CPAs love collecting data on employees, clients, and themselves. Most firms track dozens of key performance indicators (KPI) to manage their practices—most of them focused on billable versus nonbillable hours. They track every employee’s data to monitor what they are doing on an almost minute-by-minute basis. But is this data helping partners and managers make better decisions?

In this author’s opinion, the profession has completely lost sight of how to use data correctly. Data is used as a black-and-white measuring stick—did Phil meet his arbitrary goal of 1,500 chargeable hours and 55% realization—to determine whether a team member is performing well. A project’s success is measured by the numbers of hours it took to complete and whether it hit a poorly designed budget target (probably copied from last year’s poorly designed budget). Team members know this is how they are graded, so they manipulate the data (their timesheets) to hit their numbers. Data is controlling the firm, and data is not meant to be used that way.

Data should be used as a question, not an answer. Why are some team members more profitable than others? Why is the audit department more profitable than the tax department? Why are some accountants billing more hours than others, even though they all work the same amount of time in the office? Data should be the starting point to understanding the functionality of the firm, not an end-of-game box score. Consultant Rob Nixon put it best: “Excessive focus on … metrics promotes the wrong behavior. Team members ‘hog’ work, ‘pad out’ timesheets and are generally inefficient” (“Secrets of High-Performing Firms Revealed,” Firm of the Future, Firms are destroying their firm cultures and holding themselves back by using data incorrectly.

What’s funny is that, intrinsically, most partners know this. When asked how they evaluate their staff, partners at large firms almost exclusively say that the partners get in a room and talk about who the best staff are. Very rarely are timesheets looked at; they know who the high-performing staff members are because they have worked with them and know whom they trust. Similarly, partners know who the good clients are; they are the ones who are pleasant to work with, timely with responses to inquiries, and respectful to team members. So why spend all this time and money tracking all this data? Yet firms keep doing the same thing.

What can firms do to change? Instead of measuring and grading on time, the profession should shift to tracking firm-holistic numbers. This requires determining what is truly important to the firm. For example, at BNA, the most important objective is customer service; therefore, the firm focuses all of its data initiatives on measuring just that—the amount of time tax returns take to be processed, how fast the team responds to emails, and the amount of client contact (whether through phone calls, e-mails, or meetings). Another focus is on team numbers, not individual numbers; this emphasizes that the firm succeeds and fails as a team. Individual numbers are only used to look for outliers; for example, if the average billing per employee is $150,000, and someone is only billing $50,000, the firm needs to know why. Usually it is not the employee’s fault; either he is not on the right clients or helping out on larger clients and therefore not directly assigned the income. In addition, bonuses are based on team objectives and goals.

Getting rid of the traditional data points that CPAs use in favor of data that reflects the firm’s main goals can help one manage a firm smarter and better, which will led to an increase in the most important metric of all: the bottom line.

Jason L. Ackerman, CPA/CGMA, CFP is an accountant with Bernard N. Ackerman (BNA) CPAs, PA, in Rock Hill, S.C.