Who is in charge of value at your accounting firm?
By Ron Baker, Author of “Implementing Value Pricing: A Radical Business Model for Professional Firms”
I have had the privilege of posing this question—Who’s in charge of value in your accounting firm?—to thousands of professionals around the world. I’m usually met with a momentary staring ovation, and then someone will inevitably shout out, “Everyone!”
Really? If everyone owns something, no one does.
Pricing is far too important to the viability of your firm to be left to mediocre pricers. No other area—not cost cutting, efficiency increases, or rainmaking—can have as large an impact on profitability as does pricing. Firms need to make pricing a core competency. To achieve this, pricing needs to become a function within the firm, delegated to a chief value officer (CVO) and a value council, who will develop an intellectual capital base of skills in this vitally important area, while developing pricing policies in alignment with the firm’s overall purpose and strategy.
Appoint Chief Value Officer
To understand value, we have to understand the customer. This is not accomplished with more accurate cost accounting, better project management, or any other internal initiative.
Firms have a wealth of information on how long things take and what they cost; they have a paucity of metrics on the value they create for customers.
The acronym LACEY is a useful framework for identifying what characteristics are essential for a successful CVO:
An organization will never rise above its leadership. CVOs implicitly and explicitly understand that the firm’s prices are the language in which they strategically communicate value to customers.
The CVO has to believe that their firm’s services are worth every penny they charge. There is great nobility in being paid what you are worth.
The CVO and members of the value council have to view pricing as an enormous opportunity for the firm to create and capture value, rather than a limitation imposed on them by the market. Pricers have to be intellectually curious, constantly learning, reading, and studying why humans behave the way they do.
A CVO and value council that does not have the support of the managing partner are destined to be feckless. Effective centralized pricing has to have total authority, which needs to be vested in one individual so there is one throat to choke.
Also, as with any new initiative there is bound to be inevitable mistakes, failures, and setbacks. The CVO must be committed to the process. Pricing is hard, but so is training for the Olympics. Obtaining a competitive advantage is never free. Determination and commitment defeats diffidence.
A CVO is never satisfied with the status quo because they will constantly be on the search for new ways of doing things, all the while eliminating procedures and processes that do not add value to the customer. This is the CVO mandate.
Organizations, like people, tend to calcify with age, and youth can keep the blood pumping at a more vigorous pace. Ossification is not an option.
I am certainly not suggesting you cannot teach an old dog new tricks. Instead, research on age and innovation suggests you should not expect an old dog to innovate a new trick to add to the repertoire.
If organizations want innovation and dynamism, they will have to give more authority and responsibilities to their youthful team members.
Not Final Thoughts
The Roman God Janus had two sets of eyes, one to see what lay behind and the other to see what lay ahead. A CVO is an outward-looking position, with duties carried out in a world of risk, uncertainty, innovation, and faith in the future, where value is solely arbitrated by the customers your firm is privileged to serve. If the only set of eyes you possess look behind you—at historical costs, hours on timesheets, activities, and efforts—you are destined for a perilous future.
So, who is in charge of value in your firm?
Ron Baker is the best-selling author of six books, including his latest: “Implementing Value Pricing: A Radical Business Model for Professional Firms.” You can reach him at (707) 769-0965, or e-mail at [email protected].