Some of the best success stories are from firms who carefully plan strategy. However, in the midst of day-to-day firefighting of high workloads with shoe-string resourcing, operational matters can dominate attention at many SMPs. Without an understanding of the importance of strategic planning, SMPs may find lower value activities that carry a deadline taking priority over the critical task of effective planning for the future.
This article builds upon a session at a recent meeting of IFAC’s Small and Medium Practices Advisory Group (SMPAG) to highlight the importance of strategic planning and how SMPs can introduce practices to embrace the future.
Navigating barriers to strategic thought
A firm’s structure and organizational culture can discourage effective strategy, which relies on tools such as planning and forecasting to inform decision making. In environments where historic concern has been with maintenance of traditional service lines and past performance rather than growth or diversification, significant changes in thinking could be needed. In some SMPs, gaining consensus from multiple equity partners also poses challenges, as does the fear of navigating the demands of new clients and staff expectations in the event of change. Change may, therefore, need to be incremental and can take time, so it is important to start taking first steps and to trust the process.
Cost is undoubtedly another factor. Effective strategy requires staff and leadership time that otherwise could be applied to client work, and in some cases this may need to be supplemented by external consultants. Heavy competition for business, staff shortages, and constant change may also make setting long-term vision or goals seem unrealistic—but these are exactly the environments where future thinking can bring the greatest benefits. Staffing levels at larger firms may allow differentiation in duties, which can position some staff to develop and hone their skills in strategy building while others focus on delivery. But in SMPs, it can be harder for staff to build knowledge through experience in this way, and it can also be harder to free staff from delivery. Collaborating with other firms is a good way for SMPs to overcome these disadvantages with respect to larger firms.
Unlocking the value of strategic planning
Strategic planning is unlikely to succeed at an SMP unless there is a broad understanding across the firm of the value it can and will provide. It is challenging to assess future resourcing needs without understanding which services will be provided and with what frequency or volume. (This is also important for compliance with the quality management requirements outlined in ISQM 1.) A lack of strategic thought can also lead to the neglect of important tools such as contingency planning.
The future direction of a practice may also be shaped by disruptions to intended services from legal or regulatory changes. Similarly, technology may render some of the traditional SMP workstreams redundant and force a move into new services to avoid contraction. Employee attraction and retention can also be hampered unless the practice scans the environment for changes and responds to these changes with initiatives and best practices that employees value. This could compound talent shortages and make the development of future leaders unlikely.
Strategic planning also builds resilience. It can enable capacity for multiple staff and partners to be trained to operate in multiple areas. It can also emphasize an understanding of the importance of relationships with key staff. Strategic focus ensures an SMP thinks about performance broadly and sets KPIs around growth, talent retention, and client satisfaction—as well as profitability. It makes investments in technology and IT security less likely to be overlooked in favor of short-term objectives. Transformation is, of course, not only about growth either: sometimes, right-sizing the practice and terminating clients is just as important. Strategy can also help put this in focus.
Taking the first steps
For SMPs that have neglected strategic planning, the task may seem daunting, but there is much value to be unlocked by getting started. Here are some steps that firms early in this journey can take:
- Discuss proposed changes to the planning process with staff and key stakeholders to ensure everyone buys into the vision and strategic objectives (or “headline goals”).
- Use “old” tools, such as a strengths, weaknesses, opportunities, and threats (SWOT) analysis, to understand your environment and any internal or external conditions that might impact your strategy.
- Set a small number of diverse key performance indicators (KPIs) that truly reflect performance across the most important areas to your practice (e.g., staff satisfaction, client satisfaction, profitability, and growth).
- Account for how IT will be used to support future operations, what investments may be needed in technology, and what IT security services will be necessary to improve competitiveness and quality.
- Develop a summary of the strategy on one page. This can show the vision, mission, values, strategic objectives, and associated KPIs for your firm. This should be shared with all staff as transparency helps them understand the targets they are contributing to and can inspire them.
- Identify the support available from your professional accountancy organization (PAO) on strategic planning. There may be useful resources available tailored to your jurisdiction. See if there are any strategy-based working groups you can attend and start building relationships with other firms to share knowledge and practices.
- Set a timeline for revisiting the strategy. Strategy should be live and frequently reviewed.
Conclusion and where to go for further guidance
Strategic planning is essential for the success and growth of SMPs and can generate tremendous value for SMPs navigating an ever-changing business landscape. By taking the first steps into strategic planning, SMPs can better focus on building long-term success. There are more detailed resources covering “Planning for your firm” in Module 1 of the IFAC Guide to Practice Management for SMPs. This material addresses creating a competitive strategy, the need for business planning, planning for effective relationships with clients and employees, and developing plans for the various functions within the firm. The Guide includes further insight on the strategic planning process, including an introduction to strategic thought and an eight-step strategic planning process. There are also useful checklists for self-assessment of the position of the firm and matters to be covered in the planning process. Remember: creating a strategic plan is only the start of the journey, converting strategy into action is the only way to unlock the true value of strategic tools.
