Lean Six Sigma and Change Management are popular concepts in accounting firms today. Most firms start their “Lean Journey” with an eye toward improved efficiency and controlling engagement costs. But after a successful first project, many leaders in our profession rave about all of the ancillary benefits they are beginning to see within their organizations. These benefits can be summed up by saying that firms are seeing and embracing a culture shift – creating what I describe as a culture of continuous improvement.
At the heart of Lean is a relentless pursuit of optimizing value from a client point of view. This entails identifying and eliminating waste in all its egregious forms – from redundancies and excess touches to significant waiting time between steps; from process loops because of poor quality or personal preferences to ineffective utilization of technology. You name the waste, and Lean attacks it vigorously. This, of course, leads to a more effective and efficient process.
What firms are discovering is that there are many other long-term benefits of pursuing a Lean Journey. Engagements are led more efficiently, which leads to better profitability and financial performance. Traditional CPA firm metrics like realization go up. A solid operational foundation is built by creating capacity within a process. In essence, it helps firms ensure that their efforts on the top line are rewarded by making it to the bottom line. However, the most significant benefit is the culture shift that begins as firms who adopt Lean see the original objectives come to fruition. The pursuit of continuous improvement elevates the firm culture as it is embraced by all levels. And this culture shift is the catalyst for future success.
What is a culture of continuous improvement?
- It’s a culture that is focused on results, not just effort. Effort is easy, and we track effort very well in our profession. It’s called charge hours. Firms that embrace Lean realize a focus on results leads to much better financial performance and better client service.
- It’s a culture focused on timely delivery. Output goes up as turnaround times come down. Both internal and external customers (clients) of the firm are satisfied. You don’t have to wait forever to get a tax return prepared or an audit section reviewed. Discipline is built into the process and the strong desire to put the client first – both externally and internally – is what people care about.
- It’s a culture focused on being proactive instead of reactive. It’s easy to sit back and wait. Lean forces firms to avoid that plague of reactiveness and get ahead as much as practically feasible. Clients don’t find value in reactiveness.
- It’s a culture focused on switching from compliance-mode to advisor-mode. By removing waste and freeing up time, we are able to create capacity at all different levels to think and operate more strategically for clients. We call this providing delighter-level service to clients.
- In essence, it challenges the status quo – every day, every week, every year. The question “How can we get better?” is constantly on everyone’s mind.
As with any strategic initiative within any organization, maximizing success always requires buy in and commitment from the top. Before embarking on a Lean Journey, it’s critical to coach and train the current leadership team on their key role in the process. If they are going to be a champion of the initiative, they need to understand what it is they are committing to doing. I’ve had many great and successful champions of projects over the years, but one who always stands out to me is Dennis Sherrin, managing partner of Hartmann, Blackmon & Kilgore in Fairhope, AL. His passion, forward-thinking innovation, and leadership by example are exemplary in our industry. Because of his leadership and commitment, the firm has made great strides with Lean over the past four years.
“We have completed Lean projects in the past four years in tax, audit and accounting services. In addition to improvements in processes, productivity and profits, our teams benefitted through the learning experience of being a part of lean teams. As a result, employees are engaged in continuing efforts to improve our firm. The payoff is greater employee engagement, a firm always developing ways to improve and a firm preparing for what lies ahead.” – Dennis Sherrin, Hartmann Blackmon & Kilgore, PC
Emerging leaders also have much to gain by their firms going through a Lean initiative. Process improvement and change management are viewed as key skillsets needed to eventually lead the firm of the future. These emerging leaders are attracted to firms that embrace a culture of continuous improvement because of the desire to operate in an agile, transparent and fast environment. Lean initiatives seem like a no-brainer to most emerging leaders and they are quick to embrace the culture. One such firm is Windes in Long Beach, CA. After just one year, not only were process and profitability goals met, but engagement in the firm and positive culture change was evident and rising.
“Participation in a department-wide lean initiative allowed us to work closely with the Firm’s current leaders to prove as emerging leaders we possess the skills and confidence to develop and rollout policies and procedures to take the tax department to the next level. It was motivating to work with the next generation of leaders within the firm to accomplish department wide change and improve efficiencies through the lean process. By drilling deeply into the current infrastructure, we were able to take a hands-on approach and identify inefficiencies and communicate to our teammates the need to make changes through lean management. Through this process we learned the value of department wide communication, transparency and the need to solicit feedback from all levels from staff to partner. Although challenging at first, we have implemented improved processes and hope to make them better through continuous improvement. Opportunities to make a department-wide culture changes usually come from the Firm’s leaders, but this time they empowered us to really drive the process. There is a lot to be said for that.” – Rob Henderson and Christy Selogie, Windes
In today’s rapidly changing business environment, it’s my strong opinion that CPA firms can’t sit back and maintain the status quo. They most definitely will be falling behind. Forward thinking firms are taking advantage of the tremendous opportunity to embrace a culture of continuous improvement. I hope your firm is one of them.
About the Author
Dustin Hostetler is the founder of Flowtivity and the practice leader and lead consultant for Lean4CPAs by Flowtivity. As a Lean Six Sigma Master Black Belt with extensive experience working inside a large regional CPA firm, he has taken proven Lean techniques from the manufacturing floor and tailored them to bring ground-breaking value to public accounting firms. His innovation and passion has brought true efficiency to accounting — helping accounting firms unleash the potential of their professionals. He can be reached at firstname.lastname@example.org