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Feb 1992

Managing change. (Management of an Accounting Practice)

by Strauss, Paul S.

    Abstract- Managers can lessen the adverse effects of any major organizational change on their workforce with a well-conceived management plan. Managing changes involves determining the clear goals and outcomes of organizational change. A tool for measuring the success of any transition, one that will allow the comparison between the 'existing state' with the 'ideal state,' should be created. The participation of other organizational members in the process of change planning is also essential in getting rank-and-file support, lessening employee opposition to change, and obtaining new perspectives on operational issues. Other matters that need consideration include dealing with employee resistance and the stress produced by organizational changes.

If your firm is undergoing a serious transition (downsizing, merging, adjusting salaries and workloads, expanding client services, seeking new sources of revenue, etc.) you will need to understand the impact of these changes on your human resources and learn how to manage them effectively.

Know Exactly Where You Are

Going Before You Start

The first step in managing change is for the partners to identify and agree upon the desired important personal and firm goals and outcomes (such as profit objectives, new products, better operational procedures, more productivity, etc.) At one of the team leadership sessions we routinely conduct with our clients' partners, there was much discussion about how to increase the firm's revenue base by offering new types of consulting services. After hours of discussion, it became evident that the partner most resistnt to this idea felt that he was the only one who could manage this expansion (as had been the case with the others undertaken in the past). He would rather not have the income generated if the others were to share in it without working harder themselves. Partnership issues such as these must be resolved before the firm can be expected to unify around a common set of goals.

Know Exactly Where You Are

Starting From

It is not enough just to identify goals, it is also important to take careful measure of the differences between where you are now, and where you want to be--between how the firm currently operates and how you want it to work in the future. We call these the "existing state" and the "ideal state." It is crucial for the partners to understand the existing state of the firm as well as the ideal. They need to have a realistic assessment of the firm's "culture"--the extent to which the staff understands and shares their goals, the state of morale and motivation among the staff, and the readiness and willingness of managers and staff to participate in the change process. In many of the firms we have assisted through major internal transitions, our initial interviews with staff members uncovered and a number of deep-seated resentments and unresolved issues, which could have doomed their attempts to effect successful changes. It can be painful to haul issues like the perceived ineptness of a certain senior manager, unfair practices in assigning engagements, or insensitivity to gender issues, to the surface and deal with them openly. However, until and unless this is done (in a constructive manner), attempts at changing a firm's structure or culture are unlikely to meet with success.

Broaden Participation in the

Change Planning Process

The next step is to formulate actions (policies, programs, procedures, and practices) which have a reasonable chance of attaining the desired goals. In this step, it is essential to involve others at every level in the firm in developing the means by which the goals set by the partners will be attained.

Although outside consultants can be useful in reviewing a firm's resources and suggesting creative ways of solving some of its problems, there are important advantages to soliciting the participation of the staff in the planning process as early as possible. Sometimes, the people who work "in the trenches" are the best ones to identify the technologies and trends affecting their work, assess the impact proposed new procedures will have on the firm and its culture, and generate the rank-and-file support needed to implement new ideas and actions. By pooling the knowledge and experience of a broad range of staff, and by having them act as a sounding board for acceptance, the changes to be made will have a stronger chance of actually producing the desired results.

Don't Try to Change Quickly or

All At Once

Sometimes you may have no choice, but to "just do it." However, making serious alterations in your firm's organization, work procedures, account assignments or personnel policies all at once can have serious consequences. Despite careful planning, without some sort of "trial- and-error" assessment of the changes, and without some kind of informal "try-out" period, the changes are unlikely to stick. The managing partner of one small firm (30 staff members) developed a plan for reducing expenses by modifying the firm's overtime policy. He reviewed it in detail (by himself), printed an addendum to the personnel handbook, and announced the change with a memo to all staff on the first of the month. Within two weeks, the impact of the changes on the ability of the managers to schedule several "routine" engagements, and on the morale of the senior staff, was so great that he had to rescind the policy.

If you find yourself undoing changes in your own firm, consider these alternative methods of implementing the change process:

* Across-the-board implementation affecting everyone at once. This has the advantage of having everyone focus on the new procedures at once, but maximizes your exposure to unforeseen problems.

* A pilot project that tests the changes in one or move groups prior to implementation across-the-board. This has the advantage of refining the procedures in the best possible place, and the disadvantage of stimulating resistance to using "someone else's idea" among other groups.

* Experimental testing of portions of the proposed changes to assess their effects. This limited test of something new can give you a quick answer to the question: does it work? However, anything experimental tends to be unrealistic when used "for real," and may need subsequent fine-tuning.

* Temporary change-management structures, such as a task force to address specific problems and operate with new methods without making them formal. This can often enlist the support of diverse groups in the company and make them "buy into" the proposed changes when they are adopted. This process is often cumbersome and needs a good deal of team leadership skills to pull of well.

The choice of a method to manage change in your firm will depend on the nature and severity of the changes to be made, and how much time there is to effect the transition. By failing to coordinate efforts, too many firms tend to wait until their only option is to "just do it." For example, one firm anticipated the loss of a major client. Accordingly, they began intensifying their marketing efforts in an attempt to replace the substantial revenues to be lost. However, they did not plan adequately for the downsizing needed if they were unsuccessful (e.g., targeting the key staff to be retained, reassigning accounts, etc.). When the word got out that they would lose the client and would be forced to cut back staff, it was their best talent--those whose skills were more marketable--who were the first to jump ship. One strong advantage of the task force approach is that it allows you to involve your best people at every level of the firm in the change- management process. This not only encourages them to stay with you, but recognizes their talents openly.

Recognize That Resistance To

Change Is Natural and Inevitable

Most people tend to resist any new way of acting or thinking because it makes them feel uncomfortable. Being asked to handle work differently, or take on different responsibilities often implies that the way we are now working is "wrong" and therefore deserving of blame. Often, considerable time and energy have been invested in creating the present environment, and that investment is best amortized by continuing it essentially intact. Then too, the known environment, as bad as it may be, is at least certain. The new environment may turn out to be worse. As a result, most of us resist change in subtle, as well as overt ways. For example, many accounting firms attempt to increase revenue by suddenly requiring specified levels of client-billable hours. Rather than expanding the work being done for clients, the result may frequently be an unrealistic bulging in charges to "fat" accounts or existing work being expanded to fill the additional time made available. Change that requires new ways of thinking is often resisted through distorted compliance. Although the intent was control, the result was inaccuracy. You need to be aware that resistance is natural and inevitable--and that you will need a strategy to overcome it.

Prepare a Strategy to Overcome

Resistance to Change

The most effective way of overcoming resistance and motivating people to change is to explain what they need to do, why they need to do it, and what's in it for them, as well as for the firm, when they do it. In management terms, this means defining new behavioral expectations clearly and linking them to the firm's formal reward structures, such as retention, promotion, and compensation as well the informal structures, such as recognition and outward signs of approval from management. This is best done through the performance, planning, and review process and the salary review process. (Note that we refer to these as separate processes.) Make certain that performance plans and reviews at all levels reflect support for and implementation of the new methods, procedures, and attitudes desired. For example, by assessing your managers on the expanded services they sell, or on increasing the fee realization on their accounts (as well as on the more traditional performance criteria), you will encourage them to accept these changed responsibilities readily. By tying the performance review system into the salary review process, the link between new behavior, approved job performance, and rewards is complete. The same holds true for changes in the firm's organization, environment, or work procedures. When acceptance of change requires new attitudes or actions, you must define the change needed, measure compliance, then reward the person appropriately.

Although most of the small to midsized firms with which we work have some sort of performance review system in place, many confound or confuse it with a salary review system. Few enforce it properly. Almost none incorporate a performance planning element to direct behavior toward specific practice management goals. If your firm does not have a viable performance planning and review system, distinct from its salary review process, we urge you to install one now.

Deal with the Stress Produced by


Change of any kind produces stress, and the bigger the change, the greater the stress. Add this to the normal pressures of the typical accounting practice, and you have the potential for serious problems. On the personal side, increased levels of illness and absence caused by stress reactions can decimate your resources and blow your overtime budget out of the water. On the professional side, the mistakes, errors, and oversights in work that are typical reactions to stressful environments, can expose your firm to serious legal consequences. Either way, it pays to recognize and deal with the stress produced by major transitions.

Here are three ideas that have worked for some of our clients to contain the impact of periods of transition on staff stress levels:

1. Keep the staff well informed about plans that affect their salaries, their work and their future. Chances are they will find them out sooner or later. It's best coming sooner, more accurately, and from their managers, rather than from the rumor mill or the "street."

2. Encourage the staff to talk to their supervisors and managers about the frustrations and conflicts they face on the job. Make it acceptable to sound off to "management" (in addition to their colleagues) about the things that are on their mind without fear of reprisal.

3. Train all partners, managers, and supervisors to be good listeners and encouraging to people. These are learned skills that few possess naturally, but that all can develop. Reinforce the training by including this sort of behavior in their performance plans and reviews.

Managing Change is the Key


Making changes to improve the performance of an organization is essential in today's competitive, complex business environment. Success in making those changes will often depend more on how the process of change is management than on the specific changes in procedures or behavior that are sought.

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