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Jan 1989

Creating and changing a firm's culture.

by Bonsignore, Francis N.

    Abstract- Accounting firms are changing the variety of services they offer to clients, and corporate cultures are changing as a result. A new personnel management model can be employed to help adjust to the new expectations on the part of both clients and managers. Aspects of the new management model include: delivering service in new ways; using new approaches to doing work; and making sure quality people are hired.

Under an older model of human resources management among CPA firms, the formula was fairly simple: Get the right number of people, assign and supervise them to produce the "right" number of chargeable hours, apply the appropriate quality standards to gauge performance, and see that staff progression occurs on a tightly managed basis. By doing these things well--keeping to the rules--firms could ensure that they had a steady stream of people for the future, clients were well-served, and the appropriate economic returns were achieved. This is no longer the case.

There are two major aspects to the people challenge that major CPA firms now confront: One is to develop and apply the right professional resources in the management of the practice and the other is to introduce change. Successful professional organizations are adapting to new pressures in the outside environment and to new expectations on the part of both clients and their people. This article involves developing a new human resources model as a major part of such successful responses.

The New Human Resources Management Model

The elements of the "new" human resources management model include the following:

. Understanding the professional roles our people will


. Ensuring the quality of the individuals that we select;

. Delivering service in new ways;

. Understanding the value added for clients of our


. Dealing with a fewer number of professionals as practice

economics change and the nature of services provided

to clients evolve; and

. Developing new approaches for carrying out our

professional work.

It is no longer sufficient to know what engagements involve, to know the performance standards, to recruit and retain the appropriate numbers of people, and to administer the attendant personnel processes. More is needed to be successful and to adapt to changing business conditions.

In all of these "new model" dimensions, there are ongoing challenges to be confronted as well as opportunities. The pressures from external change, and the competitive marketplace for CPA firms, in particular, combine to force firms to examine how to prepare people for careers in public accounting, the work content that they engage in once they are on staff, and how a firm can influence the development of professional leadership in the management of its professionals--all to achieve quality client service and profitable results.

Ongoing Challenges

The mission in the people area (of which the human resources function is a part) should be twofold: 1) to be responsive to business realities and the competitive market situation; and 2) to change behaviors in ways that offer longterm benefits to staff, the firm, and clients. Changing salaries and pay structures clearly address, in part, the former--that is, the competitive market. However, dealing with the required behavioral changes regarding how people are managed, evaluated, counseled and developed will have much more enduring value for CPA firms and their professionals.

In learning how to manage people in this "new model," the firm should select the right talent and manage the capabilities of their people, in contrast to blindly carrying out recruitment practices and managing the historical roles CPA firm professionals have played. This shift will involve moving from a process-driven philosophy on human resources management to a people-centered philosophy. This direction will serve to change culture. But the nature and extent of such efforts will also be influenced by what a firm's culture is today.

What is a Firm's Culture?

What do we mean by culture? While a great deal has been written attempting to explain it, culture derives from and is influenced by four basic elements:

. People;

. Structure;

. Management processes; and

. Rewards.

Culture is a derivative of what happens when these four elements combine and interact within any organization. Moreover, the skillful modification of one or more of these elements can bring about desired and beneficial changes in culture. Each element can be defined briefly:

. People refers to the numbers and types of professionals

in our organizations, the roles they play, the skills they

bring to our work for clients, and the values and beliefs

that influence their behavior.

. Structure means not only the formal organization of a

firm but also the manner in which people and job

roles come together, the methods by which we deliver

service to clients, and the configurations of roles and

responsibilities we rely upon to accomplish professional

tasks in both formal and informal workgroups.

. Management processes represent the most encompassing

element of culture, including how we communicate,

how we evaluate, how we counsel, the procedural

aspects of all of our policies, and how we direct,

measure, and control our business. It includes formal

procedures as well as our management style--and

those practices, formal and informal, that drive us and

condition our behavior day to day. A great deal of

what is encompassed by management process has to

do with what is referred to as: "How we do things

around here."

. Rewards refer to incentives as well as remuneration.

Rewards embrace how individuals are compensated

and, presumably, motivated. Rewards include not only

cash compensation but noncash awards and other

forms of recognition and reinforcement.

Changing a Firm's Culture

A bit of background is in order as to why culture is important and why, for many firms, changing it is essential.

As professional accountants, we confront major changes in our profession; our competitive markets, our client mix, and our talent supply. These changes include the attractiveness of public accounting as a career pursuit, the general quality of trained accounting graduates produced, the educational preparation of accounting professionals, and the nature of the work these professionals perform once they enter a firm. Most important of all, these changes influence the way in which people must be managed in a professional setting--for them to derive the most from their professional experience and for the firm and clients to benefit.

Our business mix is changing. There is proportionately less recurring audit work and more projects; more problem solving, and business advisory assignments; less procedural work. Clients want value from our professional efforts.

On the supply side, public accounting is not, in my view, drawing the best people, and how we prepare those who choose needs a fresh look. These changes are too significant to ignore; they pose major challenges and frightening prospects if not addressed.

All of us should be interested in modifying our cultures to be supportive of what we seek to do for our clients; that is, to make culture a positive variable in meeting our professional obligations and business objectives. Important to keep in mind is that among public accounting firms-- no less so than among other successful organizations- -the patterns of how we behave are ones that are broken with great difficulty, particularly when we have enjoyed success.

Change must be reinforced with persistent and clear efforts, otherwise "the rubber band phenomenon" occurs. That is, the moment we relax a little on promoting and reinforcing important changes, the organization springs back to its original shape. It has a natural--and understandable--tendency to revert to ways that are comfortable because "that's the way we did things historically." The tougher it is to change, the clearer the indications of how strong the firm's culture is. The more successful that culture has been in meeting business objectives, the more risk in changing it. But clearly, changing markets, services, and talent supply combine to change our professional roles and argue for a response. Changing culture must be part of the response.

Elements that Can be Changed

Here are some examples of a few of the things that can be done to make the response real. Assuming that it is done correctly, changing the elements can create cultural changes that support longer-term behavioral changes. These changes can contribute to strengthening our viability in a changing business world and professional setting--and our ability to serve our clients at the standards they expect.

The People Element

Let's take the first element--people. In our firm, we are hiring more experienced professionals in greater numbers than ever before. Market opportunities and practice needs cannot be met through organic growth. Experienced professionals with two or more years of work experience comprised more than one-third of all hires in 1987. These individuals are coming from ever more diverse backgrounds and different cultures. They bring needed professional capabilities as well as different professional perspectives.

The firm is hiring more liberal arts graduates than in the past and we are pursuing educational programs that can increase further the number of liberal arts graduates entering our auditing and accounting practice. These are individuals who bring different aptitudes and capabilities and who can achieve certification readily. We believe the skills, intellect, and breadth the liberal arts graduate brings are absolutely essential for creative problem solving and professional adaptability in a changing practice--one that increasingly calls on CPAs to be business advisers and that requires one to work as part of multidiscipline teams.

Also, the number of paraprofessionals in our firm's audit practice has doubled and we are working toward a goal by 1990 that one of five individuals hired at the entry level in the audit practice will be a paraprofessional. And we are encouraging postgraduate business study for our exceptional performers so that they can acquire the types of skills and exposures they need to be future leaders.

In the context of these efforts, we are, very importantly, reinforcing actively and in several ways the concept that partner ownership and accountability are keys to achieving the greatest benefits from the firm's human resources programs. We are seeking to reinforce, as often as possible, the principle that partners have the ultimate role to play in seeing that individuals receive on-the-job training, effective mentorship, and the coaching and reinforcement they need. Also, that our professionals receive the guidance required to develop themselves fully, to experience a strong feeling of belonging with the firm and to sense a genuine interest in them on the part of the firm.

The Structure Element

With regard to structure, our firm is seeking to reorient staff roles in terms of the work content that our professionals perform. In 1987, new audit guidance was issued that focused on a more streamlined audit methodology and more effective use of professionals on client engagements. That guidance directs the efforts of our professionals toward the value added areas that are of greatest concern to clients and involves examining the condition of the business, not just the books.

More emphasis is being placed on teams as opposed to structured hierarchies as the best vehicles for delivering services to clients. This requires preparing our people to deal with a different set of human dynamics--less hierarchical, more collegial. Also, we are considering the most appropriate approaches for the identification and managed development of individuals whom we regard as the outstanding performers and future leaders. It is in the firm's interest to take a special and direct interest in the careers of these individuals and how they will be guided in their development and assignment.

As to the broader aspects of structure, recent changes have brought about fewer organizational units so as to encourage more collective ownership of staff and a pooling of the professional resources required to serve clients. These changes will avoid the fragmentation that can occur with large numbers of individual practice units. And we are, as part of our new management structure, combining geographic and discipline areas in order to merge functional expertise with the geographic delivery capability needed for bringing resources to bear on client needs as effectively and efficiently as possible.

The Management Processes Element

With respect to management processes, there are a number of things underway. One is the recognition that, as services and practices change, different businesses must be managed differently. This means avoiding slavish adherence to inflexible rules and providing, in their place, enabling policies that will promote consistency--but not necessarily exact conformance --among the firm's professional services and business segments. We are seeking to relax ingrained approaches to managing our people that are risk-minimizing in matters and in their place encouraging partners and senior human resources people to be innovative, to take reasoned risks with people that can maximize their contributions and professional satisfaction. This includes moving the best people faster and being less wedded to ironclad requirements as to how long people should serve in a given role before advancing to higher professional staff levels. More and better communications between staff and partners is key to this activity.

Strengthening performance evaluation and counseling programs is an important objective, as is giving people more professional independence earlier in their careers--by according them more responsibility, consistent with their capabilities and not necessarily their job titles. Additionally, we are expanding in-house, nontechnical continuing education. New courses, starting at the staff level, having to do with broad-based management development training are under development, and an expanded management development curriculum is being defined. Also, to support more active management of our human resources, we are completing the initial phase in the development of an on-line human resources system with direct access by every location in the firm.

The Rewards Element

Beyond increased salary levels for all staff (a result of the firm's 1987 initiative), a bonus program to recognize exceptional professional contribution is in place. Further, in 1988, the salary structure was revised upward once again, following on the major initiative of 1987, to reward more fully exceptional performance at the manager level, and the number of manager-level staff who received incentive bonuses for their technical achievements, client relationships, practice development, and engagement management contributions doubled in 1988. At the staff and senior levels, bonuses were received by a large number of people in fiscal 1988. The purpose of bonuses: to reward individuals who can make a difference in how effectively we serve clients and in our ability to assist clients in solving tough problems--professional advice that adds value. We continue to devote significant attention to ensuring that our base pay structures remain competitive in the broad markets in which we compete for staff. In order to distinguish accurately and objectively how we should be positioned in those various markets, we have committed ourselves to continued monitoring of our pay position through analyses conducted by independent consultants. And our commitment to differentiating in favor of superior performers and recognizing the stars continues.

Other Considerations

Beyond these initiatives, some major human resources policy changes have been effected and several other significant efforts have been designed, endorsed, and will be implemented over time, with the support of the firm's management and the partnership. The encouragement, support, and investment of the partners have enabled the firm to move away from accepting results like turnover or professional disenchantment with public accounting as inevitable. It has enabled us to influence the results through sound and progressive practices that treat people as responsible professionals and evaluate and reward their contributions accordingly. It has contributed to changes in our overall culture.

But probably the greatest challenge for firms and their leadership is rooted in some of the ingrained beliefs touched on earlier in this article. Basically, the key question is: Which rigid aspects of our business must remain so and which can be changed? Effective change will require coming to terms with being less concerned about uniformity or bound by tradition in our personnel policies. Progress will come through predicating human resources strategy and policies on business needs, the needs of the outside market, and the professional needs of the professional expectations of our people--rather than on internal processes and controls.

Why is Cultural Change so Difficult?

If it seems so simple, why is cultural change so difficult? Among successful organizations, it is with extreme difficulty that embedded practices and traditions change. Attempts to change culture should not be simply for the sake of change but instead, to enable and support the achievement of strategic and operating objectives. First, for effective change to begin, a number of things have to happen. There has to be a recognized need for change, and its legitimacy must be firmly established. Second, the levers by which we can effect change have to be identified. Next, specific actions have to be delineated--and support and commitment must be cultivated. Moreover, agreement has to occur at the front-end regarding the measures that will be applied to gauge success. Importantly, results have to be monitored, evaluated and communicated--an ongoing obligation of management.

Inevitably, resistance will be encountered in cultural change because risks are present, new rules are always suspect, and unknowns are cause for concern. Bringing about change in the human resources area and needed change in the management of our firms is an extremely difficult task but one that we must lend our best efforts to accomplishing.


In summary, there are three major points to keep in mind. First, there is very little guidance available on how to manage professional services enterprises or how to create people policies that are innovative and can work in changing market and business situations. It is time for firms to stop looking to the outside for answers and start setting their own examples, ones other organizations will emulate.

Second, firm leaders need to promote the application of more judgment and less rules in how people are managed. Personnel practices that confine a firm's thinking about people and relieve managers or partners of accountability for dealing with the judgmental aspects of human resources matters are, quite simply, inadequate to support successful change.

Third, simplifying how we manage our firms can help focus better on what we are in business to do--to serve clients. We would do well to keep the ultimate measure--client satisfaction--in mind as we seek to promote improved human resources management and cultural change in our organizations.

The CPA Journal is broadly recognized as an outstanding, technical-refereed publication aimed at public practitioners, management, educators, and other accounting professionals. It is edited by CPAs for CPAs. Our goal is to provide CPAs and other accounting professionals with the information and news to enable them to be successful accountants, managers, and executives in today's practice environments.

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