Knowledge at Work - Episode 6

In this episode we are going to discuss an excerpt from a podcast.  My hope is at some point the concept discussed will be built out into a larger piece exploring the intersection of data analytics and teambuilding.  But until then you are stuck with my analysis.  Building on this conversation we will talk about how a professional service firm might apply these concepts to both make talent decisions and run their organization.

The segment features Josh Hermsmeyer from five thirty-eight and host Cade Massey.  You can find the podcast dated January 18, 2023 and the conversation begins around minute 47.  Click learn more to go to the Podcast page.

The conversation builds on three different ideas that when combined allow organizations to do things others can't.  What moved them to this topic was a discussion of different quarterbacks and how their teams were built around them. 

Brock Purdy was the first example where a team leveraged the talents of the final person selected in the NFL draft to build a Super Bowl team.  Next was Jalen Hurts from Philadelphia who is heralded as the best example of leveraging data to build culture that also results in a Super Bowl team.  Finaly, they discuss the other end of the spectrum with Deshawn Watson from the Cleveland Browns who has caused controversy on and off the field and resulted in a team that has still never played in a Super Bowl. 

While the conversation starts focused on quarterbacks it moves quickly to the broader organization. Something we can apply to professional service firms, it might be easy to build a firm off the back of one person's unique talents but greater sucess typically comes from a team that works well together.  

The concept that Josh explains starts with stacking edges.  This part is driven by data analytics finding small things that can make small impacts.  Pile these small impacts on top of each other and you end up with a bigger advantage.  

One of the things the Eagles are known for is using data analytics to drive game decisions.  For example, data analysis shows that adjusting the amount of risk a team will take can pay a large benefit.  

They have implemented this in two ways.  First, they go for it on fourth down more often than others.  Second when they go for it, they have plays that are designed to consistently produce results.  Simply doing one of these things is not nearly as impactful as doing both.  

So what do edges look like for accounting?

At a very high level we can think about accounting edges in three areas: people, process, and technology.

The edges come from the intersections of each of these.

We talked in the last episode about providing freedom to talent to do things the way that works best for them.  Management needs tools to allow them to measure performance to identify who is doing better.  Once better performance is identified there needs to be a process to share how to perform better across the organization.

Leveraging technology is a key driver to future success.  The organization can create an edge by identifying who is best at leveraging technology and creating processes for them to learn and implement the software into your systems.  

A critical part of all of this is building the dataset to track and measure these things.  This could be built into your software or other systems.  It is critical that you manage this data so it can be used to make better decisions.  In earlier episodes we talked about experimentation.  When experiments are planned the data used to gauge success should be documented at the start.  

Once the team has stacked enough edges the result is more wins.  These are not huge things on their own, but they allow the efforts of your talent to be fully recognized.  

When you can get these small things right, they allow more focus on the bigger issues.  Added focus to the big things results in better performance.  A critical part of this is recognizing that the small edges contribute to the results.  If you celebrate the win and don’t continue to find edges the organization can quickly revert.

What does winning at an accounting firm look like? 

In the past winning was primarily growing the book of business and adding clients.  When there was more capacity than available work the focus was on  acquiring work to fully utilize your talent.  As this has shifted and we see more work available than we have the capacity to complete winning can take different forms. 

If we take the example of finding the most efficient methods and apply that across the organization we create an impact on capacity.  That can be used to take on more work or it can be used to create a better working environment for your talent.  This is where the traditional focus on billing by the hour fails modern accounting firms. 

If you have a manufacturing client and they find a way to streamline their process to reduce the time and cost to produce something, do you advise them to reduce the price of the product? Assuming your answer is no then why would you do the opposite for your organization?

These two options are also not mutually exclusive.  You can take the win and apply it to both growth and culture.  

In football there is a tradition to give the game ball to the person or people who perform above and beyond to recognize their contribution.  Part of this ritual is the coach telling the group what it was they saw that earned the reward. 

Another aspect of transparency in professional sports is fairly public contracts.  This forces both the team and the players to see how much value is placed on each player. 

The critical thing for building a strong culture is to have these financial reward tied to performance.  When there is a disconnect between these you create issues where your talent no longer trust the organization.  Often in professional sports these issues are very public.  In your firm these issues historically were water cooler talk and are now becoming public on sites like glass door. 

For organizations this will be the part of the process where your culture will drive if and how this can be implemented.  There is safety in having this information kept secret.  There is also history of not sharing this information.

It is critical that if you take the next step and become more transparent that you actually do have a link between these two things.  If you are currently paying people who are not performing and make that information available, you will need to explain that. 

This is also an area where human resources needs to be involved, and the laws need to be followed. 

If you decide to be more transparent on pay and performance, you should start at the organizational level.  In sports the team’s record is known to everybody, and the metric is simple to both calculate and report.  For your organization that is likely a bit more difficult.  Depending on how you measure success you may need to explain to your management and talent what success is and how it is measured.  Once you do this it is important to be able to link organizational success to the talent and management that impact the results. 

Being transparent about one of these without the other leads to your talent questioning if their efforts are being appropriately rewarded. 

So once your organization has stacked edges, started winning more, and become transparent about processes what is the result? 

Once we are transparent about what drives success, we can be intentional about who we reward.  

The final part of Josh’s idea is one that initially sounds wrong and bad.  But recognizing that we all play favorites is important.  More important for your culture is playing favorites with the people who deserve it. 

To recap we started by stacking small edges to gain an advantage.  That advantage resulted in improved performance.  We are open with the group about who deserves credit for the advantage.  The final step is recognizing that credit through prioritizing those who create our success. 

Playing favorites has a connotation of something that is not performance related.  The key aspect that Josh is expressing is the organizational benefits of liking performance with contribution. 

Circling back to the start we talked about three quarterbacks.  In football the quarterback plays a critical role in success.  They also tend to be the highest paid players on their teams.  If this was based on opinion then it could produce conflict, but since there is data to support it the conflict is reduced.  The issue becomes when that players performance does not align with their rewards.  As we see in Cleveland having a player with a massive salary who does not produce wins creates cultural issues for the team.  The same would be true for Philadelphia and San Francisco if they did not reward their quarterbacks for their impact on those teams. 

In a professional service firm, I would recommend playing favorites and rewarding in general be focused in three areas. 

First is pay, if the firm is more profitable due to the work of specific talent financial rewards are the easiest way to recognize that effort. 

Flexibility and promotion are additional tools to use based on the circumstances. 

For many people added flexibility is a greatly appreciated benefit.  We talked in an earlier episode about Erinn’s schedule at the Society.  In recognition of Erinn doing a great job we were open to her working different hours and from different locations.  Recently Connie adopted a kitten, in recognition of her good work we were open to her working from home to keep an eye on the kitten.  When people perform well being open to and encouraging flexibility is a great tool, especially when the finances do not allow monetary rewards. 

Promotions in professional service firms can be a trickier issue.  Traditionally the technically skilled staff would be promoted and given management roles.  For many people this is great and they can perform well in both technical and managerial roles.  For others the weight of management detracts from the ability to deliver on technical work.  This is an area where leveraging data to determine who is a good manager can help improve the organization. 

If you have talent that can produce great results but does not excel in management apply some flexibility to create a roll or position where they can deliver the best results.  This is another area where transparency across the organization is helpful.  Letting people know there is flexibility in career path is a powerful tool to inspire loyalty. 

Each part of this concept plays a role in the overall success.  The real potential comes from all the parts working together. 

Of all the topics we have covered this is likely the most challenging to implement.  This is not a scheduling or technical change this is a much larger mindset change.  Like any change of this magnitude there are risks and rewards to consider and changing culture takes different skills than changing process. 

As we move into how talent, management, and organization can implement this there is a stronger focus on organization.  While talent and management need to be involved in the process this is something that needs a strong commitment from the organization. 

While this sounds a bit scary at this point I would add that the potential is massive.  Looking back to the beginning the difference in football was between going to the Super Bowl and barely making the playoffs. 

One last thing before I move to how to apply this.  If you are a sports fan, or you watched to see Taylor Swift, you will likely be thinking wait a minute Philadelphia and San Francisco both lost in the Super Bowl shouldn’t we look to what Kansas City is doing?

Patrick Mahomes is a generational talent and Kansas City has built an organizational round him to take advantage of his skills.  Your firm may operate like this with a supreme talent that elevates you above the competition.   But we can also see Kansas City also leveraging these same concepts. 

The takeaway I would highlight is that talent plays a role in this.  BUT it is how organizations and managers develop and deploy that talent that makes the biggest difference.