Change Management Fundamentals – Part 1

Change Management is a hot topic today. That is probably partially true because “change” isn’t something you are expected to do once in a while anymore, but rather, “change” is something we are asked to do constantly. Even while one change is in process, we often are asked to start another change.

The topic of change isn’t just a business conversation … it is everywhere in everything we do. As a student of martial arts for almost 30 years, this topic is a daily one in our classes. Change is addressed in questions such as:

• How are you going to get better today?
• What do you need to do differently to be different?
• What are you going to do to stop being you?
• What do you need to let go of in order to allow yourself to jump to a new, higher level?

These are the kinds of questions that all of our students are asked to meditate about before they start each class. For those of you ready to bail out of this column right now, let me remind you that this self-improvement thinking isn’t some kind of new age philosophy, but one that has been time-tested (and I will get to how all of this relates to you individually, as well as to our profession before this article is over). Just think about the unsourced quote that defines the word insanity: “doing the same thing over and over again and expecting different results.” If you consider that this definition has any merit, to get better, it says we need to do something differently. And if you want to be better tomorrow, you need to start doing something today for that change to take place. My corollary to that definition is “sanity: doing something different today so that you will get different results tomorrow.”

The questions we are asking ourselves each day are real, and they might not even be hard to answer once you give them some thought, but changing yourself can be really hard to implement. Just consider our profession. In my opinion, we are fortunate that our professionals have earned and enjoyed significantly above average success in our careers. So, asking members of this group “what do you need to do to stop being you?” or “what do you need to do differently to be different?” can quickly garner the response … “why would I want to change anything?” Many quickly add “If it ain’t broke, don’t break it,” which is a common position people quickly embrace when it comes to the idea of changing themselves. It is about this time during those conversations when I look at whatever group I am working with and ask the question, “How many of you feel like you, or your firm, will be as successful tomorrow if you are continuing to do tomorrow what you are doing today?” Overwhelmingly, the answer is “of course not!”

The key phrase about change resistance in the above is “changing themselves.” Generally speaking, in any group setting I am in, almost everyone embraces the idea that change is necessary, required and imminent with regard to those around them. Statements such as, “you need to change” or “we need to change,” or “my clients/customers need to change” are ubiquitous. And even when someone recognizes that they themselves need to change, that awareness is typically accompanied by an expression such as “as soon as I see person X changing, then I will change too!” The problem is … the only person you have any control over is you. The only person you can change is you. And yet, we are the last person that we are comfortable asking to change.

What makes matters worse is that even in those times when we decide we want to personally change something about us or in our lives, leaving behind the comfort of the “known” is very unsettling. I remember when I decided that I needed to let go of some of the competitiveness that engulfs my spirit. To put this into perspective, becoming less competitive has been no easy journey for me. My positioning on the scale was probably best described by my martial arts Master years ago when he looked at me and said, “You’ve never met a situation that you did not want to compete with!” It was hard to hear, but he was right. As an example, when I bought my first hybrid car, I couldn’t drive that automobile without trying to beat my last miles-per-gallon record EVERYTIME I drove it. I would create unreasonable and senseless stress trying to win when there was nothing to win.

As I started this transformation of slowing down my need to constantly compete, I quickly ran into a conflict between what I said I wanted to do and what I believed. To me, deep down, I believed my competitiveness was foundational to my success. So, while part of me wanted to change, another part of me, sometimes the bigger part of me, felt like letting go of my endless desire to compete would make me less aggressive, which would in turn would make me less competent, which in turn would make me less effective. But as I make these journeys of change in my life, the one constant I find seems to be that I am wrong a lot!!

I have actually found this type of superstitious thinking (if I change, I will fail) with a number of very successful people I coach. We put way too much emphasis, and often give way too much credit, to a characteristic about ourselves or even a routine we follow for the success we are achieving. One of my prosperous clients gets up every morning and mentally whips himself into getting ready for work, reminding himself that if he doesn’t push himself to the maximum he will quickly slide into failure and lose everything he has worked so hard to obtain. My comment to him, just like my coaching to myself about my competitiveness, is that this approach might have been a tool or technique that was helpful to him when he was a teenager, but that it has no bearing on his success today, his actions create negativity and stress that is of no value, and continuing with his approach will likely have a harmful impact on his ability to be happy and continue to transform during the rest of his career.

With this introduction, let’s jump right to the topic of today’s article, which is change management. Change is hard because 1) why would you stop doing what has worked for you in the past; 2) we often see solutions to problems as requiring other people to change first; 3) we commonly allow superstitious beliefs to create fear around the results of a change we are contemplating making; and 4) we regularly conclude that, while the world is changing all around us, and we see that change is coming right at us, and we recognize we will need to change in the future, we really don’t think we need to do anything right now. And for this reason, the easiest time frame for most people to adopt a change philosophy is around that window of time that is far enough away that you can openly agree to the need for change without having the requirement to do anything now to effectuate that change. This is why change management is so difficult. You have to get someone or group to:

• recognize that change is needed,
• conclude that for the change to be effective, it has to start with them,
• believe that the risk of change is less than the risk of remaining the same
• understand that now is the right time to for the transformation to begin

As I mentioned above, now let’s dive into why change is so critical within our profession and for us and our professionals. When you think about our profession, we have experienced growth and exceptional success over the past few decades. We have grown from a profession predominantly delivering a couple of services—auditing, financial statement preparation and tax—to one where CPAs are in almost every role that touches a business, from the head of marketing to the CEO, from tax to financial planning, from financial statement preparation to actual or virtual CFO, from advisory work to strategic planning, from business valuator to merger specialist, from educator to visionary, etc. The odds are, that for any important business role you can imagine, we likely have numerous CPAs in our profession leading those areas. What an amazing success story for our profession, which is not slowing down, but rather, speeding up.

Why is the pace of change continuing to speed up? It is due to a convergence of various factors that have been heading our way for a long time. Regardless of where you go, you will hear about the changes taking place in the fields of Artificial Intelligence (AI), Virtual Reality (VR), Augmented Reality (AR) and so much more. Technologies that we have been seeing deployed in science fiction movies for decades are starting to show up in the mainstream marketplace. Many of you probably recently read the article on AR for the Oil and Gas industry citing Baker Hughes as deploying the Smart Helmet™ to allow a less skilled technician to replace parts of a turbine at their petrochemical plant in Malaysia, saving around $50,000 in travel expenses. Because they were able to bring the plant back online in about half the normal down time, they avoided billions of likely lost profits by connecting experts around the world real time seeing and solving the problem.

This is just the tip of the iceberg. Imagine four or five years from now asking your two-year experienced staff person that is connected to a CPA-equivalent smart helmet to handle complex tax returns that historically would have taken someone with decades of experience to handle. Or better yet, six to eight years from now, rather than that smart AR device being connected to some specialist somewhere in the world, that AR device is integrated with AI allowing that same inexperienced staff person now to not only do this complex work, but to be trained while doing it.

Next, think about globalization. CPAs throughout the United States, whether they are in public practice or industry, are utilizing human capital from around the world to help them operate their organizations more efficiently, effectively and profitably. For example, today for a CPA firm, you can find staff in parts of the world ready to work, with as good or better skills their than their counterparts doing the work in the US, for roughly 20 cents on the dollar. And there are organizations starting to pop up everywhere that are making this connection to those resources easier and easier so that even small firms and businesses can leverage these resources. It was comforting in the past for firms to lose a project and say, “well, we proposed that project at such tight margins that the firm that won the bid will likely go out of business taking on work at those prices!” The problem is that you are probably still using that excuse right now, thinking your competition is pricing themselves out of business when they are actually making more money than you would have made had you gotten the job because they are integrating a global labor force into their operations to manage the workload, cost and turnaround (a global labor force has the added advantage of allowing firms to operate a 24 hour a day shop).

Another force that is dramatically impacting the stage our profession is occupying is technology. I know, this sounds like a repeat of the first factor I covered. But it is not. In the first factor, I was discussing how technology will interact with humans to make more talented humans. However, now I am referring to technology as a replacement of the human effort. Here you have blockchain, smart contracts, and so many other technologies that will simply do the work we are currently doing. Financial statements will be, as the trend has been, more and more prepared by automated transactions. Tax returns, certainly the easier ones, will likely be generated by the IRS at some point, although there are many software companies effectively doing the same thing by giving away their software to do those simple returns now. Our bread and butter complex tax returns for the sophisticated taxpayers might still be around in eight-years from now, but the odds are that much of that work will be done by technology, making what we can charge for that effort diminish over time. Audit work is certainly not exempt from all of this as more of the work verifying transactions will go away due to technologies like blockchain. As well, many complex transactions will he handled and reported through tools such as smart contracts.

Moving to yet another transformational factor that is impinging on our firms, taking a front and center position now which has been around for decades too is the idea of living up to the role of being the Most Trusted Business Advisor (MTBA™). Our professions Vision project, conducted around the turn of the Century (yes, that does sound like a long, long time ago, partially because it was), and then reaffirmed in 2011 with the 2025 Horizon Project, clearly suggested the requirement for firms to shift to performing more of the advisory function in their work. This additional service will not only complement the technical work firms are already doing, but by coupling this commodity work with advisory services, they will make their overall services less price sensitive and add significant value at the same time. Click on this link to watch a short video that describes why this change is so critical to make.

Click to watch a short video: Vision Project Summary

As was just covered in the video, the Knowledge and Decision space is where our profession, both in public and in industry, need to gravitate to as well, and we need to start doing it now!!! Why? Because we have the convergence of 1) technology that dramatically can improve the human’s capabilities, 2) the technology that is replacing the work the humans are now doing, and 3) access to humans at a fraction of the price when we do utilize them, leaving us with the need to move up the value chain and finally grab the brass ring we have been talking about forever. That brass ring consists of actually living up to our profession’s mantra of being our clients and employers Most Trusted Business Advisor. We have predicted our future! We have talked about our future! And we have procrastinated about the changes that need to be made to leverage the opportunities and avoid the hazards expected in our future! The great news is that while windows are closing all around us, doors are opening wide at the same time. Our profession has never had a brighter future. It is just a different one. Change management is the answer to help you position yourself and your firm for long-term success and sustainability.

We will pick up here in my next column as I talk about how firms will need to alter their thinking as to what best practices might look like near term to better position themselves for the future that is almost here NOW. As well, before this column series is complete, we will discuss simple change management strategies and approaches for you to put in place to propel the successful changes and transformations you and your organization desire to make.