Shifting your firm’s culture: Wet Noodle or Deliberate Destiny?

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We've all heard the expression",Making changes in a firm is like trying to push a wet noodle across the table." This is especially true for firms that are busier than ever; the motivation to change just isn't there. If your firm is humming along with no need for change, congratulations, at least for now. If your firm has any of the symptoms listed below you may want to consider some of the best practices applied by firms who have made the transition from pushing the wet noodle across the table to having their staff and clients pull them in a new direction.

Seven symptoms indicating a need for change:

  1. If your partners spend more time on production than servicing clients.
  2. If your firm's brightest talent is burning out and leaving (or likely to leave).
  3. If it is easier to get a new client than replace or attract talent to your firm.
  4. If you look at your staff and can not easily point to the next generation partners.
  5. If the firm's average billings per client are not steadily increasing (aside from a fee increase).
  6. If you swore you'd never touch another tax return and each season you get sucked back in.
  7. If you are considering how you can retire sooner rather than later.

All these are symptoms of a firm that is buried in the present and not adequately preparing for the future. You'll have to decide what your firm of the future is going to look like; no one else can do that for you. But once that vision is clear, the question still remains",How do we make the changes necessary to achieve our vision?" Most people don't like change very much. Even those that say they like change only like it if they are in charge of it. Bottom line: altering the destiny of your firm doesn't happen by accident. Those firms who are successfully shifting their culture are applying the principles of "Deliberate Destiny."

Those firms that are most successful in making long-term cultural changes are those that engage their younger talent in the visioning process. After all, the firm's young talent are much more likely to buy-in and support changes that will have a direct effect on their future. The next generation of leaders is not motivated by the same things that motivated previous generations. Past generations sacrificed for the "good of the firm." Our future leaders are much more likely to embrace changes if the good of the firm is in line with what is good for them personally. Deliberate Destiny firms recognize this generational shift and use it to their advantage. Eventually, even the most reluctant partners will jump on board when they see the train is leaving the station without them.

Compliance services continue to trade at commodity levels. Technology has made firms more efficient than ever. We can produce more with less supply, but even that has a mathematical finale. Firms on the path of Deliberate Destiny are actively changing the mix between core and non-compliance services. They are investing in the development of their people to double their value. Note, we did not say double their production - we said double their value.

Deliberate Destiny firms are putting their younger talent on the partner track much sooner than they would have ten years ago. They are investing in the development of soft skills as readily as technical skills. Deliberate Destiny firms have redefined what it means to be a rainmaker. Traditional rainmakers are out in the public, generating new business. Deliberate Destiny firms are helping young partners-to-be operate in their rainmaking comfort zone by teaching them how to identify and sell non-core services to existing clients.

The decidedly Deliberate Destiny firm, Meyers Norris Penny LLC based in Calgary, Alberta, Canada has proven this model. Twenty of their "re-tooled" professionals generated $1.4 million dollars in new services in 12 months primarily selling to existing clients. MNP expanded their re-tooling to include another 50 professionals the next year and the combined group generated over $8 million dollars in new services in 12 months. Mark Brown, Director of Small Business Consulting for the firm said",We saw the need for re-tooling years ago, we dabbled for a few years, then we really got serious and began putting our money where our mouth was by investing in our brightest young stars. The financial results have been astounding, but equally important is the impact on our staff retention. Many have said they would have left the profession if it weren't for MNP's focus on their professional development."

Deliberate Destiny firms are out in front of their people, modeling desired behavior, recognizing it, and rewarding it. For example, if your goal is to become a "client centric firm" rather than a "service centric firm", it follows that you would expect your professional staff to invest non-chargeable time into "A" client relationships. Setting a hourly budget or number of client meetings budget for every professional every month, ensures that the goal of expanding awareness of client needs is being addressed regularly, thereby changing behaviors and re-setting client expectations of their CPA relationship.

  1. From the ground up:
  2. Contrary to popular opinion, lasting change does not happen from the top down. Wet Noodle firms make the mistake of spending all their time trying to convince partners of the importance of supporting the change process. They even expect that partners will act as role models in the change process. Wet Noodle firms waste a lot of time on this effort since so many of the partners already have their sights set on retirement and have little motivation to change behavior.
  3. Let client demand drive the change
  4. There is no more compelling motivator than the economics of supply and demand. Rather than fight this economic reality, Deliberate Destiny firms capitalize on it. There has never been a better time for firms to seek a more complimentary balance between supply and demand. As a result, we see firms firing clients in larger numbers than ever before. We also see firms raising their fees. What we are not seeing enough of are firms re-tooling their supply.
  5. Act "as if"
  6. Don't wait for the culture to change; act "as if" it already has. In other words, set expectations for behavioral changes at all levels of staff on a daily basis. There is a tendency, in firms, for the early adopters to make the big waves and then the rest will follow - if they feel safe. Expecting small but meaningful changes in behavior at all levels from the very start communicates an unwillingness to tolerate stragglers. For example, in the Meyers Norris Penny example, even though they only took 20 professionals into the 2-year re-tooling program at first, they set an expectation that every client relationship manager would participate in the "spotlight" campaign - a program designed to spotlight the client's overall business and personal needs - with a practice development specialist at their side. For many of the professional staff, those spotlight sessions were the first time they had had a non-compliance focused discussion with their clients.
  7. Take the short term view
  8. This flies in the face of traditional wisdom. Most people say you must focus on the long-term. Although it is important to have a clear view of your desired outcome, your focus needs to be on making small incremental changes every day. Although it may take firms years to reach the ideal state they have outlined in their "Deliberate Destiny", paying attention to every step in the right direction reinforces the importance of moving in the desired direction.
  9. Compensation equals behavior
  10. "That which gets monitored gets done; that which gets rewarded gets done again." Firms that state their vision but don't back it up with a link to compensation might as well not bother with their annual partner retreat. Wet Noodle firms ask for changes in behavior but aren't willing to commit to financial consequences for non-compliance. Deliberate Destiny firms not only define their vision, they link it to financial outcomes. If the firm is committed to shifting the mix of services from compliance to non-traditional services, there needs to be a corresponding bonus associated with the desired performance. Likewise there needs to be a corresponding down-side for those who do not shift their behavior. Most people would agree that performance-based compensation strategies are a necessary component of a successful cultural shift. While Wet Noodle firms hope and pray for desired behavior, Deliberate Destiny firms are willing to apply consequences for non-compliance.

If the status quo is working for your firm, again I say congratulations. If, on the other hand, your firm has a vision for the future that is different from the present, all the stated mandates in the world will not effect the cultural change you are looking for. Even firms that have experienced some false starts in the direction of the desired destiny can recover and regroup.

Here are the best practices in a nut shell . . .

1) involve the future constituents of your firm in designing the firm's future
2) capitalize on the economics of supply and demand
3) invest in doubling the value of your people – both admin and professional
4) expect and reward small steps in the right direction
5) stop tolerating wet noodle support

Although real, lasting change happens from the ground up, every firm needs a strong leader. Managing Partners must operate more like a CEO than a partner. For the good of the firm, Managing Partners of Deliberate Destiny firms are the keepers of the vision and the scorekeepers of commitment.

By Edi Osborne, CEO, Mentor Plus
About the author: Edi Osborne, CEO Mentor Plus is recognized as a leader in the area of performance measurement and management to the profession. Mentor Plus’ Performance Measurement Plus and Strategic Performance Management workshops, as well as the $COPE Advisor and Firm Forward Program are offered to the profession on a limited basis. Contact Mentor Plus for details: 831-659-PLUS (7587)

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