Ken Batson has been a CPA for thirty-two years getting up, eating breakfast, and heading to work. A partner at Sharp, Thunstrom, & Batson, a small accounting firm in La Mesa, California, Batson was complacent as a CPA. He'd heard the warnings about massive changes coming to his
profession, but gave little heed to the cautions. "I read the predictions in trade publications, but I didn't see them happening around me or feel the effects on my business," he says. "I doubted the
change was real."
In June 2001, his outlook began to change.
Batson attributes his professional turnaround to a session he attended at the Marriott School's Seventh Annual Management Conference. Batson was rattled by Jeannie Patton's presentation on the CPA profession in flux. CEO of the Utah Association of CPAs, Patton told participants the CPA profession was changing so subtly and quickly that many in the industry hadn't even noticed. Underscoring her assertions with concrete examples, Patton illuminated the warning signs and left Batson with no doubt the changes were real.
"I realized I had to broaden my view," he says. "My firm had to expand and adapt its services so we didn't make the mistake of trying to change too late. We want to be ready."
To help CPAs like Batson heed warnings and retrofit their firms, we present excerpts from Patton's presentation that describe the accounting profession's strategic inflection point, the need to recognize change, the AICPA Vision Process, and the importance of becoming a leader
of change.
Strategic Inflection Point
If not already there, most CPAs and their firms will soon hit what Andy Grove, former chair and CEO of Intel, named the strategic inflection point. He describes it as "the point in the life of a business [or industry] when its fundamentals are about to change. The change can mean an
opportunity to rise to new heights. But it may just as likely signal the beginning of the end."
Grove explains that strategic inflection points can be caused by more than just technological changes and competitors. He calls them "full-scale changes" in the way business is conducted and says simply adapting to new technology or fighting competition in the traditional
ways is no longer sufficient. "You may have a hard time even putting your finger on what has changed," Grove says. "Yet, you know something has."
If you haven't already hit this point, you soon will. Look around. Has the company or entity you worry most about shifted? If you're in public practice, you've probably noticed that your competition is no longer just the CPA firms in your community it's a whole lot more.
To find out if you are at a strategic inflection point, take the silver bullet test. If you had one bullet, who would you shoot? If you are not already targeting your key competitor, you're at a strategic inflection point.
You also know you're there when the company whose work you rely on to make your product more available has changed. If you're in public practice, those you rely on most might be doing things differently. People you've worked with for years might suddenly sound like they're
from Mars, talking about things that don't make any sense to you.
The marketplace is full of examples that reflect the rapid changes taking place all around us for example, the rise of super stores like Barnes & Noble, Office Depot, and Home Depot.
These kinds of changes can dramatically affect public accountants. You must consider who your clients are and what's happening to them. Did you forewarn your bookstore or office supply client that these changes were happening? Did you even think about these changes yourself
before your bookstore or office supply store client closed their doors?
Think back when PCs first gained popular appeal. IBM was the king of the universe. Now they're struggling to stay in business, and they're not alone. Companies like Burroughs, DEC, Unysis, and HP the best of the best had abundant resources but still managed to fall from the
top. They failed to recognize fundamental changes as they occurred.
Similar changes are taking place in the accounting world. Companies like Cisco, KPMG, Ernst & Young, Cap Gemini, PWC, and HP are merging, buying, and selling continually reinventing themselves. The accounting profession is in turmoil as accountants at all levels are
struggling to find the right business model to provide value added services.
CPAs need to pick up the pace in general, because others are ahead. There's a web site called MyCFO.com, developed by Jim Clark, that provides CFO-type services to small firms.
These types of "on demand services" are popping up all over the web.
Changes are taking place not only in public practice but also in the finance industry.
According to a KPMG study called "Finance of the Future," the finance department will no longer exist in 2010. Mobil has already outsourced its entire financial services to PWC. Another example of financial services being deregulated is HDvest. They sell investment services. At
first, the profession's response was negative. Accounting professionals felt it was an unethical practice for CPAs to be involved in. Despite the criticism, HDvest hung in there and was recently bought out by Wells Fargo.
Think about what happens when you combine the potential of information resources collecting in bank's databases from online check payments and other investment services and the financial resources of banks and financial institutions to market to their clients who could
also be your clients.
Change will continue to come from unanticipated places. It's not going to be an advertisement you see in a paper from a competitor that you recognize. It's going to happen when your clients sit down to talk about their accounts and investments with their bank or financial institution like Wells Fargo. Before you know it, your clients are going to be offered a whole array of integrated services from elsewhere some of them for free. For example, a car dealer offered free tax preparation services last tax season so buyers could apply their refund to their down payment. That's a huge shift when people start giving away one of your main line products as a loss leader for other business.
Accountants need to start thinking about what's changed and what clients value. If you are mailing or handing your clients their tax return, and you're not talking to them about what that means or what their financial situation is, you are no different than a software
package you're not telling them where your value is, you are simply producing a commodity one they can probably get cheaper in a software package.
Admitting and Adapting to Change
CPAs need to reposition themselves and their companies. For example, it's unrealistic to think enough classes can be offered fast enough to keep CPAs e-business savvy. We have to elevate to a strategy far beyond continuing education. CPA State Societies are working on a strategy that
brings the CPA into services offered on the web. With partners like Microsoft, Thomson Publications, and others, the idea is to position the CPA in the web e-enabled environment to provide reliable web-based services to businesses positioning the CPA as the
resource.
Forbes said, "If you're not bloodying your nose in today's warp-speed economy, we have a name for you dead." There are lots of folks who have died in this battle. Students coming out of school now are expected to have between eight and ten different careers in their lifetime.
Think about your professional lifetime. Has your career really shifted that much? If that's what new graduates are going through, why do you think you will avoid it? The shelf life of education is dropping off significantly. We can't teach people enough basic information to remain valuable
when the marketplace is changing as fast as it is. CPAs will have to return to the foundation of the profession professional judgment applied to new services in order to remain viable and to thrive in this new economy.
There's still a sense within the profession that all of this new economy nonsense is going to settle down, that we're going to get back to where the real world is. It's not going to happen that way. Too many things have fundamentally changed within the environment. Yes, there's
been a downturn in the economy and attention has to be paid to the core elements of accounting.
But the value is also found in something beyond that. Think about what it means to account in today's environment. What needs to be accounted for? What needs to be measured? The things that you measure will continue to be the things that get focus. If we're measuring the wrong
thing, we're blind sided by the measurement or accounting process.
Testing against the end goal is a great way to envision future success. It is an inductive process that requires working from the future backward. Typically we build a solid foundation, and we chart forward. The problem with this traditional-linear method is that we may miss what's changed within our context or environment things that can have a significant or even fatal impact. Creating a vision requires deciding where you want to be and then what it takes to get there working from the future backward to the present. We took this nonlinear approach to
developing the Vision Process.
The Vision Process
Recently, we guided nearly four thousand CPAs through an eight-hour Vision Process that included taking an intensive look at the context of the global business environment, who CPAs are, what the marketplace says they need to be, and what they want to be. These CPAs came from
every state in the United States and from all segments of the profession. This was done to identify the challenges and opportunities the accounting profession will face in 2011 and beyond.
After compiling the findings, we identified core services, competencies and values that will help the profession make sense of a changing and complex world. One of the outcomes of this process was the creation of a comprehensive and integrated vision of the CPA profession's future, which states: CPAs are trusted professionals who enable people and organizations to shape their future. Combining insight with integrity, CPAs deliver value by communicating the total picture with
clarity and objectivity, translating complex information into critical knowledge, anticipating and creating opportunities, and designing pathways that transform vision into reality.
The new vision is designed to:
- build awareness of future opportunities and challenges for all segments of the profession,
- lead the profession as it navigates the changing demands of the marketplace,
- draw the profession together to create a vibrant and viable future,
- leverage CPAs' core competencies and values, and
- guide current and future initiatives in support of the profession and the protection of public
- interest.
The vision statement identifies what CPAs are and where they want to be in 2011. It is a major shift in how we see the profession. For example, we haven't always described insight and integrity as ingredients that deliver value. This was a major discussion during the Future Forums
with CPAs, because there's a marketplace perception that many of our products and services are commodities. And if we don't explain what our products and services are and demonstrate where the value is, many traditional services such as tax preparation and financial statements really are commodities. We must learn to communicate the total picture with clarity and objectivity.
We can begin by communicating the total picture behind financial statements and other accounting and tax documents. There's an opportunity factor here. It may be in the paperwork but it's most likely in the dialogue that follows review of that document. We can translate
complex information into critical knowledge. What is it that I need to measure? What's meaningful? How do I use that information or knowledge to make the right kinds of decisions?
By answering these questions, anticipating opportunities, and designing pathways, the CPA transforms vision into reality. As a result, the CPA becomes a partner with his or her clients and helps them navigate the complex financial environment they live in.
Becoming a Leader of Change
When change comes, we can either make the decisions the change requires or defer to someone else to make the decisions using their own methods leaving us in a reactive position. As CPAs, we are perfectly positioned to help people and organizations deal with change, but we're going to have to step up to the plate to make that happen. The following are six suggestions designed to help today's CPAs become leaders of change.
- Learn how to scan for changing conditions. This takes time. If you fail to read publications outside of your professional scope, you increase your chances of being caught off guard by change. Reading is a way to break down your own prejudices about the world. That's the key
challenge to break down your walls and get rid of your own blind spots. - Determine how value is created. Many enter the accounting profession with the view that, "value is created within a certain paradigm that we view from a finance function." Caught in this paradigm, we fail to think about how value is created beyond the things that we are directly measuring in financial terms. We need to be aware of not only the traditional components of value but of all components that create value.
- Become more customer and operations oriented. When working with small firms, I love to ask how they deliver their products. I've found that many firms mail them. In many cases, these firms seldom have face-to-face meetings with their clients. If this is the case, there isn't much separating the firm's product from that produced by software packages. What differentiates you? What value do you offer your client? Do you understand what your market and business model is? Do you even have a business model? There are many questions that you're going to have to answer in order to understand how to change questions that are answered often by creating a business model.
- Get involved with strategy formulation. Whether you're in public practice or in industry, you must have a strategy to service your customers. If you're in industry, you might be confused
about who your customer is. It could be your boss or the other entities of your organization. In some cases, the sales and marketing department might consider you a service provider. However,
in many cases, you are viewed as an inconvenience.
You have control of information they need or provide them information they don't need or provide it in a form that makes it less useful. If you sat down and interviewed different segments of your business and asked them what their problems are you could provide answers that change how they see the accounting and finance departments change their perception of your value. - Use involvement and empowerment paradigms. One of the challenges of the changing environment is that hierarchies and silos are disappearing. A public practice firm may still have a tax department, an accounting and audit department, and a consulting department. In this setting, value is lost as people and groups fail to communicate about what the client need opportunity is. The opportunity costs are enormous. Firms must flatten out their hierarchy, empower each arm of their organization to collaborate, and make a way for these groups to leverage the firm's opportunities.
- Make sure your strategy is aligned with all other business processes. This point alone, if ignored, can sink the ship. Getting the business systems aligned with where the profession needs to go is a challenge we all face as we try to move forward.
Five months into their change plan, Sharp, Thunstrom, & Batson has been busy expanding and adapting its services. The small firm has added loan brokerage services, begun consulting in small-end software accounting, adapted its CFO-services, and started to aggressively market
itself. "We look for every opportunity to get our name out there," Batson says. "And it's been worth it." The company's steps to change are proof that taking a visionary approach pays off. "We've had a steady increase in clientele and profits over the last five months," he adds. "It's our
best performance in more than three years."
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Article written by Jeannie Patton
Introduction and Conclusion by J. Melody Murdock, Editor
Illustration by Nicholas Wilton
