Using Metrics the Right Way

Source: Public Practice 

According to Bill Reeb, metrics rarely provide a CPA firm with definitive answers, they just help them ask more questions. Depending on the situation, the same statistic may reflect a strength or a weakness, so it's important to think of metrics as tools rather than as benchmarks. 

Take realization, for example. Often, when firms focus too heavily on achieving high realization, Reeb warns, “training will stop, delegation diminish, and the firm will start being more efficient today while sacrificing effectiveness for the firm's long-term future.” When a firm is in people-acquisition mode, high realization may indicate that the firm is wasting resources by under-utilizing new people and overworking senior people. On the other hand, when a firm has capacity and qualified, well-trained people at all levels, high realization may indicate good workflow and proper delegation. 

At the same time, low realization may be a negative indicator, or it may signal that work is being delegated with proper oversight and training, which, over the long term, will help the firm improve its capacity and skill levels. 

Other metrics discussed in the article include leverage, net income per partner, and new business generated.

For the complete article, read “Metrics: Their Value is in Creating More Questions.” 

From Public Practice, Texas Society of CPAs, June 2015, www.tscpa.org.