Productivity has been used as a key measure of individual performance as long as accountants have been using timesheets. It’s a quick and easy way of determining how much of the working day is actually spent on client work and potentially relates back to capacity and fee targets.
In recent years, there’s been significant discussion about what productivity really reflects and whether it is a suitable measure of individual and firm performance. This is reinforced by benchmark studies including Business Fitness Good Bad Ugly National report which has observed, year after year, that there’s actually no correlation between measured productivity and reported profitability of firms.
Of course, this observation does not mean that productivity is not important, it simply means that what we measure doesn’t correlate with the results we’re looking for. Some key reasons for this observation could be that:
- Productivity does not always translate into recoverability of WIP in fees generated
- Staff may under-report or over-report time spent on client work to achieve targets
- Productivity does not provide any feedback on the efficiency or leverage of workflow
As well, In the ‘new world’ of accounting where there’s an increasing focus on client relationships and the value of work rather than simply the time cost associated with work completed, productivity is less likely to be a reliable indicator of performance.
So, should productivity still be measured and, if not, what is a more reliable indicator of individual and firm performance?
Until the leaders and managers of accounting firms can confidently assess individual performance, it’s unlikely that productivity will be despatched to the junk yard. It still adds some value as one of a number of key performance indicators that can be reviewed on a daily, weekly and monthly basis.
What should progressive firms be considering as more reliable indicators of individual and firm performance?
The following 5 KPIs should be considered:
- Turnaround time – The time taken to complete matters is a reliable indicator of a range of work practices that reflect the efficiency of systems and processes and the performance of individuals. Inevitably, when jobs are turned around quickly, clients are satisfied and recoverability of WIP is at or above 100%. Reliable data on turnaround time is difficult to find as firms are not yet reporting this measure in a consistent manner.
- Lock-up days – The value of fees in WIP and debtors is a clear indicator of the level to which the firm is able to manage client relationships. It reflects both the throughput of work and the ability of the firm to charge clients and receive payment in a timely manner. Progressive firms are achieving lock-up days of 30 or less as a result of a stronger focus on invoicing and payment arrangements.
- Recoverability – The extent to which time charged to WIP reflects the time cost associated with doing the work is not just a strong measure of efficiency, it also focuses attention on the true value of work and the individual’s ability to convince the client to pay based on value rather than time cost. All staff involved in completing client work should share in recoverability targets, which should be at least 100% of time charged to WIP.
- Value of new business – It’s not just the value of existing business that’s critical to future health of your firm, but also the value of new business. If you’re not measuring and reporting on this, the chances are that you’re missing opportunity to add value through additional services to existing clients and to attract new clients through marketing activities.
- Behavioural standards – Yes, I know this is qualitative and ‘outside the box.’ However, by identifying and describing the behaviours that are consistent with your firm’s objectives, purpose and values, your team members are more likely to reflect those behaviours in the things they do on a day to day basis.
For example, an employee who is unable to achieve their productivity target most likely has some challenges in relation to the way they schedule, start and complete their work.
Time and task management are key issues that often need to be addressed in relation to the prioritisation and efficiency of workflow. By going back to basics and coaching individuals to better manage their days rather than simply relying on easily accessible measures of performance, leaders and managers are more likely to achieve the results they need.
So, the next time an employee complains that their productivity target is unrealistic, take some TIME OUT to ask them what they should be doing to improve the way they manage their days and their workflow.
Is it time to improve the efficiency of your team?
No matter how much you try to make time for what’s important, urgent matters take over. You seem to find ourselves constantly playing catchup. How can you create more time to focus on what’s important?
The key to resolving the never-ending ‘I’m too busy’ mindset is to take control of your work environment. Register now for our upcoming “Time Out” Program, your Firm’s Time Management Fitness Program.