Systematizing: Improving the Effectiveness - with Trent Kaeslin
Trent Kaeslin 
Practice Development Coordinator
Results Accountants' Systems 
Session Moderator: Welcome to all of you! Please feel free to ask questions and be assured that we will come back to any questions we miss.
I want to welcome Trent Kaeslin as our Workshop Leader today. He is on the Results Accountants' Team and will be joined by Rich Durkin, also on the RAS team.
Any questions before we continue?
Trent Kaeslin: Just wanted to start off by saying thank you for joining us today and let you know what you can be expecting from today's chat. As you probably know, we'll be talking about, "Improving the Effectiveness (and the processes) Within Your Practice: Systematizing"
What we'll try to cover in the hour that we have together is:
1. Brief introduction into why systematizing is so critical
2. Explain what is in it for your team/staff.
3. Determining what needs to happen for a business to run effectively.
4. How to organize for systematizing the practice. I'm hoping we'll also have time to get into the nitty gritty of the systematizing process.
5. The 5 whys
6. Identify tasks that can be deleted
7. Documentation process
It looks like well have a small group so I encourage (implore) everyone to voice their opinions and experiences to enhance the topic. It will be a slow chat if I have all the input, since I'm a slow typist.
Rich Durkin: Hey, I'm also a Professional Development Consultant and am here to help out with any questions, so I may be jumping in here or there.
Amy Gardner: There are so many programs out there for keeping track of projects and clients...does anyone have a good one?
Trent Kaeslin: Before we get underway I just want to get a feel for how many of you have systems in place or are working toward having a systematized practice.
Steve Thatcher: RAS is pushing our firm to systematize, and that's what our team is attempting.
Lynn Foster: We are working toward a systematized practice.
Marla E. Huizing: We're working at it with slow success.
Rich Durkin: I know systems are one of the key ways to create more time for partners, and can be invaluable to make a practice efficient.
Trent Kaeslin: Good to here a couple of you are getting started with systems and for those of you who don't have many systems, have poor systems or no systems in place I'm hoping this chat at least gets you thinking about moving forward and systematizing.
Steve Thatcher: What is the first process a team of accountants should systematize?
Lindsay Crumbliss: With all the other work we're doing, finding time to systematize is tough! I'd love some advice on practicing what we preach!
Rich Durkin: A system can vary, but generally I find it's something specific that you may have developed in your practice.
Trent Kaeslin: The best way to address the question of the value of systematization is to think about Michael Gerber's statement: "The purpose of creating a business is to sell it." If you accept that (whether you want to sell your business now or not), then project yourself forward to the day when you are sitting in your office with a prospective purchaser.
Les Meyer: Are any of you aware of companies, in this industry or any other, where systematizing has produced dramatic results?
Session Moderator: A local carpet service company used systematization to open three other stores in remote cities within 30 days of each other. It's very similar to a franchise scenario.
Trent Kaeslin: Staying with that scenario, pick up a few sheets of paper with your right hand. With your left hand, pick up this guide. Imagine that the pieces of paper in your right hand represent the financial statements and cash flow forecast for one business. And that is all you have to present to the prospective purchaser.
Now look at the guide in your left hand. Imagine that this guide contains the same documents for another business (probably as an appendix). And the main body represents all of the systems the business uses day after day. The front of the guide displays your practice name and the title This Is How We Do It Here.
Which business do you think your prospective buyer would pay more for? (Or, more seriously, which business would he or she buy AT ALL?) Almost certainly, you'd sell the business in your left hand much more easily.
The crucial point, of course, is that the business doesn't depend on you to function. Just as McDonald's didn't depend on Ray Kroc, who was able to replicate his business on a franchise basis because he had a "this is how we do it here" system for producing burgers
Rich Durkin: The first step to systematizing is to diagnose what systems you need, I find that looking at performance roles and the breakdowns or overlaps between roles can show how systematized your business is.
Trent Kaeslin: Another recent example, consider a European acquisition made by Starbucks Coffee. It paid approximately £80 million for the London, England,
Seattle Coffee Company, with just 56 stores in the U.K. Seattle was a highly systematized, 2-year-old business started by a husband and wife with 1 shop in
London. And it wasn't even profitable when Starbucks acquired it!
When you settle the question of what the business is going to do and look like, you must consider how to accomplish that. What processes must be in place, which are the key processes, and which are the supporting processes?
Les Meyer: Systematizing -- and documenting the system -- will also make transitions easier for the inevitable changes of personnel.
Rich Durkin: Does any one have some processes that you follow in your business that get done in a routine way? Have you ever sat down with your staff and looked at those processes?
Trent Kaeslin: Great point Les. Do you have anything in place to help your practice that you can share?
Trent Kaeslin: To identify the most important processes to engineer, we need the guiding principles provided by Peter Keen, author of The Process Edge: Creating Value Where It Counts (Harvard Business School Press 1997). We strongly recommend that you study Keen's book. Here we are concentrating on the big picture.
Rich Durkin: For instance, as partners, you probably have a routine way (documented or in your head) of doing work for a client, have you ever thought about templating that so new team members can follow that process?
Vicky Lanier: We're working on systematizing our orientation process for our hiring of new employees. This gives all of us involved with new employees a road map to make sure each employee has the same information.
Rich Durkin: Exactly Vicky! Get the whole staff on board and then they'll be on board to begin developing more systems.
Les Meyer: In our time-and-billing area (2 people) we try to develop a handbook of procedures that would be helpful if either or both of us had to be replaced; we use this as a guide for people who fill in for us during vacations, etc., and they'd be useful if we either leave.
Trent Kaeslin: Les - have you found that it saves time and headaches?
Les Meyer: Yes, and it also gives us comfort to know that if we have to be away for an emergency there's at least a starting point for a fill-in person to work with.
Rich Durkin: Great Les. sounds like you can take vacations now with the at system!
Trent Kaeslin: Excellent point Les. Looks like Vicky got the team involved with the process. Did you go through this with your team/staff as well?
Les Meyer: Here's a thought: It obviously takes time (=$) to study, systematize and document processes, but in the CPA businesses the name of the game is to produce the same result as last year in less time and be able to bill it out for the same amount of money, so spending time and money to systematize can be a KEY contributor to profitability.
Trent Kaeslin: Keen presents a compelling argument for the reason that relatively few businesses have reaped significant and lasting benefits from reengineering and quality improvement initiatives: They have sought to fix or improve the wrong processes. He suggests that has arisen at least in part because processes tend to be viewed as expenses, which causes people (specifically accountants) to underestimate the true cost of processes by ignoring the capital they consume. Because they tend to think of processes as workflow, they don't think about them as assets. Once they look at both the true cost and the asset potential of systems, Keen suggests that they can immediately see how some businesses create a sustainable competitive advantage through their "process assets." For some businesses, he argues that their main asset IS their key processes.
Session Moderator: Trent, Rich do you find that there are some functions that shouldn't be systematized?
Rich Durkin: Get the processes working for you so you don't have to work on every process! - one second on the last question SM
Trent Kaeslin: We recommend systematizing everything possible.
Rich Durkin: Sometimes relying on an old system can hurt an organization, for instance, some older companies may have cultural systems, like buying computer software.
Trent Kaeslin: Peter Drucker said many years ago, "There is no point doing well that which should not be done at all." He cleanly addressed the waste of effort and cost that many businesses experience because they don't understand this point.
Not all processes add value to a business. Some processes actually consume value. The key is to have a framework to distinguish between asset processes and liability processes
Rich Durkin: Well, buying computer software through a protocol 10 years ago would be substantially more expensive then buying stuff today, thus make sure your cultural systems don't inhibit proper change. So, don't rely on an old system to often, with today's turbulent industry, you should look to updating and revisiting systems every other year at least.
Trent Kaeslin: Some of you have probably heard about the Salience/Worth matrix, which is designed to help you determine what is important.
Les Meyer: How does it work?
Trent Kaeslin: Great question Les.
Vicky Lanier: The whole team is involved with orientation - Each department has some contact with each new employee even if they don't work in that department. The systematizing works well, for the simple fact that we don't have anyone saying 6 months down the line "I wasn't told that when I started",
Rich Durkin: Exactly Vicky, not only does it make a business more efficient, but part of being efficient is having everyone accountable to what the systems can do for a business. What you can measure you can manage...
Trent Kaeslin: It weighs the worth of something by judging weather it is an asset of liability to the firm and the priority it plays in the business. There is a great example in Keen's book the Process edge.
Rich Durkin: For example UPS's salience would be great customer service, but their worth ultimately lies in getting customers packages from one place to another, thus although the customer service is important, if that salience interferes with their worth of delivering packages, than they're systems and their company isn't worth anything.
Les Meyer: Scheduling of staff is a prime example of a process that needs to be looked at. We seem to re-invent the wheel every couple of years, and one of the things we've never looked at is how much of managers' time and administrative time gets spent on the scheduling process.
Gail Perry: If your company seems to be completely unsystematized, where is the best place to start with a systematization program?
Rich Durkin: Les, great example, does anyone else encounter similar problems?
Trent Kaeslin: I know this subject tends to be a little dry but it is very important for a business and its functionality. Let me give you a little more information and then well open it up for a bit of a systems discussion.
Lynn Foster: We are systematizing our orientation process on power point
Trent Kaeslin: Great question Gail.
Rich Durkin: Gail - I say start by defining everyone's roles, get that documented and then start to see if there is overlap in roles or breakdowns, those will cost money and will ultimately make an organization more inefficient.
Trent Kaeslin: This is not rocket science. Every system (formal or informal) consists of a series of processes, and each process consists of one or more activities that will involve one or more of the following inputs: Labor, equipment, materials, facility, vendors
Vicky Lanier: Gail - We started with getting a couple of people to volunteer to write systems. After that, every time someone had a new way of doing something it had to presented in writing in a systematized format.
Rich Durkin: Once you see where the breakdowns exist you can begin to create more time for everyone by systematizing who is covering what responsibilities, and new people can be trained from the start on the right systems to get up to speed.
Gail Perry: That makes sense, Vicky -- thanks!
Trent Kaeslin: The first step: Create a process activity map. This is a fancy name for a blank sheet of paper with a series of symbols representing the parts of the process. For example, suppose you're mapping an order entry system. You'd designate boxes for "order received from sales representative," "order sent to receivables department for credit check," and "confirmed OK orders sent to distribution center." (Then you'd branch out to the order picking and distribution system that links back to the billing system). This is a routine procedure, one that any person with the most rudimentary skills in auditing and a modicum of common sense can successfully map.
The second step: Each process involves one or more activities. Use the process activity map worksheet in the Client Consulting Guide (Resource 8.5) to identify the sequence of activities required to complete the process. For each activity, indicate the required inputs for the process and the duration of the activity.
Activity duration is critically important but often difficult to determine. System failures delay the average amount of time to complete activities and often require reworking. And when people rather than systems are held accountable for outcome, the people often won't alert you about failures or potential failures. So when you're working at the system level, it's important to win the confidence of the operators and make sure they understand that your goal is to help them. Interestingly team members are more likely than partners to win this confidence.
Activity duration is so important because it lies at the heart of the 3 defining factors that determine process efficiency: first-pass yield, cycle time, and value-to-cost ratio.
First-pass yield refers to the percentage of times an activity is completed on the first try. In manufacturing if this yield factor is low, not only is time wasted but also all the unsalvaged direct costs are incurred again, capital is consumed by work-in-progress inventory, in-line production schedules are delayed, and customer delivery deadlines are often missed. This causes a loss of customer loyalty and (in some cases) late delivery penalties.
The first-pass yield concept is not limited to a manufacturing environment. Every business can be required to redo processes. For instance, an accounting practice experiences yield failure when a job must be returned to a team member who forgot to put through balance day adjustments.
Cycle time refers to the length of time any process takes from start to finish. "Start" may be defined as the date of order or the start of a process. The appropriate start time depends on the circumstances and the level of monitoring; for example, at the company level it would generally be from order to delivery and possibly even to cash in the bank. At the process level it would be from the in-process point to the out-process point. Reduced cycle time clearly reduces the costs of production and consequently increases the return on the capital invested in the process.
Rich Durkin: In line with Vicky - develop performance roles and performance standards that compliment those roles.
Trent Kaeslin: Value-to-cost ratio refers to the value added by a process as a percentage of the cost of the process. One relatively easy way to measure the value-to-cost ratio is to divide the final sales value of the batch or job less the direct costs (including the transferred-in cost) by the time taken to complete. This is a surrogate measure for the value of the process because the ratio is increased by a reduction in either direct costs or time. It is clearly not possible to make interprocess value comparisons with this measure.
Trent Kaeslin: The third step: Apply the "5 whys" questioning procedure to each activity (see next table). The 5 whys make you really think about why a process is done in a certain way. Don't talk to the people who designed the process; talk to the people who operate it. Look for constraints to smooth process flow. For an excellent and highly readable discussion of process productivity, see Eliyahu M. Goldratt and Jeff Cox, The Goal: A Process of Ongoing Improvement (North River Press, 2nd rev. ed. 1994). This profoundly important book deals with constraint management (constraints effectively inhibit productivity).
Trent Kaeslin: I know this is a lot of info, any questions?
Rich Durkin: Thanks for the comments so far Vicky, Les, and Gail.
Trent Kaeslin: All right, I'll continue.
You'll often find that the operators have never thought about these questions. They just do what they're told in more or less the way they're told. You're primarily interested in the "why" responses. To get to the heart of this, you'll need to ask the operator the following seminal question: Tell me, how would you do this if you were starting from the ground up? The operators almost always have the answers, and even when they don't, their ideas inevitably help you refine your thinking about the process.
Trent Kaeslin: The questions are the 5 whys. Why is it necessary? Why is it done there? Why is it done by that person or machine? Why is it done then? Why is it done then?
Les Meyer: Does asking these kinds of questions sometimes raise peoples' hackles? They may feel they're being grilled about what they do, and asked to defend themselves.
Rich Durkin: Exactly, just as every team member has something to contribute, remember nobody ever really paid their employees to keep their ideas to themselves, and if they do then they'll begin to loose the cutting edge by not asking the younger team members their ideas.
Trent Kaeslin: Not usually if they are willing and want to make the changes needed to make the systems implementation a success.
Vicky Lanier: Les - We didn't have any negative comments when we started asking those questions. We found that everyone had ideas about how they wanted to improved the way they we doing their jobs.
Trent Kaeslin: I've found that it is critically important to involve the team in the process in order to make it a success.
Rich Durkin: Les - I would think that they could be defensive if they didn't understand where the questions were going, that's why it's important to get the whole staff on board as Covey would say, "begin with the end in mind." Let the team know what you're trying to do to get over defensiveness.
Session Moderator: That's a good point Vicky- what do you do when you have a lot of ideas and can't implement them all at once?
Rich Durkin: Prioritize
Vicky Lanier: We just start with what we can do. Once you get started you can't stop and eventually everything falls into place.
Les Meyer: Here's an example of O
Trent Kaeslin: The Salience/Worth matrix will help in this process.
Rich Durkin: and then you can always bring in a third party to get open and honest feedback if you think that staff may be a little resistant.
Session Moderator: How do you maintain your team's enthusiasm as they are waiting on their idea to be implemented?
Rich Durkin: Short term yardage, focus on implementing a few quick things that everyone can see results in, like - showing a summary of everyone's ideas and then checking off a quick few easy ones that can be done. Raises morale.
Trent Kaeslin: In addition to Rich's idea getting the team involved in the process sop they own it will help them from feeling like they are waiting for the owners to do something.
It's important to involve your team in this project at an early stage. If you don't, you will probably find that:
Session Moderator: Great ideas - thanks.
Trent Kaeslin: Your team doesn't understand what you are trying to do and why and will consider the project to be "more unnecessary work that we don't have time to do."
Rich Durkin: Ownership gives staff confidence to make decisions later on and think more "outside" the box.
Trent Kaeslin: You end up doing the lion's share of the project yourself! That's why we recommend that you hold a Team Meeting to discuss the systematization project. We've included some suggestions for points to cover at the meeting to help you get the main points across. To make sure that you cover all the points, it's a good idea to distribute a bullet-point agenda before the meeting.
Les Meyer: Here's an example I'm very proud of -- it's a great systemizing of a nothing process, but it's so elegant I'd like it to serve as the model for process efficiency: I have to call in my home gas meter reading once a month, and I always used to forget, and get an estimated bill. The solution was very simple -- in the basement, near the meter, I put an 8 1/2 x 11 piece of paper that says "Next Reading 6/16." Every time I go down there I see it, and when the date comes it clicks that it's time, and I call in the reading. Now, how to apply that in a more complex situation...?
Trent Kaeslin: This stage is not an easy one, and it won't be completed quickly. For that reason, most businesses have found that the best way to go about it is to have team members routinely document systems as part of their weekly work. That way, the team will get used to doing the project along with their "normal" work (rather than instead of it), and systematizing everything you do will become part of the culture of your organization.
Rich Durkin: Harvard business Review has a great CD called Leading Change.
Rich Durkin: Les - Great example!
Marla E. Huizing: We tend to view it as a huge project - thus never gets started. I like the weekly work idea.
Rich Durkin: You can always put a suggestion box in the office, an easy way for people to put suggestions in without feeling bashful by them.
Vicky Lanier: As you begin this process, it's important to stop every 6 months or so and in a team meeting remind everyone of where we were 6 months ago and where we are now.
Rich Durkin: Vicky - Exactly revisit the ideas to make sure you're on check and that you are moving forward. Accountability and a progress check all at once.
Trent Kaeslin: Once you get the system process started and they are prioritized keep it going.
In preparation for your Team Meeting, you should have documented one system for your business. The next step is to have your team replicate the work you did and document 10 more systems. In a smaller team of, say, five people, you could ask each person to document two systems. Of course, it's vital that your people coordinate the systems they are working on to avoid duplication. You might appoint a champion to coordinate this function.
If you are in a larger business with, say, five departments, each department should document two systems.
Give your team a week to carry out this step and then reconvene to review what you've done (either as a team or with delegates from each department as a working party). The objective of that meeting is to ensure that the work your team members have done is consistent and follows the template and then to agree on the way forward. You need to conclude the meeting with a documented system for how and when you're going to complete the project and who is going to be accountable for it.
I want to save some time for a discussion about systems - what has worked and what hasn't. Also leave time for any questions. So fire away.
Marla, you said you had stalled with your system implementation - anything you would do differently?
Rich Durkin: Does anyone have any systems that they use specifically during tax season to make that a little smoother?
Session Moderator: There are so many programs out there for keeping track of projects and clients...does anyone have a good one?
Marla E. Huizing: I think we need to break it down into smaller pieces so it's not such a formidable project.
Vicky Lanier: We use a system from CPA Software called VPM.
Trent Kaeslin: Great idea Marla (thanks for helping)
Rich Durkin: I know there are good websites that compare accounting programs; unfortunately the actual domain names slip my memory. Does anyone have a site they use? Besides the all-encompassing AccountingWEB site?
Marla E. Huizing: Outlook is good for task tracking
Michael Platt: www.cpaonline.com  works well
Trent Kaeslin: I have a lot more information regarding systems and will forward it to Tina at AccountingWEB who may be able to include it in the transcript for a more info on systems, how to get started and how to continue the process.
Any final thoughts or comments?
Session Moderator: Sounds like a good plan, Trent. Thanks.
Marla E. Huizing: Thanks for the info - very helpful!
Les Meyer: Thanks to you all for your input!
Doug Thompson: Yes, thank you.
Trent Kaeslin: Thank you all for the input and I hope it was helpful.
Session Moderator: Thank you all for joining us today. Again, thanks Trent and Rich - great job!
Rich Durkin: The process Edge is a great book, as well as start from the team and begin to make small systematic changes, remember you'll see more results from changing 100 things 1% than 1 thing 100%.
Session Moderator: Any other questions?
Rich Durkin: Thanks for all of you who helped, please feel free to call Trent or myself @ 800-800-5601. Also, we're currently offering a Practice Development Questionnaire Analysis to help systematize practices, so please call in if you would like this analysis done.
Rich Durkin: Thank you once again.
Trent Kaeslin: Have a great afternoon.