By Kasia White
After a crisis, we often look back at the way things were before and find them … well, quaint. Looking back at the ways we measured performance and value before March 2020, they seem a little outdated. Historic drivers like scope, scale, and efficiency are rapidly being replaced by new and transformative value drivers like human capital, innovation, and strategic technological upgrades.
Holding onto the old value drivers for too long could be catastrophic for CPA firms and the businesses they advise. After all, measuring yourself against an outdated metric for success means you could be failing without realizing it. Updating and upgrading the way you view value is a valuable exercise for any leader or organization.
“Times of disruption, like the COVID-19 pandemic, present critical opportunities for organizations to innovate and become more resilient,” says Carlos Leal, senior manager of business transformation and innovation at EY Canada. “Navigating unprecedented challenges requires leaders to adopt a transformative mindset and a structured approach to embracing change, refocusing efforts, and empowering people to lead boldly.”
The new way to drive value for firms and their clients includes empowering people, intelligently investing in technology, and focusing on invisible factors like innovation and intellectual capital—and it starts with a fresh look at strategy.
Building a New Strategy
While strategy isn’t exactly a new value driver, determining your organization’s post-pandemic strategy necessarily precedes developing key performance indicators (KPIs) that will help you measure your organization’s—or your clients’—success.
“Developing new KPIs should always begin with understanding the organization’s business strategy,” says Mark Frigo, Ph.D., CPA, CMA, CGMA, founder of the Center for Strategy, Execution, and Valuation in the Kellstadt Graduate School of Business at DePaul University and lead instructor in the Illinois CPA Society’s new Strategy Academy. “Without a clear, articulated strategy, KPIs can become disconnected, irrelevant, and in some cases even work against value creation. During the pandemic I recommended CPA firms conduct KPI reviews with the express purpose of achieving better alignment with long-term value drivers.”
Leal notes that EY has developed a strategic framework to help leaders navigate their post-pandemic recovery and re-strategize for their imminent business revival. “This framework was informed by the efforts of business leaders across a variety of organizations with a focus on their abilities to pivot and adapt their business models in response to the disruptions created by the pandemic,” Leal says. Here are the four steps they identified:
1. Scenario plan your post-pandemic recovery: Define a few focal questions and construct relevant scenarios, data-driven analytic goalposts, and concrete resource allocation choices. “Prepare to move with or ahead of change,” Leal says.
2. Prioritize adaptability: In line with your scenario plan, prioritize the operational and market-facing tactics available to your organization as clients and businesses slowly return to pre-pandemic habits and activity levels.
3. Execute your reinvention: Despite the importance of agility and experimentation, the ability to create and successfully execute bold transformation initiatives are still essential to value creation, particularly in a changing environment.
4. Make reinvention a core competency: Change is constant and accelerating, but organizations can and should be resilient in the face of it. “We need to embed a culture of lifelong learning to ensure our teams and organizations continue to thrive and unlock long-term growth,” Leal notes.
Once the strategic framework is built, it’s time to look at the new value drivers.
People’s habits and expectations have changed since the pandemic. Months upon months of remote work and modified business practices have changed both employee and client behaviors. With such new and different expectations hitting businesses from both sides, fostering long-term human connection has become perhaps the most important of the new value drivers.
“The pandemic created major disruptions in supply chains, employee engagement, and—maybe most importantly—client needs, a primary value driver for every business,” Frigo explains. “When client needs change, organizations must move quickly to fulfill those needs before competitors do. This requires understanding how what you offer actually creates value for your clients, since developing value for the client or customer is how you drive the value of your business.”
Traditional financial value drivers such as cash flow, revenue growth, profitability, and return on investment (ROI) are still valid but Frigo stresses the need to remember that these are driven by client value creation. “Let’s not forget that employees are the primary value creators in any company—companies who treat their employees as valued clients create greater long-term value,” Frigo says.
With workers quitting in record numbers as the economy rebounds, organizations that prioritize their employees and their needs will enjoy greater value, while those who fail to take worker demands seriously will likely end up seeing their long-term value plummet.
“Talent is at the forefront of our strategic plan,” says Brian Blaha, CPA, growth partner with Wipfli LLP and a member of the Illinois CPA Society’s board of directors. “When we focus on the individual and really care about them, we are able to work to accommodate both their needs and the needs of the firm. Because of this, we see turnover rates below industry averages.”
Post-pandemic, Wipfli is embracing the hybrid work schedule, allowing employees to choose between working at home or at the office without mandating how many days they should spend in either place. Blaha notes that even so, they have seen an uptick in the number of employees returning to the office. “The future of work will be a hybrid of in-person and remote, where in-office work will be encouraged when collaboration and face-to-face relationship building is required,” he says.
CPA firms and the businesses they advise must prioritize changing client needs and shifting employee demands if they hope to build long-term value. “At Wipfli, we emphasize seeing each associate, client, and referral source as the individual they are, focusing on our collective results versus strictly our own,” Blaha explains. “We really seek to focus on each person.”
Intelligently Investing in Technology
Resource allocation is the name of the game when it comes to the second new value driver: the intelligent deployment of technology. Technology is unavoidable, expensive, and can be a game changing value driver or value destroyer for any organization.
“By upgrading existing technology, CPA firms can not only increase efficiency and improve productivity, but also begin serving new groups that were either not geographically available to them before or that required additional resources,” says Matt DiLiberto, BDO USA’s modern workplace practice leader. “The pandemic showed us that by investing in technology that allows auditors to do their jobs remotely—like video conferencing services and online file sharing programs—you can serve clients from afar without spending money on travel. Technological tools are only going to keep growing in scope, so CPA firms that invest now will be ahead of the curve.”
Technology can also help firms retain employees by eliminating the annoying minutiae that often leads to burnout.
“Firms should continue to evaluate existing business processes to reduce inefficiencies, eliminate scenarios where employees are doing manual tasks, identify systems that are not accessible from all devices, and enhance tools and training that support the employee experience,” DiLiberto advises.
Blaha says he has seen huge improvements in the technologies available to supplement the employee experience, from leveraging social media for recruiting to utilizing digital channels and microlearning for employee development. “We are implementing many new technologies, participating in the AICPA’s dynamic audit system, utilizing robotic process automation, and investing in our data structure and enterprise systems for marketing, sales, finance, human capital, and customer service,” he says. “Many of the enterprise systems have AI components, and we are also researching other advanced technologies, such as blockchain and augmented and virtual reality.”
“We are seeing clients in the manufacturing space express interest in augmented reality tools, which can be useful for on-site inspections to capture information that may otherwise be missed,” DiLiberto notes. “Ultimately, adopting the right technologies and tools for your firm will allow your employees to focus on more complex, strategic problems. This can help the firm save time and money by increasing efficiencies and quality control and reducing administrative overhead and turnover.”
Only by keeping a finger on the pulse of technology and making strategic choices that support both employees and clients can firms innovate and build value moving forward.
Innovating for the Future
Innovation was a buzzword long before COVID-19 hit, but the pandemic made it clear: Organizations that cannot move quickly and imaginatively to new ways of doing business will not survive in a post-pandemic world.
“My fellow CPAs should recognize that the business environment today is changing at an accelerating rate of speed, and the pace of change will continue to accelerate,” Frigo says. “Strategic risk-taking and strategic thinking are core competencies every firm needs to get better at. Look back and ask: What have I learned during the pandemic? How can those lessons drive my firm and my clients to greater value in the future—and greater resiliency when the next shock hits our economy?”
As we have seen, the firms that used the pandemic as an opportunity to learn how to move quickly and be open to experimentation saw the payoff in added business value.
“Try new things and learn to fail fast and adjust course,” Blaha exhorts.
Driving Value Now
COVID-19 spurred a great test run for innovation in a globalized world where climate change, shifting cultures and demographics, and constantly accelerating technological advances will make future disruptions increasingly common. For many firms and their clients, the pandemic shined a spotlight on the fault lines in the old ways of doing things—and the old value drivers. These three new value drivers—empowering people, using technology intelligently, and foregrounding innovation—are all interwoven and offer big lessons for both CPA firms and the business clients they advise. Starting to effectively focus on just one of these value drivers will likely soon begin to bear fruit in the other two areas.
“CPAs are equipped with the knowledge base and tools necessary to help spearhead the transformation of their own firms and their clients’ businesses,” Leal says. “As leaders with a pulse on organizations’ financial outcomes, CPAs must be part of this value transformation and provide leadership and support in projecting the different future scenarios and their implications; collaborating with functional area leaders to identify the relevant value drivers; and monitoring and regularly reporting on business performance as strategies are implemented.”
In other words, the CPAs who embrace the new value drivers will bring huge growth to the businesses they serve and also see exponential value growth at their own firms—long after March 2020 and COVID-19 are distant memories.
This article was originally published by the Illinois CPA Society in Fall 2021.