Becoming the firm of the future: 6 stumbling blocks on the road to greatness
Most accounting and legal firms are facing unprecedented marketplace transformation in the form of evolving client demands, a talent shortage, and competition from non-accounting and legal firms. Traditionally, public accounting has stuck to the status quo rather than engaging in intense, healthy debates on any necessary cultural changes. As a result, many of our firms are in denial about the challenges they face and the steps they need to take in response. Is your firm one of them?
Here are six common characteristics that foster denial and create stumbling blocks that can prevent our firms from achieving greatness.
1. Partner/manager comfort zones. As firm leaders, we often prefer things the way they are, and consequently, we ignore or discount the sweeping changes on the horizon. Underlying this behavior is the fear of loss, of losing what we have or even going backward in our finances, careers, or whatever we hold dear. Fear of loss is the reason some firm leaders don’t tighten client acceptance policies, preferring instead to grab and hold on to every single possible client.
Many of us insist we embrace change. However, it’s one thing to believe in change and another to acknowledge that it must begin with us. As CPAs, we often are risk-averse, but sticking to the status quo may present even more risk to a firm than making a few bold moves.
2. Artificial harmony. Many firms have collegial cultures where employees avoid conflict and feel pressure to agree with others. In such firms, partners and managers often fall victim to confirmation bias and only seek out information or opinions that reinforce what they already believe. As a result, everyone overestimates the extent to which they share the same vision, and the firm does not benefit from enough healthy challenges to its views and beliefs.
3. Overconfidence. Did you know that 94% of men rank themselves in the top half of all men in terms of athletic ability? When we are overconfident in our ability to make accurate estimates, we blind ourselves to the degree of change necessary as the world transforms around us. Just look at what happened to Blockbuster, Kodak, and Polaroid: They failed to adapt to changes in the marketplace and lost their positions as industry leaders.
4. Herding instinct. We would rather fail as a part of a group than be seen as an outlier who did something foolish. We assume that there is less risk of failure in following the herd than in making bold decisions about an uncertain future. CPA firms that adopt this mentality will offer clients cogent advice about innovation, talent management, and strategic planning, but fail to follow it themselves.
5. Banking on good intentions. Some firms mistakenly assume that merely wanting to change, maintain, or increase their relevance is a strategy. We fool ourselves by holding retreats and creating goals, objectives, and action plans, then failing to act on them.
6. Vested anchoring. It’s also possible to believe that past successes will inevitably lead to future accomplishments, which robs us of any motivation to change. We expect clients to retain us based on long-term relationships, even when their needs have changed. Clients may be seeking deeper insights, more proactive advice, and unrivaled expertise to help them anticipate and address the uncertainty ahead, but firms can’t continue to meet these desires if they’re not changing along with the marketplace. Most CPAs excel at identifying the risks associated with any new strategies or services, but how many adequately gauge the lost value of not doing something?
Do any of these obstacles exist at your firm? Use the questions below to determine if they do and brainstorm potential solutions.
Which of the six stumbling blocks do you recognize? What consequences is each one having on your practice? For example, how is it holding you back now or making future initiatives more difficult or unlikely? Is it preventing you from remaining relevant with clients or in recruiting and retaining quality staff? What are the potential risks if you don’t remove the stumbling blocks?
Frequently, partners aren’t aware when their firms have a tendency to sidestep conflict. Ask your team members this simple question: Does our firm have a culture of conflict avoidance?
What is the best path to having more open and healthy challenges to your present strategies and beliefs?
What actions have you taken that reflect your firm’s commitment to bold decisions based on our profession’s inevitable transformation? How much time has your partner group invested in understanding the hard trends that make up this transformation and the challenges it presents for how we do business today? Do your actions reflect recognition of the need for change or the continuance of the status quo?
As Nobel Prize-winning physicist Richard Feynman once remarked, “The first principle is that you must not fool yourself—and you are the easiest person to fool.” Ensure that your firm is not fooling itself about the necessity of change, and you’ll be well on your way to facing the future with confidence.
adapted from cpa2biz.com