The Business of Accounting (short reviews of three books)

As part of my exploration of the role of the Accountancy Practice as a provider of support and advice to small and medium sized businesses, I have read three books aimed at helping accountants define and develop their practices:

– “The e-Myth Accountant: Why Most Accounting Practices Don’t Work and What to Do About it
by Michael E. Gerber and M. Darren Root

– “How to Quickly Grow Your Accountancy Practice: By acquiring and keeping the clients you really want
by Steve Hackney and Richard Brewin

– “The UK’s Best Accountancy Practices
by Steve Pipe

The e-Myth Accountant: Why Most Accounting Practices Don’t Work and What to Do About it

I want to start by saying I am a fan of Michael Gerber’s “The e-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It”. While written in a style that sometimes grates to my British ear, I feel the book introduces some “truths” about the nature of the owner-managed business and the dynamics of growth. In “The e-Myth Revisited” Gerber sets out a clear approach for owner-managers seeking growth which seeks to address the inevitable challenges and hurdles that they will face. I find the advice to treat your business as if it were going to be developed into a franchise a helpful mechanism that encourages the development of appropriate systems. These combine to enable the owner to start to work “on”, rather than “in” their business and enable them to move from being a pure “technician” toward a role that includes being an effective “manager” and “entrepreneur”.

I was, however, very disappointed with “The e-Myth Accountant“. While co-authored with a practicing accountant, the book offered little that provided domain-specific insight. Instead, the book consisted of a series of homilies from the authors which urged the reader to adopt the e-Myth way, but lacked any meat that would help the reader develop practical strategies for change. While the key messages from “The e-Myth Revisited” remain with me, two weeks after reading “The e-Myth Accountant” I cannot remember anything that seems useful! As I write this I opened the book again, and skimmed through the content and – no, nothing to report. Sorry!

Here is a book that does not live up to the philosophy that it seeks to promote. Gerber urges us to treat our businesses like franchises so that highest levels of service-quality can be delivered on a continual and repeated basis. Yet the “Accountant” offering within the e-Myth franchise demonstrates the worst aspects of a franchise – delivering a product that relies on, rather than enhances, a trusted brand.

How to Quickly Grow Your Accountancy Practice: By acquiring and keeping the clients you really want

In this book Hackney and Brewin set out a multi-stage approach that aims to help accountancy practices define their target market, marketing messages, and the appropriate media and methods for delivering those messages. They identify 14 “agenda items” that firms should address in order to develop an appropriate strategy for growth – illustrating how two fictitious firms (one “traditional” and one that follows Hackney and Brewin’s advice) might address these agenda items.

The book touches on the need for “process”, “management” and “marketing”, which roughly translate to the definitions of “technician”, “manager” and “entrepreneur” in Michael Gerber’s “The e-Myth Revisited”. However, unlike Gerber, the focus in this book is almost entirely on the “marketing” aspect of a growth strategy. In doing so, the author’s did try to practice what they preach and really did try to “sell” the approach they advocate. Did they succeed? Well not to this reader!

From the very start, the book fell into making over-blown claims. The inner sleeve provides details of the authors saying “Richard Brewin … is renowned for being one of the few people who has created two perfect practices” – perfect! - anyone who claims that their organisation is “perfect” does not earn my trust. Later they claim “We can go into almost any accountancy firm and release thousands of pounds of revenue and profit, literally overnight” – literally overnight! And how do they achieve this? Well they launch into a folk story about “acres of diamonds” and “moments of truth” – and while they may have provided some useful motivational encouragement to act in a positive way, I was so busy looking for evidence as to how they were going to release thousands of pounds of profit “literally overnight”, I am afraid it did not work for me.

The problem may be all mine, but for me the inflated “marketing speak”, along with a number of inaccuracies (like misusing the term “Boston Matrix”) and the fact that the book continually made assertions based on the author’s “research” without providing any evidence for the basis of this research, all led me to disengage from some useful techniques and approaches that I am sure could help accountancies grow their business. But my biggest criticism is that, unlike Gerber in his original “The e-Myth Revisited“, Hackney and Brewin imply that it is easy to grow a business (if you just follow their approach) – it is not, and to imply otherwise undermines the validity of any advice they may be able to offer. (See my post Why Grow? where I discuss a much more appropriate message from marketing “guru” Seth Godin.)

A much better and less sensational approach to helping accountancies achieve growth is demonstrated in an interview between Paul Shrimpling of Remarkable Practice and Rob Walsh of Clear Vision. Here both marketing advisor and practice owner repeatedly articulate the need for the business to be able to deliver on the promises made in the marketing message.

The UK’s Best Accountancy Practices

After the disappointment of the previous two books, Steve Pipe’s “The UK’s Best Accountancy Practices” was a revelation! As I have said previously, this book contains case studies of over 40 UK accountancy practices, each of which provides and insight as to how practices are serving their clients and growing their businesses.

Pipe states that he hopes that the examples of excellence will inspire, and for me, the descriptions of practical action, sometimes radical and sometimes relatively mundane, and often in the words of the partners themselves, are far more inspirational than the authors attempting to achieve guru status. As Pipe says, “there is no theory in these pages – just example after example of what real UK accountancy practices have done … to generate better results for their clients, their communities and themselves”.

There are some issues with the book:

  • All but one of the case studies are from firms within the AVN network, and as such, have not surprisingly adopted both similar strategic approaches and similar tools and techniques. There is therefore a degree of repetition. However, each firm is distinctively different and it is fascinating to see how different organisations implemented similar approaches in very different ways.
  • Some of the methods adopted by firms within the book have been criticised, for example in here on the “accounting web” site.
  • Pipe is both a researcher and founder of the AVN network. He is therefore open to the criticism that his work “is just promoting AVN and it’s services”. However, while it would be good to see more independent academic research into the role of the accountancy practice as a service provider to the business sector, Pipe appears very open and clear about any links with AVN and it is clear that the accountants quoted in the case studies are speaking with their own voice.

This book does provide an excellent example of “open innovation” in practice, where firms are willing to share information as to “what works for them” with potential competitors.

Of the three books, “The UK’s Best Accountancy Practices” that gave me the greatest insight into the role of at least a subset of accountancy practices and how they are serving our small-business sector. As such, it gave me grounds to be optimistic that there is potential for our best accountancy practices to be a real force for good in the provision of effective support for their clients.

Finding Best Practice in Accountancy Practices

I have been carrying out some informal research into the role of the Accountant as professional advisor to small and medium sized businesses.

A really useful source of information has been Steve Pipe’s ‘The UK’s best accountancy practices‘. Pipe provides case studies of over 40 UK accountancy practices, each of which provide fascinating insights as to how our best accountancy practices are serving the business sector. Most of the practices service small and medium-sized businesses and are, themselves, small businesses.

In seeking to help us learn lessons from successful businesses, Pipe is following an approach adopted by some very influential books, such as Peters and Waterman’s ‘In Search of Excellence‘ and Collins’ ‘Good to Great‘. The scope of the book may be narrower than these predecessors – while Pipe states that he hopes that the examples of excellence will inspire, he makes it clear “there is no theory in these pages – just example after example of what real UK accountancy practices have done … to generate better results for their clients, their communities and theselves”. Some common themes are identified, but it is left up to us to decide which of the diverse range of examples might inspire us to do things differently. By letting us draw our own conclusions, Pipe will avoid the criticism that followed both ‘In Search of Excellence‘ and ‘Good to Great‘ when some of the quoted exemplars in those books failed to deliver exceptional financial performance over a sustained period.

Reading the case studies, I got the impression that many of the practices may have been following (directly or indirectly) the approaches advocated by Michael Gerner in ‘E-myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It‘ – a book that, though very different in style, I also think is of great valuable. But if you are looking for a book that is specific to the business of Accountancy, I find Pipe’s work much more useful than the rather light-weight (in my opinion)  ‘The e-Myth Accountant: Why Most Accounting Practices Don’t Work and What to Do About it‘ by Gerber and Darren Root. Indeed, ‘The UK’s best accountancy practices provides examples of excellence that should inspire anyone who works in a small service business – the lessons can be applied far more widely than just in accountancy practices.

Is CSR relevant outside of the Corporate Sector?

There was an interesting discussion on the Mentors for SMEs LinkedIn Group this week.

Jonnah asked how Small and Medium Enterprises (SMEs) should take on Corporate Social Responsibility (CSR) in their business and financial reporting.

In the debate that followed no one argued that SMEs were exempt from the requirement to be socially responsible. Indeed, there was a concensus that social responsibility, which might be defined as self-regulated behaviour that meets and exceeds regulatory requirements regarding the impact of the organisation, needs to be embedded in the values and activities of the organisation. There was some discussion as to whether CSR was necessarily about the external impact of the organisation, or whether CSR also covered how an organisation behaves toward its own employees (the majority felt that there should be no distinction between internal and external impact).

So if CSR is relevant outside of the corporate sector, are there differences in how it should be applied within small businesses? Well, many felt that, for small organisations, adopting a formal CSR policy is not the best approach. Better, it was argued, to focus on establishing clear values that the organisation decides it wants to underpin its activities, and then defining behaviours that support these values. There were different views as to how formalised and auditable the resultant activities should be and there are resources out there that can help you analyse your own organisation’s approach – for example the Organisation for Responsible Business offers a “responsible business questionnaire” geared to SMEs and the organisation has developed “The Responsible Business Standard”. The MBA Oath was also mentioned as an individual approach to responsibility and ethical behaviour.

There was agreement that, for many small organisations, their Accountant may play a particularly important role, as they may be their only source of professional advice. As such, it may be particularly important for Accountants to act in a socially responsible manner and to be concious of the importance of their role.

One accountancy that has adopted a particularly value-driven approach was described by Steve Pipe in his book “The UK’s best accountancy practices“. Pipe quotes Simon Chaplin, practice principal at GreenStones, as saying that everything starts with purpose and values “inspiring, challenging and supporting colleagues and customers to be the best they can be”. GreenStones is described as engaging the whole team in defining core values, rejecting those that the company could not demonstrate that it lived up to, and introducing innovative systems for measuring, enhancing and rewarding value-related behaviour and practice. Subsequently Greenstones achieved an Investors in People Gold Award (given to only 1% of IIP businesses),  and dramatically improved financial performance. It seems likely that Chaplin will agree with Tom Peters’ 7 Steps to Sustaining Success:

  • You take care of the people.
  • The people take care of the service.
  • The service takes care of the customer.
  • The customer takes care of the profit.
  • The profit takes care of the re-investment.
  • The re-investment takes care of the re-invention.
  • The re-invention takes care of the future.

What Steve Teaches Us

Many have commented on the death of Steve Jobs this week. I was moved by the thoughts of Business Coach  John Dennis. John quotes the speech made to Stanford University students in 2005, when Steve said:

“Remembering that I’ll be dead soon is the most important tool I’ve ever encountered to help me make the big choices in life. Because almost everything – all external expectations, all pride, all fear of embarrassment or failure – these things just fall away in the face of death, leaving only what is truly important. Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose. You are already naked. There is no reason not to follow your heart.

Your time is limited, so don’t waste it living someone else’s life. Don’t be trapped by dogma – which is living with the results of other people’s thinking. Don’t let the noise of others’ opinions drown out your own inner voice.

Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do. If you haven’t found it yet, keep looking. Don’t settle. As with all matters of the heart, you’ll know when you find it. And, like any great relationship, it just gets better and better as the years roll on. So keep looking until you find it. Don’t settle.”

John reflects on the power of Steve’s words and states that one of the techniques that coaches will sometimes use, is to get the client to imagine they are on their deathbed, reviewing their life.

The positive impact on Steve’s illness on his philosophy and outlook is interesting and perhaps counter-intuitive.

And there is the case of Alfred Nobel, who read his own obituary (a newspaper published it mistakenly following the death of Alfred’s brother in 1888). It condemned him for his invention of dynamite saying Le marchand de la mort est mort (“The merchant of death is dead”). It is said that reading his own obituary brought about his decision to leave a better legacy after his death by setting aside the bulk of his estate to establish the Nobel Prizes.

Maybe it is easier for stupendously rich people like Steve Jobs and Alfred Nobel to take actions that involve “following your heart”, than it is for the majority who have to worry about paying the rent and feeding the family. But remembering our own mortality can be useful. A friend of mine, who is neither rich nor famous, talks of the positive change on his outlook and stress levels following an accident in which he nearly died – since this event he says that he has worried less and lived more “in the moment”.

Confidence, Optimism and Passion

flamy symbolThe Ambitious Owner Managers Group were discussing the topic “Is Confidence Slowly Returning?”. “What is confidence but a feeling that things will improve?” asked Stephen. Gerald responded by defining the difference between “confidence” (“being certain that a prediction is correct”) and “optimism” (“a tendency to anticipate the best possible outcome”) and went on to say that being confident in a positive future was an important attribute of the successful owner manager.

Getting the “confidence” thing right seems very important to me.

At one end of the spectrum, there is nothing more dangerous than the leader who has no self doubt – blind belief, when combined with passion and optimism, can be a very seductive mix. But there is a danger that we see “confident optimism” as a virtue in its own right. I remember people’s confidence in technology stock just before the dot.com crash. And the bankers were confident that sub-prime was a great business to be in. And I have seen profitable companies with good business models flounder due to the blind belief of owner managers that every new business venture they undertake is bound to succeed.

On the other hand, we know that there comes a time to “put aside our doubts and commit to a chosen path” – we have all seen people and organisations incapacitated by self-doubt and inability to make a decision.

Ian Graham has a good perspective on this in his in his post “Passion the poison pill“, where he says “while passion is the glue for the vision and the driving force behind the dream it can also be the poison in the kool aid or the seed of irrational exuberance”. Daniel Isenberg, in his HBR blog The Danger of Entrepreneurial Passion, says “Passion is up there with innovation in what people think entrepreneurs need in order to succeed. I doubt it. My experience as entrepreneur, entrepreneur educator, and venture capitalist tells me that the more scarce and valuable commodity is cold-shower-self-honesty. Sure, it takes huge commitment, energy, and stamina to get a new venture off the ground. And of course you have to believe, sometimes with little data, that you can succeed against the odds. But passion is an emotion that blinds you.”

It seems to me that being able to achieve and communicate the appropriate level of confidence, optimism and passion is an important competence for us all, and is critical for owner managers and other leaders. One thing that makes getting the balance right particularly difficult is that the definition of what is “appropriate” will be different at different stages of your organisation’s development (this requirement is described well in “What Got You Here Won’t Get You There” by Marshall Goldsmith). “Getting it right”  requires self awareness and the ability to receive honest feedback from those around you. Access to good feedback can be particularly difficult for owner managers, who often do not have to report to Boards and shareholders. Developing a relationship with a good Executive Coach or joining a group such as the Ambitious Owner Managers Group, can provide a useful check on whether we are being under or over confident.

Why Grow?

Godin

I am impressed by Seth Godin and regularly review his blog. Recently I came across a video of him fielding questions at an Open Forum event. An owner manager asks: “How do you build a foundation for scalability and how do I embed the things that made us successful?”

Godin’s response was spot on, which I paraphrase below:

First, ask yourself “Why exactly do I want to grow?” Most attempts to grow lead to negative outcomes. This is partly because you are really good at getting your company to the size it is, but probably really bad at running a large enterprise. More importantly, your customers are not going to be happier when you focusing on building your business rather than them. So ask yourself “why bother?” because you will probably make less money in the short and medium term and may get a lot less joy out of it. But if you do go for growth, do it on purpose. If we are going to add a zero, then work out what are the twelve things you have got to do and plan for those – it will be a tough journey.

This kind of thinking may appear negative, and counter to today’s “entrepreneur as rock star” culture. However, Godin’s response chimes with my experience – I have seen successful businesses fail due to the desire of business leaders to grow rapidly into new areas. And Godin is not alone. The dangers of inappropriate change are articulated by Zook (2007), who urges organisations to ‘focus’, then ‘expand’, and only then ‘move on’, saying “Company after company prematurely abandons its core in the pursuit of some hot market or sexy new idea, only to see the error of its ways – often when it’s too late to reverse course.” For Peters et al (1982), in their influential ‘In Search of Excellence’, one of the eight themes that characterise successful companies is the willingness to “Stick to the Knitting – stay with the business you know”. Treacy et al’s (1995) strategy is set out in the title of their book: ‘The Discipline of Market Leaders: Choose your customers, narrow your focus, dominate your market’. Similarly, Moore (2006) argues that organisations seeking to innovate at every phase of their evolution require disciplined, focussed and systematic approaches, far removed from the ‘instinctive’ approach of many entrepreneurs. Finally, like Godin, Executive Coach Marshall Goldsmith focuses on the different behaviours that are required by different contexts: in ‘What Got You Here Won’t Get You There(2007) he says “it may be that the very characteristic that you believe got you where you are – like drive to win at all costs – is the one that is holding you back”.

For me, all companies need to be able to adapt, and the ability to grow is an important capability. The challenge is to have the self awareness that enables you to know your own strengths and motivations – and then to set goals with the appropriate level of challenge and risk. That is why, in my work with owner managers seeking growth and agility, I work hard to help them clarify what they want to achieve, what motivates them, and what their criteria for success are.

Goldsmith, M. (2007). What Got You Here Won’t Get You There: How Successful People Become Even More Successful. New York: Hyperion.
Moore, G. A. (2006). Dealing with Darwin: how great companies innovate at every stage of their evolution. Chichester: Capstone.
Peters, T. J., & Waterman, R. H. (1982). In Search of Excellence: Lessons from America’s Best-Run Companies. New York: Harper & Row
Treacy, M., & Wiersema, F. (1997). The Discipline of Market Leaders: Choose your customers, narrow your focus, dominate your market. New York: Perseus Books.
Zook, Chris (2007) ‘Finding Your NextCore Business’, Harvard Business Review, (April 2007)

TED Talk: Gordon Brown on global ethic vs. national interest

 

credit: TED/James Duncan Davidson It may be deeply unfashionable to say anything complimentary about our Prime Minister at the moment. However, I was extremely impressed by Gordon Brown’s presentation at TED in Oxford last July. I was reminded of this because TED have just posted the video of the follow-up question and answer session between Brown and conference organiser, Chris Anderson.

I have long held the view that commercial globalisation must be matched by the development of more powerful global legislative frameworks and institutions. Global recession and concerns about climate change reinforce this conviction.

I therefore welcome Brown’s call for the creation of global institutions to deal with the global problems. It will take time, maybe generations, but it will happen. And the increasing use of multiple forms of global communication that allow us to share the experiences of individuals around the world will foster the development of a global ethic and the sense of global society essential to the acceptance and success of such institutions.