This is the sixth of a series of articles on sessions presented at the 2002 Association for Accounting Marketing Conference.
By Karen Bergh, Senior V.P., RainMaker Pro, Inc. for the Association for Accounting Marketing
Ron Baker, Founder of VeraSage Institute, shared in his topic "Trashing the Timesheet" his philosophy of how accountants should free themselves from the "tyranny of time" as an indicator of performance.
Baker suggests that Key Performance Indicators (KPIs), especially those that are "leading" rather than "lagging" should be used rather than timesheets to measure the productivity of team members. The advantage of KPIs over timesheets, he said, is that they measure:
- results, not efforts;
- productivity, not activity; and
- outputs rather than inputs.
A leading indicator would be one that is production oriented, whereas a lagging indicator would reflect measurements "after the fact." For example, lagging indicators that economists use are "unemployment rates" and the "prime rate." Leading indicators would be those like "new orders," or "building permits".
Baker used the example of Continental Airline’s leader Gordon Bethune, who wrote a book about the airline’s turnaround under his leadership entitled "From Worst to First: Behind the Scenes of Continental’s Remarkable Comeback." Using Bethune’s story, Baker pointed out how the airline improved its financial performance by defining its success by the same measures that its customers do. Under Bethunes’ tutelage, the airline began to run according to KPIs that showed how they were performing in such areas as:
- on-time performance (flights arriving on time);
- lost luggage; and
- customer complaints.
Baker suggested there is a high correlation between such measures and profits. He conducts workshops to help accounting firms identify their own unique KPI measures. Many accounting firms continue to use lagging indicators, such as "labor as a percentage of gross revenue" or "cycle time" (the number of times a file was "handled" and the average number of days work stays within the firm) which are not necessarily the best measures to promote profitability.
In his work, Baker asks CPAs to assume that timesheets are not available to measure and compare the profitability, productivity and efficiency of your firm. He then challenges his clients that if this were indeed the case, what measurements would you look at? Baker asserts: If time were no longer needed for pricing purposes, what indicators would you look at to measure the effectiveness of the firm’s ability to fulfill its mission?
Baker’s own mission is to change the accountant’s mindset that “we sell time.” He suggests that we should be selling value, and that like Continental Airlines, that value should be measured in our customers’ terms.
He also shared with us the top reasons why clients leave their accounting firm (source unknown):
1. Doesn’t treat me right
2. Ignores me
3. Fails to cooperate
4. Let partner contact lapse
5. Doesn’t keep me informed
6. Assumes I am a technician
7. Uses me as a training ground for new team members
He also cited the Rockefeller Corporation’s study of why customers are lost:
1. Dies 1%
2. Moves away 3%
3. Has a friend 5%
4. Lost to a competitor 9%
5. Dissatisfied with service 14%
6. Believes you don’t care 68%
Ronald J. Baker started his accounting career in 1984 with KPMG Peat Marwic's Private Business Advisory Services in San Francisco. Today, he is the founder of the VeraSage Institute, a think tank dedicated to teaching Value Pricing to professionals around the world. For more information on Ronald Baker or VeraSage Institute contact 770 Tamalpais Drive, Suite 221, Corte Madera, California, or 415.927.7114. Web site: www.verasage.com
The Association for Accounting Marketing (AAM), headquartered in Kansas City, Missouri, is the leading trade/educational organization for individuals working in marketing, sales, and communication for accounting firms. Since 1989, AAM has provided members with the information, resources, and market intelligence needed to excel and grow in their careers.
For more information about joining AAM or to be placed on a mailing list for next year’s Marketing Summit in Boston, MA in June 2003, contact Lisa Daniels at 816.221.1296, or [email protected].