your team by dumping c and d clients | the new formula for an accounting business | don’t risk losing good employees for bad clients | four questions to make your firm more successful as a business | say adios to audit fee pressure | deliver more audit value by getting out of the conference room | six essential elements in audit planning | before the audit: more than just planning | five crucial attributes for successful audit leadership | put the ethics code to work for your clients and your firm
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my associate corey told me about his experience and why he left his last firm. see if this sounds familiar:
corey said, “what really got me were the archaic metrics for valuing employees. leadership gave lip service to supporting us in doing things to make the firm better, but the bottom line was hours you put in. they assigned me the ebp portfolio of 16 audits. over two years, i improved realization on those from 60 percent to 100 percent, by workflow management and managing the process. but when i went to talk to the managing partner about my bonus, that improvement in realization was just chalked up to “general performance.” what carried more weight in those discussions was that i was in the 30th percentile for total hours. there were people in that firm who would just take a cruise around the office to check on who was still there. now physical presence doesn’t equate to adding value, but that’s what they cared about.”
as corey’s account shows, business-mindedness bleeds into empowerment. your team won’t feel empowered to work hard and won’t be encouraged to be innovative in managing workflow or doing other things that help the firm bottom line if the metric that matters is total hours. by corey’s account, his efforts meant that the same work was being performed in less time. that reduction in hours could be used to either take on more work – and thus add revenue to the firm – or to give team members a better quality of life by requiring them to work fewer hours. that extra time can also provide additional value to clients by helping them improve their businesses.
are you mixing up your v’s?
too many firms mix up their v’s by focusing on volume over value. firms that focus on volume think they’re successful because they added more revenue, but they often can’t provide value to the client.
focusing on volume puts you in the commodity market. focusing on value sets your firm apart from others. focusing on volume means you might take on work you shouldn’t, like those ebp plan audits that can get you in trouble when you only do a few each year. focusing on value means leveraging the power of relevance to understand the industry and what’s important to the client.
emphasizing volume means your people can only focus on getting the work out quickly. a focus on value means your people actively seek ways to provide additional insights and advice to the client.
when you take a value-based approach to your firm, you measure success in two ways. at the staff level, you measure success on the deliverables instead of on chargeable hour budgets. at the client level, you measure success on the value you provide to that client, resulting in the pricing. fee realization becomes irrelevant, and your focus moves to what you’re collecting per hour because that’s how you pay the firm bills and the salaries.
your firm will attract and retain auditors who want to do more value-based work and work with better clients, which means you will likely churn through fewer team members, saving you on payroll and training time. extra value to your clients makes them less fee-sensitive and may bring you additional projects.