Further Defining 'Value Added'
Sylvia Pate of QuickSilver Consulting gave an encore performance this week to her initial workshop session on Value Added services. This week's session focused on the incremental efforts that add value. We believe that by breaking down "value added" into it's smallest chunks, Sylvia has provided a mechanism to truly understand "value added" and to use it as a management tool to ensure client satisfaction and retention.
I. Value-adding Elements
Already, you use Value Added decision techniques. When?
- Performing daily work routines
- handling clients
- deciding how to allocate personal efforts
How do you know if Value Added decisions are effective?
- Less work with greater impact.
- Fewer fee-based questions.
- Reduced client churn.
- Clearer, sustained priorities.
- Greater involvement in practice decisions.
Costs, results and leveraging the DIFFERENCE between them are all elements that go into Value Added decisions.
II. Value Paths and Incremental Efforts
Value Pathing is a tool for executives, managers and individuals to chunk down business practices into individual actions. It isolates precise activities and their impact on Value Added.
Precise actions are leveraged into tactical steps that meet client-specific needs. Precise actions that improve Value Added are directly tied to business strategy and objectives.
One common way to validate the potential value impact of an individual action is to cross-reference it against work unit objectives (Performance Targets).
This is very effective for non-managerial personnel to ensure their efforts are valued given existing business conditions.
Just as there are INCREMENTAL STEPS to getting business objectives met, there are incremental ACTIONS that impact Value Added. These activities should OVERLAP.
Value Pathing integrates 4 types of analysis:
- Action Scans-ground zero analyses of personal activity
- Value Ratings- the client's value for activities
- Dependency Points- incremental activities that JEOPARDIZE client relationships
- Critical Points-incremental activities that GROW client relationships and opportunities
Let's bring Value Pathing to life! Let's use a real-life situation - combating fee pressures! How can you use Value Pathing to justify a fee increase?
Focus on the Planning stage of a client engagement. (For the initial Value Added workshop we used the Planning Stage of an Audit so we'll start there.)
Identify surface, ground-zero actions like:
Audit team assigned
Inventory data provided by client
Prior year reports reviewed
Dollar value of client inventory established
Audit team arrives (to client's horror!)
To increase your value to the client, to which action(s) can you make small changes in the way you perform them?
II. Value Paths and Incremental Efforts
How much harder are you willing to work to make the adjustments? Safe assumption that you prefer to not work harder? And still increase your value?
Rather than allocating more of yourself - that is, your personal effort -
How can you THINK differently?
How can you EXECUTE differently?
How can you INCREASE YOUR IMPACT within the same effort being spent?
Rather than allocate more time, how can you think or execute differently to make a positive impact on the engagement?
- Where can you save client time?
- Reduce labor costs associated with the Audit?
- Take less physical space?
- Protect opportunity costs i.e. time used by the client to produce revenues?
If you do any of these for the same or less fees you have increased your Value Added.
Now, to justify higher fees how will Value Pathing help? You're able to identify incremental adjustments that increase the real and intrinsic value of the engagement for the client.
In addition to the ideas above how about:
- Help client cross-polinate their growth strategies (Herb Kelleher, Southwest Air. does this) by discussing what you've see other non-competing companies do?
- Discuss benchmarks from client's industry to increase efficiencies?
- Provide data you gathered that could be used for Tax Prep?
Find ways to neutralize the effect of increased COSTS by increasing the RESULTS of your work!
Remember the basic framework for increasing Value Added and for making incremental adjustment to your actions:
Maintain or Reduce COSTS
Grow your Personal VALUE ADDED!
Creating value is a strategic necessity for your firm and for you. And since it's impossible to deliver Value Add ALL THE TIME identify incremental efforts that deliver the greatest RESULTS at the least COSTS!
Value Pathing helps you see which personal actions to adjust incrementally to become Value Add.
As we remind clients, "Never be afraid to try something new. Remember, amateurs built the ark. Professionals built the Titanic!"
Voice of the Editor
Which isn’t completely true. I mean, occasionally I drop by when I manage to sneak out of the nonstop frat party over at Going Concern, but I’m mostly a wallflower over there. I’m happy to say that I’ve been given express permission (or explicit orders, if you like) to wander over here to AccountingWEB more often.
Why is that, you might ask? My job is to replace the irreplaceable Gail Perry as Editor-in-Chief. What does that mean? I don’t really know! I think it’ll be fun getting a feel for things, throwing in my own thoughts here and there, and listening to the discussions you’re having about the accounting profession.