New Ways of Driving Value for Today's Firmsby
While the COVID-19 pandemic has led to many challenges, it's also an opportunity for CPA firms and the businesses they advise to reevaluate old practices and establish new ways of driving value. In this article, freelance writer Kasia White discusses the new value drivers, including empowering employees through a hybrid firm solution and investing in the right technology tools to drive innovation.
After a crisis, we often look back at the way things were before and find them quaint. The ways in which we measured performance and value before the onset of the COVID-19 pandemic now seem outdated. Historic drivers like scope, scale and efficiency are rapidly being replaced by new and transformative value drivers like human capital, innovation and strategic technological upgrades. Holding onto outdated value drivers could prove catastrophic for CPA firms and the businesses they advise. After all, measuring yourself against an outdated metric for success means you could be failing without realizing it. It's critical that leaders or organizations update and upgrade how they view value.
“Times of disruption, like the COVID-19 pandemic, present critical opportunities for organizations to innovate and become more resilient,” says Carlos Leal, senior manager of business transformation and innovation at EY Canada. “Navigating unprecedented challenges requires leaders to adopt a transformative mindset and a structured approach to embracing change, refocusing efforts and empowering people to lead boldly.”
The new ways to drive value for firms and their clients include empowering people, intelligently investing in technology and focusing on invisible factors like innovation and intellectual capital—and it starts with a fresh look at strategy.
Building a New Strategy
While strategy isn’t a new value driver, determining your organization’s post-pandemic strategy is necessary to developing key performance indicators (KPIs) that will help you measure your organization’s—or your clients’—success.
“Developing new KPIs should always begin with understanding the organization’s business strategy,” says Mark Frigo, Ph.D., CPA, CMA, CGMA, founder of the Center for Strategy, Execution, and Valuation in the Kellstadt Graduate School of Business at DePaul University and lead instructor in the Illinois CPA Society’s new Strategy Academy. “Without a clear, articulated strategy, KPIs can become disconnected, irrelevant and, in some cases, even work against value creation. During the pandemic, I recommended CPA firms conduct KPI reviews with the express purpose of achieving better alignment with long-term value drivers.”
Meanwhile, Leal has developed a strategic framework to help leaders navigate their post-pandemic recovery and re-strategize for their imminent business revival.
“This framework was informed by the efforts of business leaders across a variety of organizations with a focus on their abilities to pivot and adapt their business models in response to the disruptions created by the pandemic,” Leal says.
Here are the four steps they identified:
1. Scenario plan your post-pandemic recovery: Define a few focal questions and construct relevant scenarios, data-driven analytic goalposts and concrete resource allocation choices. Leal says to prepare to move with or ahead of change.
2. Prioritize adaptability: In line with your scenario plan, prioritize the operational and market-facing tactics available to your organization as clients and businesses slowly return to pre-pandemic habits and activity levels.
3. Execute your reinvention: Despite the importance of agility and experimentation, the ability to create and successfully execute bold transformation initiatives are still essential to value creation, particularly in a changing environment.
4. Make reinvention a core competency: Change is constant and accelerating, but organizations can and should be resilient in the face of it. Leal recommends that we establish a culture of lifelong learning to ensure our teams and organizations continue to thrive.
Once the strategic framework is built, it’s time to look at the new value drivers.
People’s habits and expectations have changed since the pandemic. Months upon months of remote work and modified business practices have changed both employee and client behaviors. With the new expectations that businesses face, fostering long-term human connection has become perhaps the most important of the new value drivers.
“The pandemic created major disruptions in supply chains, employee engagement and—maybe most importantly—client needs, a primary value driver for every business. When client needs change, organizations must move quickly to fulfill those needs before competitors do. This requires understanding how what you offer actually creates value for your clients, since developing value for the client or customer is how you drive the value of your business," Frigo says.
Traditional financial value drivers such as cash flow, revenue growth, profitability and return on investment (ROI) are still valid, but we must remember that they are driven by client value creation. According to Frigo, employees are the primary value creators in any company, and companies that treat their employees as valued clients create greater long-term value. With workers quitting their jobs in record numbers as the economy rebounds, organizations that prioritize their employees' needs will enjoy greater value, while those that fail to take employee demands seriously will likely see their long-term value plummet.
“Talent is at the forefront of our strategic plan,” says Brian Blaha, CPA, growth partner with Wipfli LLP and a member of the Illinois CPA Society’s board of directors. “When we focus on the individual and really care about them, we are able to work to accommodate both their needs and the needs of the firm. Because of this, we see turnover rates below industry averages.”
Because of the pandemic, Wipfli is embracing a hybrid work schedule, allowing employees to choose between working at home or at the office without mandating how many days they should work from either place. Even so, Blaha says the company has seen an uptick in the number of employees returning to the office. The future of work will be a hybrid situation comprised of both in-person and remote work, where the former will be encouraged when collaboration and face-to-face relationship building is required, he says.
CPA firms and the businesses they advise must prioritize changing client needs and shifting employee demands if they hope to build long-term value. At Wipfli, there is an emphasis on seeing each associate, client and referral source as an individual, focusing on collective results, Blaha says.
“We really seek to focus on each person," he says.
Intelligently Investing in Technology
Resource allocation is the name of the game when it comes to the second new value driver: the intelligent deployment of technology. Technology is unavoidable, expensive and can be a game-changing value driver or value destroyer for any organization.
“By upgrading existing technology, CPA firms can not only increase efficiency and improve productivity, but also begin serving new groups that were either not geographically available to them before or that required additional resources,” says Matt DiLiberto, BDO USA’s modern workplace practice leader. “The pandemic showed us that by investing in technology that allows auditors to do their jobs remotely—like video conferencing services and online file-sharing programs—you can serve clients from afar without spending money on travel. Technological tools are only going to keep growing in scope, so CPA firms that invest now will be ahead of the curve.”
Technology can also help firms retain employees by eliminating the annoying minutiae that often lead to burnout.
“Firms should continue to evaluate existing business processes to reduce inefficiencies, eliminate scenarios where employees are doing manual tasks, identify systems that are not accessible from all devices and enhance tools and training that support the employee experience,” DiLiberto says.
Meanwhile, Blaha says he has seen huge improvements in technologies that supplement the employee experience, from leveraging social media for recruitment to utilizing digital channels and microlearning for employee development.
“We are implementing many new technologies, participating in the AICPA’s dynamic audit system, utilizing robotic process automation and investing in our data structure and enterprise systems for marketing, sales, finance, human capital and customer service. Many of the enterprise systems have AI components, and we are also researching other advanced technologies, such as blockchain and augmented and virtual reality," he says.
Only by keeping a finger on the pulse of technology and making strategic choices that support both employees and clients can firms innovate and build value moving forward.
"Clients in the manufacturing space are expressing interest in augmented reality tools, which can be useful for on-site inspections to capture information that may otherwise be missed. Ultimately, adopting the right technologies and tools for your firm will allow your employees to focus on more complex, strategic problems. This can help the firm save time and money by increasing efficiencies and quality control and reducing administrative overhead and turnover," DiLiberto says.
Innovating for the Future
Innovation was a buzzword long before COVID-19 hit, but the pandemic made it clear: Organizations that cannot move quickly and imaginatively to new ways of doing business will not survive in a post-pandemic world.
Frigo says CPAs need to recognize that "the business environment today is changing at an accelerating rate of speed, and the pace of change will continue to accelerate."
“Strategic risk-taking and strategic thinking are core competencies every firm needs to get better at. Look back and ask: What have I learned during the pandemic? How can those lessons drive my firm and my clients to greater value in the future—and greater resiliency when the next shock hits our economy?” Frigo says.
The firms that were able to learn how to move quickly and be open to experimentation during the pandemic saw the payoff in added business value.
“Try new things, and learn to fail fast and adjust course,” Blaha says.
Driving Value Now
COVID-19 spurred a great test run for innovation in a globalized world where climate change, shifting cultures and demographics and constantly accelerating technological advances will make disruptions increasingly common. For many firms and their clients, the pandemic shined a spotlight on the flaws in the old way of doing things and the old value drivers. These three new value drivers—empowering people, using technology intelligently and foregrounding innovation—are interwoven and offer big lessons for both CPA firms and the business clients they advise. Focusing on just one of these value drivers will likely lead to improvements in the other two areas.
Leal of EY Canada says CPAs have the knowledge and tools necessary to transform their own firms as well as their clients’ businesses.
“As leaders with a pulse on organizations’ financial outcomes, CPAs must be part of this value transformation and provide leadership and support in projecting the different future scenarios and their implications, collaborating with functional area leaders to identify the relevant value drivers and monitoring and regularly reporting on business performance as strategies are implemented," Leal says.
In other words, the CPAs who embrace the new value drivers will bring huge growth to the businesses they serve and also see exponential value growth at their own firms—long after COVID-19 is a distant memory.
This article was originally published on the Illinois CPA Society's website.
Kasia White is a dedicated journalist with five-plus years of B2B magazine publishing experience. Her work has taken her around the country, from reporting on the world's largest music trade show to sitting down with executives from globally renowned companies.
From 2016-2019, Kasia served as the editor of Music Inc. magazine, North...