During a down economy, leaders of accounting firms rightfully focus on retaining and growing their client bases and bringing in new business. Organizationally, during poor economic times, the leader's focus is usually on downsizing. However, organizational decisions in a challenging economy should extend far beyond downsizing. Wrong decisions regarding the organization in both good economic times and challenging economic times are always very costly.
What are the organizational mistakes CEOs and their management teams make? There are primarily four. CEOs and their management teams 1) fail to understand the skills required to execute the Firm's strategy; 2) fail to recognize those people in key positions who are incompetent or who have contrary agendas; 3) fail to remove and replace these incompetent or contrary people and 4) fail to have a long term organization plan.
Organization Mistake #1: A Failure To Understand The Skills Required To Execute The Firm's Strategy.
Expecting too much of the best people may cause diminished performance or cause them to jump ship.
Leaders in accounting firms must have a clear understanding of what it is they must do. Before a leader begins work on an organization plan, they themselves must have a clear grasp of what they need to accomplish and they must prioritize those needs correctly based on cost and return estimates. And, once priorities are established, leaders must find the best person to accomplish what they need to have done. Effective leadership requires a quantified, clearly stated and clearly communicated vision. Leaders must understand quantitatively where their business is at the moment, and where they want it to be in the future. Therefore, leaders must have clearly defined and clearly communicated strategies for achieving their vision. An effective leader will understand the strategic organization requirements needed to carry out their strategies. Understanding how to reward those who successfully carry out the strategies is also imperative. A compensation system which measures performance quantitatively and rewards contributors fairly is critical for success.
Leaders must be able to determine the highest and best use of their most talented people. They must determine their organization need in the short term balanced against what they must have in the long run. Losing sight of either is disastrous. Leaders must understand how to ask people to do what they are capable of doing and understand clearly that even the best performers have limited resources and time. Expecting too much of the best people may cause diminished performance or cause them to jump ship. Top performers need to be allowed to do what only they can do and should not be overly burdened simply because they are surrounded by those who can't. Leadership must prioritize and estimate the cost and benefits of the use of their key people. Leadership must earn and keep the respect of their top people.
Organization Mistake #2: Failure To Recognize Those People In Key Positions Who Are Incompetent Or Who Have Contrary Agendas.
A firm cannot expect to achieve demanding objectives while staffing with less than competent managers and staff.
The most challenging aspect of the organization plan is that of staffing. Very few leaders and managers get staffing right in all key positions and they err for very foolish reasons, such as misplaced loyalties and supposed friendships. Effective selection of managers is one of the most important contributors to success and yet it is rarely done well. Therefore, a few good guys pulling north are negated by, two or three (even one) pulling south – leading to an incredible waste of time and energy and frustration for the good guys.
Too often advancement into management is an ad hoc process through which people rise to successively higher positions over time. Sometimes the rise to a management or leadership role is based on valid and reliable performance criteria, although too often that is not the case. Instead, informal processes take over and promotion devolves to the favored long-time friends, sons or daughters, whose rise confounds those who know them well. Incompetence at the top levels of management provides ample testimony to the failure of firms to select their leaders and managers.
An accounting firm cannot expect to achieve demanding objectives while staffing with less than adequate managers and staff. Shortchanging the organization by skimping on the quality of staffing at both management and staff levels is a foolish economy, for such skimping never saves a single dime, but rather wastes tens of thousands of dollars through ineffective execution of plans and failed achievement of deliverables. Moreover, the organization that decides to hire and develop managers and staff from the upper quartile of their industry always has a substantial leg up and will outperform their competition even with mediocre plans and programs because those plans and programs that exist will be implemented effectively.
"Elephants on the conference room table" is an often quoted metaphor for the obstacles (usually people and organizational) plaguing corporate America today and preventing growth in enterprise value. Almost always, these elephants are allowed to interfere with business success, while leaders avert their eyes, pretending these organization issues do not exist. These elephants include disrespectful and rude behavior, focus-diverting people, management and leadership incompetence demonstrated by absence of clear direction, lack of accountability, failure to follow up, and, the ever-popular elephant - inability to execute. Easily seen, they are the elephants sitting on the conference room table. They live long organizational lives, seemingly immune to accountability and true performance measures, and therefore erode the CEO's credibility to their detriment and that of the firm.
The most frequently ignored elephants are unresolved people, management and organizational issues. It follows then that these people-centered issues, which management refuses to address, inevitably lead to other weaknesses and are the root cause of failure to perform throughout the organization. The effective organization identifies these elephants, accepts the reality that they prevent the organization from achieving their goals, and removes them (or reassigns them) so they can no longer hurt the organization or its people or finds a role where they are able to perform adequately – usually involving no management responsibilities at all.
Organization Mistake #3: Failure To Remove And Replace Incompetent Or Contrary People.
Developing a sound staffing plan begins with an honest and penetrating analysis of the current staff.
A simple strategy for reviewing the current staffing situation is the process of Red/Yellow/Green (RYG) analysis. The approach, although qualitative, produces remarkably reliable results. Assess the organization's management ranks one by one, assigning a color code of red, yellow or green to each member. Those staff designated as reds do not meet the requirements of the position through problematic behavior, dishonesty, or by being intentionally contrarian. If designated a red, the employee must be confronted immediately and a remedial program put in place. Immediately means this afternoon, not sometime in the undefined future. Staff designated yellow are those who do not meet all the requirements of their position. These staff may be promising, or recently promoted, but whether this employee's performance is improving or declining, a plan must immediately be developed, implemented, and monitored closely to get them to green. Staff designated as greens are acceptable performers who meet all the position requirements. Green is the performance standard. Management must insist that everyone within their organization is either green or in the process of moving to green.
Too often yellows and reds are not identified, therefore no action is taken, and the result is a quiet cancer which develops in the organization. If allowed to grow this cancer usually kills, in one way or another, the healthy and competent parts of the organization. Staff designated as yellows and reds must be addressed immediately, their shortfalls explained, and remedial plans put in place with weekly deliverables and weekly reviews. Reds must show improvement within no more than four weeks, yellows within three months. Once a staff member's performance indicates that no improvements are possible, the reds must be shown the door, and yellows given another position within the organization if their efforts merit such a second chance. While addressing yellows and reds is a difficult undertaking, failure to do so will result in diminution of firm performance, or at the very least, serious performance decrements.
Mistake #4: Every Firm, Regardless Of Size, Needs An Organization Plan.
While organization planning in terms of structure, function, and staffing is not the entire answer to effective performance, it is the greatest contributor.
Leaders, particularly marginal leaders, often fail to plan and every firm, regardless of size, needs an organization plan. Even a small accounting firm with limited ambition for growth may need to replace or guarantee key technical capabilities for the long term. Those firms must have organization planning just as certainly as a large firm. If a firm has plans for growth, its executives must plan for and meet the projected organization requirements. Just as the cash flow plan is crucial for the survival of any business, so is proper staffing. When a business runs out of cash, it must close the doors, and when a business can no longer staff adequately, it will surely deteriorate. The essence of organization planning is the ability to anticipate staffing needs by level and technical or managerial skill and develop the means to meet them in a timely fashion. Failure to do so will impede the execution of the strategic and business plans. Every manager or leader should take the time to understand why a strong organization is crucial and then plan for and build their organizations correctly. Their time could not be spent more productively. While organization planning in terms of structure, function, and staffing is not the entire answer to effective performance, it is the greatest contributor.
Staffing with effective leaders and managers is critical. Even the best visions, strategies and plans will fail without an effective organization to execute those strategies. However, when a clear understanding of what is required organizationally to carry out the firm's objectives is combined with an organization that is correctly structured and staffed, success is almost assured. When a firm has competent, committed people working together in harmony within a structure that defines roles, responsibilities and levels of authority, that team will not only make plan, they will have a rewarding experience.
Most are aware of accounting firms that have prospered because they were well lead and managed. Unfortunately, these are the exceptions rather than the norm. The reason is quite simple: management is one of humankind's most complex undertakings. Few truly understand and use effective leadership and management fundamentals – that is why effective organization behavior is so elusive. Because good management requires defining the chain of command and accountabilities, a strong organization plan becomes central to success.
Effective organization planning assures success in executing firm strategies. Too frequently managements err in their organization planning by going directly from their objectives to the organization staffing. This is almost always done without paying adequate attention to the underlying strategies and plans which must be defined to determine proper organization structure and staffing. The organization structure defines who reports to whom not just in terms of people but in terms of functional responsibilities. If the organization structure is not carefully thought out and set up correctly, delegation and tracking accountability become very difficult if not impossible. Therefore it behooves top management to take adequate time to develop both short and long-term organization plans. Management must always go back to the strategies and plans that are to be accomplished when structuring the functional roles and responsibilities and in making staffing decisions for its organization. And just as the strategies and plans must be reviewed quarterly to identify the critical changes that are required so too must the organization be reviewed constantly.
Summary
The organization is a gold mine of performance opportunities. It is the job of leadership and management to become highly effective "miners" of bottom line dollars to be found in effective organization planning.
When reflecting on the organization plan consider the ERR principle – the Early Recognition of Reality. Look openly and honestly at the organization. Evaluate staffing with a red, yellow, green analysis and be willing to see reality. Apply the concept of ERR. Choosing to admit reality is a conscious process, a process that the best leaders and managers employ in accepting the truth about their organization. When leaders fail to employ the concept of early recognition of reality, they will err. How? By denial – "I am sure their numbers will look better next month." By rationalization – "I know they have a poor attitude that affects the team, but it is impossible to find someone who can develop business as well. We can't afford to let them go." And frequently leaders allow emotional attachments to cause them to err – "They have been with the firm since we started, I can't possibly let them go." It is not difficult to see the cost that will result from the failure to act on organizational realities.
The organization is a gold mine of performance opportunities. It is the job of leadership and management to become highly effective "miners" of bottom-line dollars to be found in effective organization planning. Every day represents huge opportunity costs if organization behavior is not optimized. Leaders and their management teams must be willing to recognize reality and be willing to make the hard decisions that are, in fact, their responsibility. A healthy organization is like a healthy garden – it produces results that enrich and reward. If a leader in an accounting firm wants to know what kind a leader or manager they are - they must take a hard, honest look at their organization and after recognizing reality, be prepared to take action. |
