Platt’s Perspective: 24/7/365 Access – Is It Good Client Service Or Are We Kidding (Killing) Ourselves?

I recently served as a panelist at a conference, and the organizer was trying to coordinate logistics in advance. He sent an email on a Tuesday at 11:11 p.m. – clearly a time that worked for him. One of the panelists responded at 2:18 a.m., three hours later, and another panelist weighed in four hours later. I had business to attend to that morning and didn’t respond until 10:04 – less than 11 hours after the initial request. As the last person to respond, I admit that my initial feeling was that I let everyone down since I was so “late” to the conversation.

I get it that the responses from the other panelists came at a time that was convenient for them and most appropriate for their schedule. I get it that the “anytime, anywhere” work environment means that we all get communications like this at any time of the day, and that we should expect that going forward.

Mike Platt

Mike Platt

This not-so-unique experience quickly turned to curiosity as to how these kinds of communications – while exceptionally flexible and convenient for the sender – may affect the receiver. When you shoot off an email to your staff at midnight because you just thought of something and didn’t want to forget it, is it accepted that way, or does the recipient feel stressed that he or she let you down by not responding until 10 a.m.?

What about when a client sends you an email at 11 p.m.? Do you feel compelled to respond before the sun comes up? Are they expecting you to? Is it a hallmark of great client service or is it a recipe to stress yourself – and your staff?

There are clearly no right or wrong answers to these questions, but you should develop good answers for your firm. If 24/7 access and the promise of an immediate response is a competitive advantage you believe in, and one that is a core value, then go for it!

I’m not against responding to emails whenever it is convenient. But I do wonder, as technology and expectations continue to speed up, if it is the right expectation to set. Society may have already answered that question for us (“It’s inevitable, get used to it!”), but maybe there’s another way to look at it.

Maybe it can become a competitive advantage to not move so quickly. After all, research has shown that a client values a professional’s opinion much more when delivered in a timely but considered manner – rather than an immediate response. These are all good questions to ponder. I wish I could spend more time sharing my opinion, but it’s now 11 p.m., and I’ve got some emails that just came in that I need to respond to . . .

Platt’s Perspective: Disruption Is Affecting Associations As Well

Mike Platt

Mike Platt

While firm leaders are working hard to address disruption in the profession, CEOs of associations are doing the same – planning their next moves to strategically stay ahead and best serve their members.

Associations have been around for more than 50 years, and the basic premise – to help members grow and better compete – hasn’t changed much. But with the needs of firms constantly changing, the landscape of mergers and acquisitions removing longtime members, and newer firms being challenged to find a home because of geographic restrictions, the world of association management can be as topsy-turvy as that of the members they serve.

As a former association executive myself, I recognize the challenges that many associations are facing: they are generally not-for-profit organizations with a relatively small staff and a volunteer board serving a diverse group of firms that are all following independent pathways.

Consider some of the changes happening in the association world recently:

  • Moore Stephens LLP (UK), the founding firm in the Moore Stephens International association, announced it is in merger discussions with BDO. How might that affect Moore Stephens International, if at all? In 2014, Baker Tilly UK, the founding firm in Baker Tilly International, made a similar move and joined the RSM network, and Baker Tilly International kept marching right along.
  • Many associations have wrestled with how best to achieve a grand goal of global branding – in a cost-effective way – without reducing the independence of their member firms or the brand value of the individual firms in the markets they serve.
  • Over the past 24 months, a number of association CEOs – with decades of experience – have retired or will soon be retiring, giving the association volunteer leadership the opportunity to create new/different strategic directions.
  • Several associations are reviewing their organizational structure, adding or enhancing the role of a global CEO. The global leader oversees and coordinates the activities of the dedicated group of regional leaders, who are highly tuned-in to the unique needs of their members.
  • Generational differences point to younger firm leaders being less inclined to join associations / peer groups / business organizations than their older peers were, adding a level of complexity to the conversation of why join an association.

According to the 2018 IPA survey, one of every 20 firms that identify themselves as a member of an association indicate they are considering leaving the association in the next 12 months. Those firms tell IPA confidentially that they are just not getting the support, direction, resources or vision of the future from their association that they feel they need to succeed in the next few decades.

I’m bullish on the future of associations. As firms grind their way through their own strategic visioning to determine what they want to be in the future, I’m confident associations will follow suit. There may be some associations going by the wayside, there may be mergers of current groups, and there may be completely new business models created to meet the fundamental needs of members. After all, like the firms they serve, the associations themselves are not immune from disruption.

Platt’s Perspective: A Side Of AI And Technology Developments That No One Is Talking About

Mike Platt

Mike Platt

I have attended many conferences, partner retreats and association meetings over the last few months and, as you would expect, THE topic that is top of mind for many firms is technology innovation and how automation will change what we know about providing accounting and tax services. But I find one thing very troubling in all these conversations – they tend to be myopic and don’t address what I believe to be the more “clear and present” danger. Let me explain.

Many firms are rightly thinking about automation, new service opportunities and how they can be more efficient in what they do. All recognize that they cannot compete financially with investments in these technologies being made by the Big 4 and many of the Top 20 firms. And while the conversation about what might be possible in the future is of academic interest, far too many are dismissing it as, “While that might be reality for the Big 4, we don’t serve American Airlines as a client and our clients don’t need that level of sophistication in their tax and audit services.”

Yes, it’s true that you aren’t auditing American Airlines. Yes, it’s true that the vast majority of your clients don’t need these sophisticated systems to audit their accounts. And yes, it’s true that it will be several years before many of these disruptive technologies are affordable and available to firms of your size.

But here’s my biggest concern with that thinking, and why I feel compelled to sound the alarm. What happens when the largest firms perfect the technology to the point of significant cost savings in servicing their Fortune 500 clients? The answer is THEY WILL MOVE DOWN MARKET because now it will be affordable and profitable to do so. They will be able to very profitably serve the Fortune 1000. The Fortune 5000. Local construction companies. Mom & Pop grocery stores. YOUR CLIENT BASE.

It is this threat to your future that I believe isn’t being talked about with the intensity and volume I believe it should be. What will happen when your longtime client goes through a generational change of leadership and they feel that – for a similar fee as yours – they would prefer having the name, cache and resources of a Big 4 behind them? And with the technology innovations, it won’t be long before the Big 4 can profitably compete for a piece of your client base. Let that sink in for a moment.

Implementing all the new technology that is being talked about today will certainly provide your firm with cost savings and operational efficiencies. But what are you doing today to ensure that the relationships with every current and future decision-maker in your client companies are rock solid to ensure that when the Big 4 come knocking – and they surely will – your client doesn’t open that door?

I encourage all MPs, executive committees, state society leaders and consultants to the profession to include this perspective in their discussions of the future, because this is a conversation we are not hearing anywhere, and one we believe is a “clear and present” threat that needs to be planned for.

Platt’s Perspective: On Slaughtering Sacred Cows

Mike Platt

Mike Platt

It’s no secret that change doesn’t come easily. The best change agents are fundamentally curious, not only wondering why a system or a process is done in a certain way, but digging deep to uncover the root cause. Using the “ask five ‘whys’ ” technique in their exploration, the best leaders will often get past the surface answer and expose what is at the core of a “fundamental truth” about how business is done in their firm.

As an example, consider a common complaint in firms today – staff turnover is high and often the wrong people are leaving. Why is that? Professional staff are often frustrated because they don’t know what it takes to get ahead, and they make a decision – often in a vacuum – based on what they think is their best career move. Why is that? In many firms there is not a well-defined or well-communicated path to advancement from staff person to partner. Why is that? Because often there is not just one path to success, and by defining the path, partners feel they are boxed in to one approach. Why is that? Because when they were coming up, partners had to define their own path and demonstrate their own entrepreneurial “chops” to get ahead, and often feel that handing a defined plan to someone is short-circuiting what it takes to get ahead. And why is that? Because ultimately partners believe that the staff haven’t yet paid their dues and should not be given a free ride.

This ultimate partner belief – that staff haven’t paid their dues – contributes to high turnover rates and may no longer serve the firm the right way. This type of a belief system is an example of a sacred cow of the profession.

What other sacred cows should be analyzed? See how many of these beliefs you recognize in your own firm:
1. Our pyramid-shaped business model is the key to a successful firm going forward.
2. There is no time for additional value-added work during busy season.
3. Partners own the relationships.
4. Partners are best to run the firm.
5. As a partner, no one else can do what I do.
6. Minimum hours are required during tax season.
7. Face time is critical, the team needs to be in the office.
8. Entry point to a client is compliance services.
9. Technology can’t replace what we do.
10. We need to treat all clients like “A” clients.
11. Career success = Partnership.
12. Firm success = Net Income per Partner.
13. Traditional metrics tell us all we need to know about our success.
14. We are a service organization, not a sales organization.
15. High quality work will ensure that we keep our best clients.

Without a doubt, many sacred cows exist in firms today, and the list above is just a fraction of the many (outdated?) belief systems that dominate the profession. Ask your partner group and key staff to identify their own list. Slaughtering these sacred cows can be a liberating experience for all involved, and will make room for a new set of beliefs that will better serve the firm by propelling everyone into a more successful future.

Platt’s Perspective: Diving Into The World Of Big Data

Mike Platt

Mike Platt

Last month, the IPA leadership team took the opportunity to attend the four-day Gartner Data Analytics Summit in Dallas. Nearly 4,000 data engineers, data scientists, chief data officers and other dedicated analytics professionals gathered to discuss the latest trends in predictive analytics, Big Data, blockchain, business intelligence platforms and artificial intelligence.

With thousands of the smartest people in the field sharing best practices and success stories, we were overwhelmed with where the technology is going and excited about the amazing possibilities for the future.

Identifying, capturing, storing, analyzing and harvesting massive amounts of consumer data is the holy grail for most companies. The majority of attendees came from Fortune 500 companies with multi-million-dollar budgets dedicated to leveraging and customizing services and products to individual customers. (As an example, think about how Amazon or Netflix “suggest” your next purchase based on past behaviors.)

It’s not surprising that the accounting profession is far behind corporate America in taking advantage of available data and harnessing it to build the enterprise. The bigger takeaway for me is that so few firms even recognize what kinds of data they have, never mind its value and potential.

Most firms don’t have the resources to hire data analytics professionals and implement new technologies at the scale discussed at the Summit. A handful of firms can capitalize on some of these opportunities, and are making strides to do just that. But where does this leave the other firms? What should they be doing right now to get on the bandwagon?

Leaders can:

  • Acknowledge that this trend of micro-experiences [Amazon- and Netflix-type recommendations] for customers is not going away.
  • Recognize that Fortune 500 companies are targeting your clients using these data analytics efforts, which are shaping their view of how business is conducted.
  • Understand that you can access much of the same kind of customer data today – the challenge is how to harvest it.
  • Stay up to date on the latest in analytics, artificial or augmented intelligence, blockchain and other new technologies, and play out scenarios among your leadership team as to what you could do with the new technology once you have access to it. Better yet, bring in your younger leaders to take control of that discussion.
  • Embrace the idea that your knowledge of clients, their challenges and their opportunities can be used to create a lot of the unique-to-each-customer experiences that larger companies are trying to deliver. You have an advantage over companies like Amazon or Disney because you are much closer to your customers and you understand the nuances of what they are looking for. Make sure you maximize this advantage.

What was the biggest lesson garnered at the Gartner Summit? The accounting profession needs – once and for all – an ‘all-in’ mental shift. Firm activities should not be viewed as a series of transactions (“we do tax returns and audits each year”) but as part of a continuous, trusted relationship with clients. Through these connections, firms can uncover issues specific to each client and help find solutions, even if the answers lie outside the world of accounting. Then – and only then – can your firm deliver personalized services on par with what your best customers are already receiving from the Fortune 500 companies that are spending millions of dollars to serve them today.

Platt’s Perspective: Don’t Like Disruption? ‘Expect An Earthquake Every Three Years’ Says McKinsey CEO

Mike Platt

Mike Platt

Disciplined. Compliant. Orderly. Methodical. Those are the driving personality characteristics of most left-brained accountants that I know. Doing things the right way. Debits equal credits. There is a natural order to accounting, and that has tended to attract many similar-thinking people to the profession.

It also has created a profession filled with practitioners who are, at their core, fundamentally resistant to change. Any leader who has undertaken a change effort has encountered this group – not on board at best, actively resistant at worst. “Why do we need to change, everything has been going well so far, so why fool with success,” is the cry most often heard from the group.

In the past, shaking up the status quo even once a decade was a painful process for this group. Dominic Barton, CEO of global consulting giant McKinsey, recently told The Australian Financial Review in an interview that large companies will need to massively restructure to the point that they will “expect an earthquake every three years.”

With high partner compensation numbers, there’s a tangible lifestyle measurement at risk. After all, there have been calls for change before, the profession has made small, incremental adjustments to its trajectory, and “we’re doing just fine as we are, thank you.”

But this time it’s different. This time, the pace is lightning fast. The image that comes to mind is my own experience of skydiving for the first time. Door open, a white-knuckled grip on the doorframe, feet firmly on a small step. As the instructor encouraged me to “climb out,” I warily slid one hand on to the wing strut. “Keep going” the instructor urged…“Keep going – I’ll talk you through it.” As I finally lifted my feet off the step, the realization that I was no longer tethered to the safety of the plane, hit me. “LET GO!” the instructor bellowed, and I let go.

As I watched the plane fly away, my heart stopped for a moment until I heard the whoosh of a parachute opening above my head. And then silence. Beauty all around me. A feeling of genuine exhilaration. As I glided down to Earth, I felt an accomplishment and satisfaction. My final thought was “I jumped out of a plane and landed safely on the ground.”

For those leading the change, recognize that you are flying the plane filled with some white-knuckled staff and partners who are perfectly comfortable inside the safety of the plane. Never underestimate the significance of encouragement to get your group to sit in an open doorway with feet hanging out at 10,000 feet above the ground; to be the voice of “keep going,” “keep going,” “keep going.”

Understand how critical it is to them to hear your calm and confident instructions to “now LET GO!” As you talk them through their maiden flight and land them safely, they will gain the courage and the confidence to go back up in the plane again – if McKinsey is right – another three years from now as you continue to create an organization whose core competency is the ability to adapt to change.

Platt’s Perspective: How Much Of Your Partners’ Time Is Spent On Partner-Level Activities?

Mike Platt

Mike Platt

For years I’ve asked a simple question of my clients: “Think about all of the hours your partner group collectively spends on firm business each year. Raise your hand if you believe that more than 80% of those hours are spent doing partner-level work – however you define that.”

When I get no responses, the next offer is “70%?” A hand or two goes up. “Sixty percent?” Maybe a quarter of the hands are visible. “Fifty percent?” Without fail, about half the hands are finally in the air when presented with the 50% option. To spare the rest the embarrassment of raising their hands at levels below 50%, I stop there.

In this unscientific – but consistent – poll of firm leaders, the conclusion is that partners spend more than half their time on work that should be delegated.

The reasons are varied. For some partners, grinding through staff-level work brings them cozily back to their comfort zones. Some don’t trust the quality of subordinates’ work. Others are short-staffed and can’t delegate work. And for some, prioritizing the highest and best use of their non-billable time can devolve into “what can I check off my to-do list?” Too often, that work is not a partner-level activity that will help the firm grow.

The result of all this? Profitability may suffer. Staff engagement suffers because staff know partners will jump in and change things anyway. Strategic planning and brainstorming suffers at the partner level because there is never enough time to work on the business. Partner growth and development suffers because partners are not being challenged. Ultimately the partner’s value to the firm suffers because compensation levels are incompatible with their staff-level activities.

As client needs become more complex, partners will need to step up their game. As staffing leverage continues to grow, as it has for more than 15 years, partners will no longer be able to hide behind staff-level work. As the profession continues to evolve, firms will demand their owners meet the complex demands of the future, and continually raise the bar on what being a partner really requires.

If you want to make an impact on your firm this year, have your partner group commit to increasing their time doing partner-level work from 50% to 60%. It seems like a little step, but it is entirely achievable and will help build the confidence to keep going to 70%, 80%, 90% and beyond.

Platt’s Perspective: Will The Definition Of Success Change For Firms In The Future?

Mike Platt

Mike Platt

Ever since key performance indicators were created for accounting firms, measurements of success have been dominated by traditional metrics like growth percentages, leverage, revenue per charge hour, revenue per FTE, utilization, realization, profit margin and the ultimate target – net income per equity partner.

In recent years however, conversations have turned to targets of a different nature – staff satisfaction, investment in the future, re-imagining the business model, bench strength, succession planning, staying relevant and transformational change, to name a few.

As we enter a new year, it’s the appropriate time to look at the old and the new, and question how the profession’s definition of success may change over time.

How are firms marrying the traditional metrics with the top-of-mind issues listed above? Who will “win” the new game, and how will that be measured? What are the new goalposts that will define future performance and overall success?

Some suggest that traditional metrics no longer meet the needs of the profession, and point to benchmarks such as net income per equity partner as no longer relevant. Others vehemently oppose this notion, arguing that no targets are achievable without a solid business foundation that generates acceptable / suitable / achievable profits for partners.

A middle ground is needed – one that accounts for not only traditional performance metrics but also perceptions of staff, partners and customers and the firm’s impact on the lives of those it touches. At the 2017 PRIME Symposium, firms began this exploration of new measurements to assess the well-being of the firm as well as partners, staff, clients and communities they serve. IPA is committed to building on this holistic approach going forward to help firms achieve the balance between the objective and subjective indicators of success.

In the meantime, I challenge everyone to consider how the definition of success might change for your firm in the coming years. What do the current partners think? What do the next generation of partners think? How big is the perception gap between the two groups? Our goal is to understand that gap and bridge it to build a shared vision of success in the future.

Platt’s Perspective: ‘Tis The Season To Be . . . Stressed

Mike Platt

Mike Platt

I’m a news junkie. I inhale news, politics and culture news the way a caffeine addict gulps coffee. No doubt you have people in your firm who do the same.

With all the seemingly disheartening news – divisive politics, terrorism, racial tensions, sexual harassment, nuclear threats, gun violence – I wonder what toll it is taking on all of us, and more important, how much of that toll is showing up in the workplace.

Could it manifest itself in reading false intentions into the actions of our colleagues, in minor distractions throughout the day, or in shortening our fuses when we react to perceived threats? It may manifest itself more subliminally, with feelings of stress and disenfranchisement bubbling just below the surface.

In a newly released study, “Stress in America,” the American Psychological Association reaffirms the findings of previous surveys – that Millennials continue to have the highest levels of reported stress, at an average of 5.7 on a 10-point scale. Boomers, by comparison, report an average stress level of 4.1, and Gen-Xers 5.3.
That same study points to a widening gender gap in the stress levels reported by men (4.4) and women (5.1), as well as a racial difference among Caucasians (4.7), Hispanics (5.2) and African Americans (5.0).

Clearly the news isn’t the only trigger causing stress – financial pressures, family issues and health concerns top the list of the big three that impact all of us. On top of all those issues – both those within our control and those outside our control – is the reality that Americans are among the most vacation-deprived groups in the world according to Expedia in a recent report. That report indicates that Millennials are the most vacation-deprived (62%) of any age demographic and are more likely to shorten their trips due to impending workload than their older colleagues.

So, what does this have to do with running a successful firm? Life doesn’t occur in a vacuum – all employees bring baggage with them, and workplaces are affected.

Firms need to consciously choose whether to address the well-being of their staff, partners and clients. Does the firm’s responsibility end at the office door or is it the firm’s role to help them manage the pressures they will inevitably encounter outside work? Are firm leaders aware of the ways these outside concerns are manifesting themselves? Do you know who is feeling disenfranchised, detached or stressed – and if so, the reasons for it? Do supervisors get training in detection of behavioral changes in those they manage, or is their CPE more focused on the latest FASB rules? And how do we measure commitment to overall well-being to benchmark progress from year to year?

As the holidays are upon us and tax season approaches, chances are stress levels are ratcheting up – whether you realize it or not. As you celebrate this season of thanksgiving, family and traditions, be sure to reaffirm your conscious decision – it is a choice – as to how much you are willing to address the issues your partners and staff are dealing with every day. And for those of you with news junkies on your team, encourage them to turn off all media, curl up with a good book, and just relax . . .

Platt’s Perspective: Classifying Clients – It’s Good For The Top And Bottom Line (And Everything In Between)

By: Michael Platt

Have you ever noticed that after you a buy a new car – let’s say it’s a 2017 silver Mercedes-Benz – you start seeing the same make, model and color every time you look around?

In similar fashion, firm professionals can begin to home in on their ideal clients and recognize them instantly. To help accomplish this, they need to go through two exercises that the majority of firms neglect: Define the firm’s best to worst clients, ranking them A through C or D, then outline a plan to improve their grades so they become better clients.

IPA’s most recent survey data, from more than 540 firms, show that only 30% are formally classifying their clients in this way. The other 70% are missing an opportunity to sharpen their focus, make more money and limit unnecessary headaches.

Mike Platt

Mike Platt

Many firm partners have their own ideas on who their A, B, C and D clients are, but it’s rarely agreed upon firmwide, and lower-level professionals may hold vastly different views on the attributes of a “perfect” client. The more clearly this is defined up front, the easier it is to target that group.

Every firm over the years has collected all kinds of clients – some are ideal fits for the services the firm provides; some were ideal at one time and are now legacy clients; and some are no longer appropriate.

So, how would a firm decide which clients are As and which are Cs or Ds? That’s up to every firm to define, but typically A clients are ones with growth potential, who are cooperative, pay premium fees for premium services, come to you before making major decisions, rely on your advice and refer other clients to the firm.

B clients, for example, may not access a full range of services or actively refer your firm, but they are owners of up-and-coming companies who could likely become A clients someday. C clients may be your 1040 tax return customers, and D clients could be those who are late providing information, argumentative with staff, late paying bills and constantly complaining about fees. Some D clients are unavoidable (think your brother-in-law, or the grandson of your best A client), but all should be reviewed and culled on a regular basis.

I believe so strongly in classifying clients that I suggest identifying them by letter grade in a firmwide database that is accessible to all professionals and reviewed every few years. Obviously, keep this information confidential – no client wants to hear that they’re a C client.

Once clients are classified, the firm should define a plan to move clients up. Can your firm guide tax return clients on ways to streamline operations of their businesses, grow and become more profitable? If so, those B clients may become more reliant on the firm’s expertise and opt to take advantage of more firm services, becoming A clients in short order.

Classifying clients moves the right metrics. When a firm focuses its energy on providing great service to A and B clients, realization goes up, fees go up and profitability goes up. At the same time, clients are fulfilling their dreams for their businesses, and they’re more successful and happier as well.

Classifying clients helps with business development. When you’re out looking for new clients, you don’t want to just grab whatever’s out there. Zero in on the kind of client the firm wants to pursue. That’s because not all revenue dollars are the same. Generating a dollar’s worth of revenue from an A client often costs far less than generating a dollar’s worth of revenue from a C or D client.

Don’t limit your thinking to believe that classifying clients is just a marketing activity. It is, but it’s much more than that. This exercise can focus the firm in a clear, targeted way on key metrics related to profitability, realization, revenue per charge hour and contribute to business development opportunities, growing the top line as well.

One other benefit to consider – once A clients are defined, future A clients are much easier to find, just like those 2017 silver Mercedes-Benzes you’re seeing everywhere.