Case Study—Improving Operational Efficiency

Source: CPA Practice Management Forum

Weaver and Tidwell, L.L.P., is a three-office firm in Texas. Its success since its founding in 1950 came from its internal strengths and its environment. During the latter part of 2004, the firm decided it wanted to improve daily operations. It engaged the services of Larry Valant and his Valant Execution Model. The goal was to “make plan on time and on budget.”

Key was an alignment of firm and individual goals. Each person set 13-week goals for which he/she would be accountable. The plan concentrated on quantifiable and achievable strategies and objectives, dealing with real obstacles like staffing and resources, and having the right organization structure.

Success was measured in terms of “residual income,” which was net income less cost of capital.

The firm’s strengths were many, highlighted by strong service areas and personalized service, which enabled it to relate to clients as if it were a much smaller firm.

Improvement was needed in they way the firm functioned—as a group of individual small firms rather than one firm with a common vision. This created miscommunication, inability to make decisions, and lack of focus. The firm feared that continued growth would exacerbate these problems.

The firm changed its structure, becoming more corporate. It hired a chief operating officer (partner level) to manage delivery of services and to make day-to-day decisions. Each service area was organized similarly. The head of each area reported to the chief operating officer. Partners not part of a distinct service area were accountable to the lead partner in their locations. There were 13-week plans (one for the firm, one for each service area, and one for each person) to which everyone was accountable. Weekly accountability meetings were held, and bonuses were paid based on residual income.

Partners, many of whom were accustomed to great autonomy, were sometimes obstacles. Many of them didn’t like being accountable for meeting their 13-week plans. The focus, for everyone, was on accountability and discipline. However, area heads, rather than acting as taskmasters, became counselors. The program was started in late 2004 and wasn’t totally accepted and incorporated until the middle of 2005.

Productivity increased because resources weren’t wasted on unnecessary things. People didn’t feel uncertain about whether they should or shouldn’t take certain actions. Weekly accountability meetings were viewed as positive events.

The firm increased net revenue by 20 percent in 2006 and 30 percent in 2007.

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From CPA Practice Management Forum, CCH Incorporated, 800-449-8114, November 2007, p. 13.