The Proactivity Paradox: Accountants Claiming to be Something They Haven’t Defined and Don’t Measure

By Posted in - Public Blog on September 15th, 2014 5 Comments

The Proactivity Paradox

Progressive accountants sometimes describe themselves and their firm as ‘proactive’. Some even pay to badge themselves as a ‘proactive accounting firm’ through their memberships to accounting networks.

But does a self-anointing process make an accountant proactive?

Clearly not.

Behaviours —not badges—are what really matter.

With many accounting firms labelling themselves as ‘proactive’, let’s consider what it actually means, first from their clients’ perspective.

When PARADOX conducts client surveys on behalf of accounting and advisory firms, we telephone their business owner clients and ask:

  • what the firm does for them
  • what they wish the firm would do for them.

And two main themes come up again and again, which can be summed up by these words:

  1. “I want to know there is someone other than me thinking about my business. Someone to share the load.”
  2. “And I want them to make suggestions on how I can improve.”

They don’t use the term ‘proactive’. They rarely do—it’s accounting and advisory jargon. But notice how they articulate the same meaning with ‘make suggestions’.

In language terms, people didn’t start using ‘proactive’ as the opposite of ‘reactive’ until around 1980. But does a definition of the term help guide behaviours in accounting or advisory firms?

No, it doesn’t. ‘Be proactive’ is vague advice.

For example, what does ‘being proactive’ even look like? And how do you know you and your team are being proactive? If you’re not measuring it, chances are you’re not focusing on it. You’re just paying lip service to it, comforted by its good intentions and the rented “we are proactive, honest we are” badge on your website and stationery.

The Proactivity Paradox:

Accountants want to be more proactive

yet they have not defined what proactive means

and therefore and don’t know how to measure it.

There are certain things you should you never claim in your marketing, no matter how much you believe them. Instead you should simply exhibit them behaviours, values or traits. Things like:

  • We give great service
  • We care
  • We’re professional
  • We’re friendly
  • And yes, we’re proactive.

Don’t say you’re any of these things in your marketing. Ever. Just be them.

If you want your firm to be proactive, how can you teach your team to do that, if you don’t know what it looks like or how to measure it?

A fundamental principle in change management is the concept of ‘vital behaviours’, as explained by Patterson, et al. in Influencer: The Power To Change Anything (one of our ‘change management bibles’ here at PARADOX).

According to the book, a ‘vital behaviour’:

  1. leads directly to better results
  2. breaks self-defeating patterns
  3. causes many other positive behaviours to follow naturally.

As you can see, behaviours are actions. They’re not results, qualities or traits.

So ‘being proactive’ is not a behaviour.

Understanding the concept of ‘vital behaviours’ is incredibly useful in business. It allows you to cut through the clutter, quickly spot vague motherhood statements, and protect yourself from the vague (non-actionable) business advice of many consultants and business coaches.

So what vital behaviours matter to an accounting or business advisory firm that wants to ‘be proactive’?

Before you can identify the relevant vital behaviours you need to clarify the measurable results you want to achieve.

But how do you measure how proactive an accounting firm is? Is it:

  • Greater revenue? No. The firm might just have a lot of clients.
  • Greater average fee per client? No. The firm might simply have larger clients whose tax and compliance needs are more involved than the average business. Or the firm might simply charge more than their competitors, achieving a higher average fee per client.

The lack of clarity in the accounting profession regarding how to define and measure proactivity inspired me to develop a new term and Key Performance Indicator (KPI): Clientshare™. It’s a simple number. It’s easy to measure. And it can be measured across a firm, for a Partner, for a Client Manager and for a specific client group.

Yet most ‘practice management’ systems don’t measure it because they don’t actually help you manage a practice—they’re just time and billing tools.

So what is Clientshare?

Clientshare is the number of services provided per client group per annum.

By client group we essentially mean ‘family’ or decision-making entity, to distinguish between ‘clients’ being counted as companies, trusts or individuals.

You don’t use Clientshare to benchmark yourself against other firms. It’s a way to measure real and tangible progress compared to your firm’s initial baseline.

We give our Modern Marketing Academy members a Clientshare Matrix where they can perform an objective gap analysis on Current Clientshare versus Potential Clientshare for each client group.

  • Current Clientshare
    is a count of how many services the firm currently provides the client.
  • Potential Clientshare
    is a count of how many services the firm could provide the client, based on their knowledge of the client’s affairs and complexity.

Completing a Clientshare Gap Analysis isn’t easy or glamorous. Then again, many of life’s disciplines that support health and prosperity involve just rolling up your sleeves and doing the hard work.

And the rewards are certainly worth the effort.

If you have a large number of client groups, start with your ‘A-List’ clients. Have each Client Manager work through the Clientshare Matrix by checking each client against each service you offer and answering:

  • Yes – We provide this service to the client
  • No – This service isn’t relevant to the client
  • Potential – This service is relevant to the client, but we don’t provide it to them

Completing a Clientshare Gap Analysis is always an eye opening exercise. You often find there’s substantial growth potential available in your existing clientbase before you need to start looking for new clients.

We call this Clientshare versus Market Share focus:
Is your firm’s growth priority to grow your Clientshare or attract new clients to grow your Market Share?

Of course, they’re not mutually exclusive. But while you can do both in parallel, unless you’re a startup we suggest you start by focusing on your Clientshare.

Why? Here are just some of reasons:

  • Less emotional overhead: Every client you have is an emotional overhead you need to manage. Whether they’re a $1,000, $10,000 or $100,000 client, you need to manage their expectations and provide communication and support.

    If you could choose to generate $1m in fees from either 500 clients paying $2,000 per annum or 100 clients paying $10,000 per annum, which would you choose? Unless your business’ processes and technology are geared towards a high-volume/low-touch business, you’d choose the ‘fewer clients’ option.The good news is, you do have a choice. And whether you’re doing it consciously or by default, you’re making that choice every day through your actions (behaviours) or inaction.

  • Fewer, more meaningful relationships: Not only is the High Clientshare model easier to manage, it’s also more enjoyable. You and your team can have more meaningful relationships with your clients, and play a significant role as one of their key advisors.
  • More stimulating advisory work: Once you climb the advisory ladder you can start doing more future-focused, non-compliance work for your clients that’s more intellectually rewarding.
  • More profitable: You might be thinking, “Emotion, more meaning… whatever. Show me the money!” But studies have shown:
    • it costs four to ten times more to acquire a new client than it does to retain an existing client
    • a 5% increase in client loyalty has been shown to increase profits by 25% to 95%.

    While these staggering figures obviously depend on your business model and margins, it clearly makes sense to focus more on looking after your existing clients than to go chasing new ones.

  • More loyalty, and more referrals: The more engaged a client is, the more loyal they are, and the more often they refer. It might seem paradoxical that a client paying you $20,000 per annum is more loyal than one paying you $2,000 a year. But unlike the low-engagement-level client you communicate with only occasionally, the higher Clientshare client has:
    • more invested in the relationship
    • more communication with you each year
    • a greater sense of knowing, liking and trusting you.
  • The Moral Obligation: Finally, we firmly believe you owe it to your clients to help them beyond the basics of tax and compliance. Many of your clients probably don’t know what they don’t know about your future-focused, value-add services such as:
    • cash flow forecasts
    • KPI Dashboards
    • succession planning
    • estate planning
    • thorough tax planning
    • setting up cloud accounting and related apps to make their business more efficient.

    Your firm probably has a long list of services you are technically capable of providing. But your clients won’t know the value of these optional services until you educate them about the benefits.

    And these future-focused services add far more value to your clients than compliance and historical reporting services because they help your clients:

    • avoid problems
    • achieve goals
    • improve cash flow
    • reduce stress
    • provide more certainty
    • build their wealth
    • set up their families’ financial future.

As an accountant or business advisor, you’re in the box seat to make a significant difference to the quality of your clients’ lives.

And that’s an exciting place to be.

As I touched on in The People Paradox, benchmarking data from accounting industry surveys such as The Good, The Bad & The Ugly of The Accounting Profession shows that only one in ten accounting firms succeeds in crossing what we’ve termed The Value-Add Chasm. Nine out of ten accountants want to provide more value-add, non-compliance advisory services, only one of those firms actually does it to a meaningful degree.

Nine want to. Only one of them achieves it. That’s a gulf between intention and results.

Why is this happening? Or rather, why is ‘proactivity’ not happening in the accounting profession despite the intention, desire and frequent use of the label?

One reason is the massive skill gap, which we’ll cover in an upcoming post, The Skill Paradox. Another reason is the lack of clarity and focus on what proactivity actually is, and therefore how to measure it.

Is Clientshare the measure?

No, it’s only part of the answer. Clientshare is a lag indicator. A result. An outcome. It can’t be a vital behaviour because you can’t ‘do’ Clientshare any more than you can ‘do’ proactivity.

So, what is the vital behaviour? What’s the lead indicator that creates a High Clientshare firm?

It’s simply the number of Future-Focused Advisory Meetings (FAMs) the firm conducts with clients.

I’ll share with you the anatomy of a FAM and why it’s possibly the most important lead indicator your firm should be tracking in our next post, Active Ingredient: The Key to Proactivity in an Accounting Firm.

  • […] our previous post, The Proactivity Paradox, I explored the lack of clarity the accounting profession has regarding how to define and measure […]

  • Great piece.

    ‘Proactive’ is definitely a label that is earned through satisfaction of your client base.

    It’s easy enough for firms to call themselves proactive but have they gone the extra mile for their clients? Are they putting in the emotional overhead you mentioned?

    In my opinion, our work doesn’t end at number crunching. It involves the evaluation at end of year, advisory services after the fact as well as involvement during the year in your clients growth – as mentioned above, clients are happier knowing we care about them!

    Totally agree with you on the skill paradox again, communication skills and involvement with your clients is a must to maintain a large, satisfied client base – can’t all be about the numbers!

    • Michael Carter says:

      Thanks for your comment Gavin. Glad to hear your work goes well beyond number crunching! Accounting and advisory work can be so much more meaningful and valuable when the number crunching and compliance is just the first step, not the end game. Great to connect with you here.

  • Thanks MC, another great post reminding accountants that clients want and need services other than regurgitating numbers.

    • Michael Carter says:

      Thanks Greg. So much potential for accountants who learn how to market, sell and deliver their value-add services. But as startup entrepreneurs say, “Nothing happens until somebody sells something.” Value-add services, sadly, don’t sell themselves. I’m still waiting/hoping for the federal budget to be handed down that gives SMEs an incentive to lodge a quarterly cashflow forecast. THEN… planning for the future becomes an element of ‘compliance’ and accountants could add the value they’re already technically capable of providing. But until this is handed to accountants on a platter, only the progressive accountants will succeed in doing much future-focused work with their clients.

      See you at next week’s Marketing Automation Masterclass in Brisbane, by the way!

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