Generalisations
can be grossly misleading, but this one I will still make. We as Chartered
Accountants love to complain and project ourselves as victims. We genuinely
believe that we are tirelessly slogging away for unappreciative and
unresponsive clients. I find this a self-defeatist attitude stemming from a
lack of enjoyment and pride in the job we are doing. If there is a real problem
then let us fix it. As they say, if you are not lighting any candles, don’t
complain about being in the dark.
To fix the
problem, we need to ask some basic questions. As individuals, we often ponder
over some existential questions, but fail to ask similar questions relating to
our professional existence:
– What is the
purpose of our existence and why are we making all these efforts?
– Where do we
see ourselves in the next 5/10 years and what efforts are we making towards
that end?
– How do our
clients and others see us?
These and
similar core questions will help us decide the strategy for managing our
professional practice.
Size Matters
Over the last
few decades, businesses have evolved and have got far more complex on the
backbone of technology. Indeed, the technology revolution has permitted
businesses to assume structural changes and scales never contemplated or thought
feasible before.
The unfortunate truth is that Chartered
Accountancy(CA) firms have not evolved at the same pace. The records of ICAI
shows that less than 10 % of the Indian CA firms are more than 4 partners
strong and hence most often incapable of providing the full range of
professional service to their clients.
Professional
firms have a choice; to either remain small and create a niche for themselves
or build scale and become a one-stop shop for their clients. A firm where
partners individually would create a niche for themselves, but the firm
collectively would cater to the full range of services. The reality however, is
that firms have chosen to remain small for all the wrong reasons. The chief
reasons are – unwillingness to give up the name, protecting tenancy rights,
fear of losing independence, etc.
Firms that
remain small get into the vicious cycle, often unable to retain clients that
are growing both in scale and in complexity.
Clients that
are growing, face ever more complexity in terms of their structure, operations
and compliance needs. This throws up tremendous opportunities for the CA firms
that have adapted to changing environment. Clients do not look for
one-dimensional solutions from the perspective of audit or tax or corporate
law, but from a comprehensive business viewpoint. The professional (even if he
is operating in a niche area) must therefore develop the competence to look at
the client problem in a holistic manner, thereby providing value to the client.
Perhaps, the
only way to build expertise over diverse areas of practice, each having its own
complexities, is to build scale, induct talent, and recognise that it is no
longer possible for a professional to have expert knowledge in all areas of
professional practice. Firms should also think of building multi-disciplinary
teams and collaborate with other professionals, such as lawyers, cost
accountants, information technology professionals, management graduates, etc.
Think
Strategically
Scale can be
achieved only if the CA firms think strategically and professionalise the way
they manage their practice, which is entirely different from rendering
professional services to clients. Many CA firms have grown up as family run
businesses, where the control and decision-making vests with the person who
started the practice and at best is handed down to family members. Outsiders
have very little chance of taking the leadership position and this creates a
serious impediment to attracting talent and consequently professionalising the
firm.
CA firms
compete in the professional space in two distinct areas: 1) To attract clients;
and 2) Recruit and retain competent staff. Perhaps, in a growing economy such
as India, attracting clients is a lesser problem. The bigger challenge and
determinant of success is the ability to attract, develop, retain & deploy
competent staff.
Today, the
Indian economy is doing well and the rising tide has lifted up all boats. It is
the right time to invest in internal competencies, put in place robust
processes and build scale, as that alone will help provide consistent quality
and value to the client, even when, inevitably, the tide turns. As Warren
Buffet said, “it is only when the tide goes down that you find out who is
swimming naked”.
Eventually,
clients will pay based on their perception of the value they have received.
Goods are consumed but services are experienced. In order to win client loyalty
and enhance reputation, CA firms will have to focus on customer experience. It
is said that: Satisfaction = Perception – Expectation. When a
client gives an assignment, he has certain expectations as to the quality of
service he ought to receive. At the end of the assignment, if the client
perceives that his total experience is better than his initial expectation,
then his satisfaction quotient remains high. In other words, if one can deliver
more than what was expected by the client, it helps cement relationships. One
of the best compliments is when a client introduces you as one who “delivers
more than what he promises”.
Standardisation
to leverage growth
CA firms need
to standardise their processes and procedures for rendering professional
services. Even complex assignments can be broken down to simple executable
steps. These steps can be standardised and templates/checklists can be prepared
for their execution. This would help in delegation of work, resulting in
improved efficiency in its execution. Of course, professional work requires
intellectual application and cannot and should not be totally standardised. However,
the portion that can be standardised – and most often this is the major portion
of the total work – should be standardised, so that the senior team can focus
on the critical issues where the actual value addition happens.
As the firm grows, standardisation also helps
maintain service standards and consistency in the stand and position taken by
the firm across locations and across partners in technical, legal, statutory
and operational matters.
Linked to
standardisation is institution building and positioning of the firm. A client
operating from multiple locations is happy to deal with a firm that can support
him in all the locations, but would necessarily expect the same service level.
Standardisation gives him that look and feel of consistency and assurance that,
across locations and partners, the service level will remain the same.
Professional
firms do rely on the individual brilliance and charisma of their partners.
However, to ensure continuity and to achieve smooth succession, it is important
to give confidence to the client that the firm, as an institution, will deliver
quality service in a predictable manner on a consistent basis. As Aristotle
said, “We are what we repeatedly do. Excellence, then, is not an act, but a
habit”.
We have
unfortunately seen many examples of reputed firms headed by highly respected
professionals wither away once that professional has completed his innings. One
of the critical requirements of growth is to build trust and confidence in the
institution, and not just in a particular individual. Standardisation goes a
long way in institution building.
Focus on
training and quality
CA firms are
integral part of the knowledge economy and can deliver quality service only if
they have trained, competent and motivated staff. Firms that intend to grow and
remain relevant will have no choice but to invest in their human resources.
Partners can leverage their ability to execute more work by delegating it to
competent trained juniors. Standardisation of work coupled with regular training
of staff would help a CA firm reach its full potential.
In order to
reap the maximum benefit of training, one has to create an atmosphere where
staff can work at their optimum level. High salary is only one facet of
motivation. If the staff has independence, challenging work, and a nurturing
environment, it will go a long way in retaining talent. A formal unbiased
appraisal system with 360 degree feedback mechanism, coupled with mentoring,
would help staff understand the expectations of the firm and do course
correction, when required. It would also help in the partners understanding the
aspirations, expectations and problems faced by the staff, creating a virtuous
circle. A well-defined path for rising in the ranks of the firm would provide
motivation and a sense of belonging.
The staff
members constantly deal with the staff of the client and often gain invaluable
insights relating to client expectations, opportunities for new work and
weaknesses in delivery of service. Honest feedback from the staff would be of
immense value in initiating remedial and even strategic decisions.
A formal Human Resource (HR) approach will
ensure that all issues relating to staff are formally and systematically
managed. This will ensure that small irritants are addressed promptly without
festering into deeper problems. It will also result in a feedback system, where
information will flow both ways from management to staff and vice versa.
It is a common
complaint of CA firms that there is tremendous resistance from clients to fee
increases, and there is a hanging sword of losing assignments to fellow
professionals willing to work at a lower fee. There may be some truth in this,
but the fact remains that most clients do not change their CA unless there are
compelling reasons to do so, and fees is rarely one of them. CA firms should
focus on enhancing the quality of their service by knowledge building and
thereby raising the bar on efficiency. If the firm renders service at the
highest level of professional expertise, fees should never be a problem. The
problem is when CA firms demand premium fees without building on quality and
excellence.
Position your
firm
Further, the CA
firm should be clear about the area of practice that it intends to occupy and
the value proposition that it brings to the table. The operational strategy,
the pricing decision, the HR policies will all flow from this understanding.
David H.
Maister discusses a very interesting concept in his book entitled “Managing the
Professional Service Firm”. The services that professional firms render can be
broadly classified as:
Brains (Expertise) practice: Hire us because we
are smart.Generally,
these are non-recurring assignments where the stakes are high and the client is
willing to pay a premium price, but wants the highest level of professional
expertise. The execution of the assignment would typically require intense
involvement of the partner and lightning quick response time. The assignment
would require innovative, out of the box thinking with minimal scope of
standardisation and downward delegation.
Grey Hair (Experience) practice: Hire us because
we have been through this before: Most medium and small CA firms fall under this
category. They have the experience and have done similar assignments many times
over. It could be statutory audit or other recurring work like filing a tax
return or attending a scrutiny assessment. Each assignment may have its unique
features, requiring partner time, but also a large component that can be
standardised and delegated.The clients may believe that they can get the same
level of service or in any case have the same end result achieved by going to
another professional firm. Relationship, trust and comfort levels of the client
play a major role in ensuring an enduring relationship.
Procedural (Efficiency) practice: Hire us because
we know how to do this and can deliver it efficiently: This practice could be akin to
business process outsourcing. Companies may want to transfer certain processes
to a professional firm as they may have dedicated and trained staff to do these
functions. These assignments would be repetitive and would necessarily need to
be standardised, with only exceptional matters required to be escalated to
seniors or partners’ attention. Profitability would be achieved by increasing
operational efficiency and quick turnaround would be the name of the game.
Firms that
carry out “Efficiency work” cannot expect the fee scales of the “Expertise”
firms. However, they could achieve the same level of earnings by improving
internal efficiencies, standardising, streamlining processes, and putting in
place quality review systems to ensure that mistakes are minimised and/or
detected early. It is not that any one of the above areas of practice is
preferable to the other and a CA firm may be in more than one of the above
spaces. The point is that the strategies, focus and approach would necessarily
have to be different for each of the above-mentioned areas.
Managing
knowledge
Professional
firms generate a great deal of knowledge material, which perhaps is one of
their most valuable assets. Yet, most often, there is no well-defined system or
process to manage this knowledge base efficiently without compromising
security. As the firm grows, the same research work or knowledge material
prepared by one partner/team is likely to be duplicated by other partners and
other locations. This results in not just inefficiency, but also exposes the
firm to risk due to different partners potentially taking a different position
on the same technical point. Managing knowledge and creating a structure where
this knowledge is assimilated, stored, updated and shared by all partners and
senior staff, easily and seamlessly can become a differentiator between a
successful firm and just any other firm.
Adopting technology
We are living
in times of technology revolution and yet many CA firms have failed to
adequately harness the power of technology. Size and scale would give CA firms
the ability to invest in technology that enables them to leverage their
professional expertise many times over. It would enable them to computerise and
delegate the repetitive tasks or tasks that require data mining and computer
aided analytics, leaving time to concentrate on matters requiring professional
acumen. In addition, technology can be used to analyse information and generate
reports in ways not possible until now, both with regard to client servicing
and practice management. Of course, technology poses its own threats and hence,
every upgradation should address concerns about data security.
CA firms should
make innovative use of technology to stay ahead of the curve and not
grudgingly, because it is no longer possible to function without it.
Think Global
In times where
the world has become a village, CA firms cannot remain local when practically
all their clients – big or small- have international connects. They will have
to maintain a global perspective, while enhancing their local expertise, so
that they can advice local businesses looking to expand globally and global
businesses looking to come to India.
Perhaps, the
obvious choice is to become part of an international network or association.
This sends a strong and clear message that your firm has the reach and connects
to handle cross border transactions.
Being part of
an international association gives the firm a chance to interact with other
professional firms from all over the world and imbibe the best of professional
practices across countries and continents. It gives an understanding that there
are many paths to professional excellence and it is for each firm to choose the
path that most suits its local environment and specific growth aspirations.
Attending the
meetings of the international association also provides an opportunity to bond
closely with fellow professionals and develop close friendships. This helps
both parties to understand the capabilities, practice standards and ethical
values followed by the respective firms. Clients often look up to a CA as a
confidant and a guide for all their problems and needs.
The CA firm can
recommend a reliable foreign firm in an alien jurisdiction with much greater
confidence, when it has interacted with the partners of such firm personally.
Such an international association also creates a framework for doing joint assignments requiring professional expertise in multiple geographical
locations. Working together is much
easier and rewarding, when parties know each other at a personal level.
The truth is
that, insular domestic practice will fall short of client needs and expectation
and will struggle to
remain relevant.
To sum up
We are living
in exciting times where the environment in which we operate is constantly
changing. This throws up tremendous opportunities; but to capture them, CA
firms will have to take strategic decisions, be proactive and willing to
constantly adapt and innovate. The future will belong to those who break free
from old dogmas and are willing to constantly challenge themselves to achieve
excellence. _
