Mark Miller, a Chick-Fil-A executive, says, “Nothing improves without measurement.” Anyone who has eaten at a Chick-Fil-A has experienced the improvements the restaurant has made to the fast-food scene. These improvements have brought success. Although the fast-food chain doesn’t have as many locations as McDonald’s or Taco Bell, Chick-Fil-A has significantly outperformed the competition on revenue per store. In 2014, Chick-Fil-A had an average sales per restaurant of $3.1 million whereas McDonald’s only had $2.5 million per restaurant. Chick-Fil-A is the 8th largest fast-food chain in total sales even though it only has 1,950 restaurants in the US compared to the 14,000 McDonalds locations.
What does Chick-Fil-A chicken have to do with measuring success as an accounting firm?
Although Chick-Fil-A sells fast-food, they are keenly aware they are in the service industry. Mark Miller measures for success accordingly.
That’s where the shift needs to happen for accounting firms. Accounting firms are in the service industry and need to choose their metrics for success accordingly. Service is not something that shows up in last quarter’s sales reports, but it is something that shows up in how the accounting team is performing their tasks for clients today. Success in service is best shown through lead measures as opposed to lag measures.
Lag vs Lead Measures
The first step in measuring success for accounting firms is to track lead measures not just lag measures. The Four Disciplines of Execution (4DX) delineates the difference between the two kinds of measurements. Lead measures are specific, measurable actions that team members can act on today. Lead measures are how you predict success. In contrast, lag measures are the record of what has already happened in the past. There is nothing a team member can do to change a lag measure.
Tracking lead measures empowers your team to push towards success.
Examples of Lead Measures for Accounting Firm Success
When I am speaking with large accounting firms, they often speak of utilization rates of team members and other metrics related to how effectively their people are used. However, firms are traditionally using lag measures to indicate effectiveness.
Here are some examples of lead measures to use if team member effectiveness is your goal:
Net Promoter Scores. Use client satisfaction surveys to measure success. Since client and team member relationships are ongoing, team members can do specific things to improve the client’s satisfaction. Remember, accounting is a service industry.
Number of apps used per client. The more apps used for the client, the more likely the client is not just more efficient but has more up to date information. It also usually means another area of concern is resolved, such as being audit-ready with receipt images attached to every transaction.
Number of clients on cloud accounting. Accounting team members can make it a priority to educate their clients on the advantages of cloud accounting so that they feel comfortable enough to use the system. The more clients a team member has on cloud-accounting, the more efficient, and more collaborative, their work can be.
Reduction in hours worked per client. In order for this to be a measure of success, you need to use value pricing instead of hourly rates. Once value-based pricing is implemented, the team member can look for ways to work more efficiently for the client without compromising the service that the client is given- or the profit of the firm.
Number of services performed per client. If the team member is looking to serve the client, and free up the client’s time to run the business he loves, your team member will be offering additional accounting services to the client.
Profitability per client. This is a different metric that many firms fail to track. This metric levels the playing field when you are comparing the effectiveness of full-time and part-time team members and the usage of apps. It also helps when comparing larger clients and smaller clients. Not every business has the same needs but all can be served profitability.
Looking Forward for Success
Accountants are good at “what happened” but we need to start looking ahead at what makes some clients so successful to work with! It can be hard to see the big picture and what step to take next when you are leading your accounting firm. Sometimes it’s helpful to bring in an outside perspective to see what might be hard for you to see since you are wrapped up in the day to day of your accounting firm. That’s where I can help. I have experience in both the business world and the accounting world. I understand both sides of the coin that partners in an accounting firm experience. Schedule an appointment with me and let’s get started on the best way to measure your accounting firm success.