A Business Model with No Managers? Yes, it Works
There’s a lot of talk within public accounting about altering the existing business model to adapt to a changing marketplace and the evolving needs of our clients and staff. At my six-person firm, we decided to take a leap into the future by completely rethinking our business model. In July 2012, we went from a traditional firm—one with an office and a hierarchy—to a digital practice where there are no managers. Virtual means a lot of things to different people, and for us it meant closing our doors on our traditional office location. We tried it as an experiment beforehand, and it worked so well we decided to switch completely.
At the same time, we also instituted a Results Only Work Environment, in which we rate performance, not attendance. For us, that also meant doing away with the management structure. I lead the firm and set our future direction, but I don’t know what anyone is doing throughout the day. In fact, no one oversees what our team members do all day—or tracks their vacations or time off--as long as they achieve the required results for the firm.
We did face some stumbling blocks at the beginning, which is not unusual with this kind of change, because you can’t really understand what you’re facing until you jump in. Since our system is results-based, one potential pitfall was failure to properly define “results,” which we realized we hadn’t done initially. Many firm leaders assume that the desired goals or performance are understood, but that’s often not true of all staff members. In a traditional office, that problem can be smoothed over through day-to-day contact, but it requires more forethought in a virtual ROWE situation.
Without managers, how is work assigned and handled? Before we adopted our new model, we went on a retreat to address this question because it’s such a critical component to how the model works. Most firms have a department model, divided into audit, tax and so forth. The problem is that the client, who has many different needs, may never be quite sure whom to call. To solve that problem, we assigned each client to a CPA, who is dedicated to and ultimately responsible for their account. It’s one of our promises of value to clients. To make that work, our firm is evenly split between technical people, who serve the client, and support staff, who run the firm. The CPAs can turn to technical people, such as me, and to administrative staff for support.
How Did Clients and Staff React?
We knew our radical change would not be right for all clients. Some would not be comfortable with the virtual environment or with the new structure of our firm, so we sold off a group to another CPA firm before we made the switch in order to avoid losing that asset. Fortunately, we work exclusively with clients in the creative industries—including design and software development—where innovation is welcome. We had already been serving them in a virtual way, even though the firm was not yet strictly virtual, so the change didn’t have a large impact on them. With new clients, we do a month-long onboarding process, introducing them to our values and how our firm works, which helps identify the ones who aren’t right for us. We also discuss our value pricing model, in which every service is priced up front, so there are no surprises.
The staff members who have thrived under the new model are able to work independently and really bond with clients. In addition, they must also be comfortable knowing they’re not going to move up the ladder the way you would in a traditional firm. Growth does not happen in our firm the way it does in traditional practices. You have a great deal of autonomy in choosing your own direction, which may or may not appeal to some people. The upside is that I work with our people to help them carve out roles and career paths for themselves. To find the right people, however, hiring is much more strategic and it does take longer.
In addition, the larger you are, the longer it will take you to make this kind of shift, especially if multiple offices and owners are involved. Even at our nimble small firm, it has required two to three years to solidify the change. It goes without saying that every owner must be 100% on board. We coach and consult with many organizations that are undergoing change, and if a partner does not buy into the process, there’s a lot of turmoil.
To truly disrupt your business model, you must be prepared (and willing) to change your services, your clients and your team members. We have found, though, that the payoff includes higher profitability, lower overhead, better motivated staff (given the right people), deeper client relationships, stronger branding within our niche and client appreciation of our straightforward pricing structure. We also achieved a better work/life balance, in which work serves our life, and not the other way around.
Want to hear more about the ROWE model? Look for me at this year’s 2014 AICPA Practitioners Symposium and TECH+ Conference, which will be held June 9 to 11 in Las Vegas, where I’ll be presenting "Business Model Innovation with the Virtual Firm."
Do you think the ROWE model could work at your firm?
Jason Blumer, CPA.CITP, Chief Innovation Officer, Blumer & Associates, CPAs.
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