Fueled by competition, technological changes, and the impact of COVID-19, the landscape for certified public accounting firms is more competitive and dynamic than ever. Organizational agility has become an important feature in empowering firms to turn these potential challenges into opportunities to thrive. This article provides guidance about how an accounting firm can use firm-centric teams to introduce agility into the organization. Based on one firm’s case study and academic theory, the authors highlight four distinct phases that firms can follow, from the initial phase of team formation until the final phase of self-governance.
Although CPA firms have always faced a dynamic business environment, the impact of emerging technologies and increased regulation are causing the rate of change to escalate. The ability of CPA firms to adapt to change will determine which firms struggle and which thrive. Robotic process automation, predictive analytics, machine learning, and blockchain are just a few of the emerging technologies that have the power to significantly disrupt the profession (D. Lehmann, “Building a Next-Generation Internal Audit Organizational Structure,” The CPA Journal, October/November 2020, pp. 86–87; G. Dickey, S. Blanke, L.P. Seaton, “Machine Learning in Auditing: Current Applications and a Look to the Future,” The CPA Journal, June 2019, pp. 16–21; D. Appelbaum, S. Smith, “Blockchain Basics and Hands-on Guidance: Taking the Next Step toward Implementation and Adoption,” The CPA Journal, June 2018, pp. 28–37). As these emerging technologies alter the competitive landscape, CPA firms will need to adjust to focus on the highest-value activities that will enable them to prosper (D. Lehmann, M. Thor, “The Next Generation of Internal Audit,” The CPA Journal, January 2020, pp. 60–61).
Another environmental disruption that has had a profound impact on how firms conduct their service activities has been the COVID-19 pandemic. CPA firms of every size have had to readjust, realign, or regroup throughout the pandemic, both from providing their own service activities and from the impact on their clients. One significant adjustment made by many firms and clients was the movement to a virtual work environment. The authors have spent time visiting with numerous professionals from accounting firms of all sizes and found some consistent themes. Many of these professionals noted that “the virtual work environment will be here to stay in some capacity.” Therefore, CPA firms must consider how to manage a more virtual business environment over a longer time frame than originally anticipated. Understanding the impact that a more virtual business environment will have on a firm’s services going forward constitutes another strategic imperative.
Many organizations view a transformation to an agile culture as a potential solution for dealing with a quickly changing business environment, because such an organization has the ability to be fast, nimble, and adaptive (W. Aghina, A. De Smet, K. Weerda, “Agility: It rhymes with stability,” McKinsey Quarterly, December 2015, https://mck.co/3U5vtR5). Agile organizations have strong cultures of proactive collaboration, continuous improvement, and innovation, allowing them to respond to and take advantage of environmental forces quickly and effectively. The benefits associated with agile organizations are widely documented; however, transforming into an agile organization can be challenging. It requires a shift in employees’ mindsets, behaviors, and skills, which can be problematic for a traditional organization whose employees have pre-existing attitudes and behaviors that may be incompatible with a more agile culture (R. Newmark, G. Dickey, W. E. Wilcox, “Agility in audit: Could scrum improve the audit process?” Current Issues in Auditing, 2018, https://bit.ly/3DyJbFa).
Internal auditors are beginning to recognize the benefits of the role of agility in the next generation of internal audit (Lehmann and Thor, 2020); it appears that organizational agility will become an even greater imperative for organizations with limited resources. There is limited guidance, however, on how to introduce organizational agility into a traditional organization such as a CPA firm. This article is designed to help CPA firms that are struggling to adapt, innovate, and grow in this increasingly uncertain business environment. The authors use a combination of experience and theory developed from the existing literature on agility, as well as evidence gathered from a CPA firm undergoing an organizational transformation to an agile culture, to provide a guide for how to incorporate and foster organizational agility. Agility cannot be cultivated by a transformation in attitude and mindset alone. Structures must be put into place to develop the behaviors and skills reflected in an agile culture, which is why agility experts have noted that it is better to be structured for agility than to attempt to be agile when necessary (C.G. Worley, T. Williams, E.E. Lawler III, The Agility Factor: Building Adaptable Organizations for Superior Performance, Jossey-Bass, 2014).
The purpose of the firm-centric teams was to give the firm’s employees a direct stake in executing the firm’s mission and vision while serving as a mechanism to introduce agility.
The authors provide a practical road-map for how an accounting firm can transform into a more agile organization by using a structural mechanism designed to introduce agility to the firm’s employees while also focusing on the firm’s strategic objectives. This mechanism is a set of firm-centric teams that was developed by a CPA firm undergoing an organizational transformation. This article identifies four distinct phases that can help guide an organization attempting to incorporate agility using firm-centric teams. By understanding the objectives and outcomes of each phase, a firm can improve the likelihood that it will make a successful transformation to a more agile culture.
To gain an understanding of the firm-centric team mechanism, the authors studied a smaller regional CPA firm. The firm provides a portfolio of services, including internal accounting, external audit and assurance, information technology, and tax. The firm has a wide range of clients and primarily competes with other local and regional firms for small to mid-size clients. The firm’s executives decided to use firm-centric teams to transform the culture to one that is more vigorous and proactive. Although the organization has a very traditional structure, the transformation to an agile culture is expected to enable the firm to become more competitive in this dynamic environment.
After one year, the teams were functioning and operational, but the transformation to a truly agile culture had not yet occurred. It was at this point that we were able to evaluate the performance of the different teams and identify how to better facilitate the transformation process. This evaluation has led to the identification of four distinct phases:
- Phase 1: Team Formation. Team organization, mission and objectives of each team, team directives
- Phase 2: Team Empowerment. Supportive and functional coaching, disciplined goal setting and monitoring process, members take ownership of tasks
- Phase 3: Shared Leadership. All members lead and hold each other accountable
- Phase 4: Self-Governance. Members independently identify team initiatives.
Exhibit 1 further details these phases and the tools and expected outcomes for each.
Tools and Expected Outcomes
Phase 1: Team Formation
- Firm-centric team formation→All members vested in vision and mission of the firm.
- Creation of each team’s Mission and Objectives→Team members link the team’s objectives with overall firm’s values and strategic initiatives.
- Vertical leader directly involved→Centralized leadership role ensures that teams are getting established and that the strategic initiatives are appropriately vetted and incorporated.
Phase 2: Team Empowerment
- Use of SMART goals→Increased clarity of what is expected from the team members’ activities.
- Vertical leader role shifts from directive to coaching→More responsibility and authority transferred to team members, resulting in more empowered team members.
- Use of goal tracking and feedback tools that are task-focused→Allows members to take ownership of team activities, further enhancing empowerment.
Phase 3: Shared Leadership
- Use of a scheduled meeting tool such as a weekly standup→Ensures that team activities are not neglected due to other firm commitments and allows the teams to share in leadership rather than relying on a vertical leader or coach.
- Use of a formalized feedback tool that is idea and process focused to complement the task focused tools in Phase 2, such as periodic retrospective→Ensures that all team members will be held accountable to each other, from the most senior to the least.
- Use of an idea generation tool such as a problem/solution session, where team mem bers discuss problems and potential solutions→Ensures that the firm can leverage the knowledge being accumulated by the team members and gives the team members a stake in developing the firm’s go-forward initiatives.
Phase 4: Self-Governance
- Focus turns to firm-wide innovations and “outside the box” solutions
- Move beyond best practices to challenging the status quo externally
- Peak of the agility transformation.
Phase 1: Team Formation
The firm-centric teams were formed as a mechanism to improve firm-wide agility as part of an overall organizational transformation. The structures and procedures implemented by an organization must provide opportunities for the bottoms-up decision making that can cultivate the employee-vested and collaborative environment that is crucial for an organizational transformation to succeed (P. Gibbons, The science of successful organizational change: How leaders set strategy, change behavior, and create an agile culture, Pearson Education, 2015). The purpose of the firm-centric teams was to give the firm’s employees a direct stake in executing the firm’s mission and vision while serving as a mechanism to introduce agility.
The first step of the team formation process was to describe the macro-level vision for the teams and their expected impact. Language matters when attempting to transform a culture. Therefore, a distinction was made between transformation and change. This made it clear that “transformation” represents a new direction that relies on leadership and doing something different, while “change” simply represents new behaviors that rely on management and simply modifying what has previously been done. This transformation was designed to create the opportunity for all employees to become vested in the future direction of the firm.
The firm’s executives and employees worked together to determine the firm’s core tenets of growth, talent, brand, culture, and clients. Teams were then developed to align with these tenets and a sixth team was added for leadership. The teams were formed organically, meaning each employee was afforded the opportunity to join a team with the tenet they were most passionate about. The teams consist of four to seven employees and each employee is on one team only. The teams include all levels of employees except first-year staff, who the firm believes needs more time to integrate into the firm culture. The teams spent the first eight months meeting to identify their overall mission and objectives (see the examples in Exhibit 2). Although the teams were designed to have the firm’s executives serve in an advisory capacity, a senior executive acted as the team’s vertical leader and performed a mostly centralized leadership role during the team formation stage. This senior executive was responsible for setting meeting dates and agendas, meeting operationalization, and directing processes and creating accountability for accomplishing objectives.
Firm-Centric Teams, Team Missions, and Sample Objectives
Mission: Grow the business
- Systemize, socialize, and educate team members on the firm’s business development strategy for organic and new growth.
- Develop a new client pipeline strategy to track prospect flow, traction, and timing to close.
Mission: Develop leaders
- Customize a growth strategy by individual
- Intentionally develop both technical expertise and relational skills
Mission: Provide exceptional client service
- Define and build out training for all team members
- Establish benchmarks for measurement and improvement
The overall team mission and objectives were intended to provide outcome-based evidence of team performance. Because agile organizations rely on leadership, rather than management, a successful implementation will not only accomplish the team’s mission and objectives but will also foster and cultivate the leadership behaviors reflected by truly agile cultures. The formability phase of the firm-centric team process is defined by a transformation of attitude in the firm’s employees to one of collective involvement in the firm’s mission. The teams provide a mechanism by which the employees play a role in determining the organization’s core values; therefore, there is alignment between the executive team and the employees, which facilitates increased levels of organizational commitment. This phase also has a primary internal focus, as the teams are defining both the organization’s values and each team’s mission and overall objectives. The organizational and team interaction style that was observed was one of brainstorming, whereby ideas were generated, and an organizational vision story was developed. The expected mindset at this point in the process is one of optimism (i.e., “We can do this!”).
Phase 2: Team Empowerment
The authors’ assessment of the Phase 1 activities provides insights into what was achieved, as well as what the next phase will bring. Upon completion of Phase 1, the teams were given a team-work effectiveness survey to assess their progress. The survey consisted of categories for goals and objectives, trust, leadership, utilization of resources, communication, processes and procedures, problem solving, creativity, and evaluation. All the teams scored highest in the categories of trust and communication. These scores, in addition to the written comments that were evaluated, suggest the following three benefits: 1) the team members were supportive of the firm’s initiatives and saw value in the team structure; 2) the team members were able to effectively communicate with each other; and 3) the team members trusted different members, including the senior executive who was responsible for facilitation. These benefits provide a necessary foundation for utilizing teams to introduce agility into an organization; however, the teams were still struggling to make sufficient progress, indicating a need to transition to the second phase: team member empowerment.
One group of lower scoring items in the teamwork effectiveness survey related to processes and procedures, and evaluation. A sample of comments made by team members included: “I don’t believe we have a great list of procedures and goals. We come up with a lot of ‘ideas,’” and “goals are understood at a high level; however, a plan to reach the goals is lacking.” This indicated that a more formalized goal setting and tracking process was needed. Katzenbach and Smith (“The discipline of teams,” Harvard Business Review, 1993, vol. 71, no. 2, pp. 111–120) highlight the importance of SMART (specific, measurable, achievable, relevant, and timely) goals to team success. SMART goals allow team members to identify what outcomes clearly and unambiguously are desired by the team to meet its overall objectives, allowing individual members to perform, assess, and re-evaluate their different activities and tactics.
Having unambiguous SMART goals gives the individual members the confidence needed to conduct required activities, knowing they are acting in accordance with the team’s overall goals and objectives.
Having unambiguous SMART goals gives the individual members the confidence needed to conduct required activities, knowing they are acting in accordance with the team’s overall goals and objectives. For example, the clients team had an objective to “Gain more referrals.” Although this is a desirable outcome, it lacks the clarity necessary for individual team members to know how to proceed. This can lead to frustration and inaction because the team and its members are not sure how to measure the progress of the goal and whether that level of progress is satisfactory. A SMART goal would consider the strategic objectives of the firm. For example, the specific attributes of a goal would target a particular industry, line of business, or customer; or the objective could be written to acquire new business from existing customers. A measurable attribute would be one that is quantifiable, such as a 10% increase of revenues or a $$ increase in margins. To be achievable, the team and its members must participate in the goal-setting process to determine: 1) what outcomes can be accomplished in the current environment, 2) the people dedicated to accomplishing those outcomes, and 3) the resources the team and its members need. Relevance determines how the goal relates to the overall firm strategy; for example, although revenues are an important part of achieving market share, margins are also key to near-term profitability. Timeliness relates to the time frame in which the objective can be achieved. For example, a 10% increase in new revenues over the next calendar year would likely be an appropriate timeline. By having these attributes, team members can more clearly determine the tactics needed to achieve these objectives, as well as assessing performance along the way and making any adjustments necessary to increase the probability of success.
A second group of categories that had lower scores included utilization of resources and leadership. Although team members had some uncertainty about their goals and objectives, another challenge was their roles and responsibilities in meeting these goals and objectives. While some of this could be attributed to a lack of clarity about the goals and objectives and not knowing how to achieve them, the lower scores in this second group indicated that another important transition was needed: team members taking on the responsibilities initially done by the senior executive. For this to be successful, senior executives playing the centralized leadership roles need to transition their roles, and the team members need a process to help them take over the responsibilities performed by the senior executive.
In Phase 1, the senior executive was actively involved in all the different teams’ activities. This individual was also involved in the creation and formation of the teams; guided the teams in setting their goals and objectives to ensure alignment with the strategic direction of the firm; and was responsible for organizing meetings, establishing agendas, and delegating tasks and responsibilities to different team members. Although this centralized leadership role is necessary in Phase 1 to help get the teams established, it is important to transition to an empowering leadership approach allowing for the successful delegation of authority to lower levels (C.L. Pearce, J.A. Conger, “All those years ago,” Shared Leadership: Reframing the Hows and Whys of Leadership, Sage, 2003, pp. 1–18). This delegation of authority and responsibility provides the autonomy necessary to foster confidence in the individual team members, allowing them to eventually take on leadership roles. The senior executive will gradually transition from “directing” behaviors to becoming more of a supportive and functional coach. The supportive aspect focuses on promoting leadership behaviors in the team members, primarily through the recognition and reward of such behaviors. The functional aspect targets interventions when necessary to ensure that the tasks and responsibilities are identified and completed, as well as the removal of any obstacles preventing team members from achieving their goals (J.B. Carson, P.E. Tesluk, and J.A. Marrone, “Shared Leadership in Teams: An Investigation of Antecedent Conditions and Performance,” Academy of Management Journal, 2007, vol. 50, no. 5, pp. 1217–1234). These activities by the coach will diminish over time as the team members grow in confidence and ability.
Although the senior executive’s transition from a vertical leader role to a supportive and functional coach is important in allowing team members to take ownership of the team’s functioning, it is also important to provide individual team members with the necessary structure to allow them to successfully conduct those activities. One important item is a tracking and feedback tool to monitor the team’s progress on its goals and objectives. A formalized SMART goal setting and tracking process will impact the effectiveness of the team, empowering the individual firm-centric team members. This tracking system should include the following:
- The SMART goal being monitored
- Key person responsible for goal achievement
- Resources needed to accomplish the goal, including other team members
- Indicators of success, including any milestones
- Time frame for measuring progress
- Corrective actions needed
Phase 2 of the firm-centric team process is defined by a transformation of structure in the firm-centric team processes. Without the necessary structure in place, the ideas developed in Phase 1 remain unrealized. Although the teams still have a primarily internal focus, the interaction within the teams evolve past brainstorming interactions to execution interactions; therefore, the team interaction style becomes one of discipline. The team members learn how to identify problems and develop solutions based on their current capabilities. Customer-oriented solutions at this point in the transformation process become more capability-centric (e.g., “What can we do for the customer?”). The mindset at this point in the process that firms should expect to see is one of practicality (i.e., “We can accomplish what we are capable of.”).
Phase 3: Shared Leadership
Pearce and Conger (2003) are widely credited with developing the shared leadership concept. They define shared leadership as “a spirited and interactive influence process among individuals for which the objective is to lead one another to the achievement of group and organizational goals.” Shared leadership is a process that occurs when group members intentionally shift the role of leader to one another as needed by the operating environment or circumstances.
Pearce and Conger (2003) also promote the idea that leadership is a process that can be taught, shared, distributed, and collectively enacted. Therefore, the shared leadership concept aligns well with organizational agility because agile organizations rely on leadership rather than management. Proponents of a shared leadership environment believe that the more that skilled individual employees understand the organization’s needs, the more likely they are to lead themselves.
The purpose of firm-centric teams is for the team members to exhibit shared leadership behaviors in executing the team’s responsibilities. These shared leadership behaviors will emerge when team members can effectively rely on each other to handle the team leadership responsibilities. Extending past an empowered environment, a shared leadership team environment allows individual team members to work independently to identify and perform their tasks and responsibilities. A shared leadership environment is one marked by high levels of open communication, wherein team members actively discuss and debate ideas and develop a strong understanding of the knowledge, skills, and strengths of each of their team members, thus allowing leadership behaviors to emerge within context.
With the attitudes and structure in place, interaction within teams continues to increase, but the focus moves from primarily internal to more external.
Firms implementing the use of firm-centric teams should expect to see each team member’s knowledge, skills, and strengths develop over time, to the point where each team member can generate ideas, guide in execution, and bring about results. For example, all Growth Team members will be capable of initiating proposals about firm growth opportunities, guiding the other team members to an actionable set of SMART goals, and ensuring that members follow through on their respective tasks and responsibilities. This can be accomplished by organizing meetings, following up on time-lines, and facilitating communication among team members.
There are three tools that can be utilized in Phase 3 to help ensure the continued transformation of the firm-centric teams and their members. The first tool is predetermined meetings with set times and objectives, such as a weekly standup. A weekly standup is an approximately 15-minute session where team members meet to discuss their progress towards goal accomplishment. Team members stay standing during these meetings to ensure that the meeting is short and on point. Too often, members can be sidetracked by their normal work activities, thus ignoring their firm-centric team responsibilities. It is imperative that firm-centric team members be allocated enough time for their firm-centric team responsibilities to ensure that members understand the importance of their activities as they relate to the success of the organization. A weekly standup helps keep the firm-centric teams on track and allows teams to share in the leadership responsibilities rather than waiting for a designated or centralized leader to organize all meetings.
A second tool, called a periodic retrospective, should be used to establish accountability among the team members. Initially, team members look to the firm executive for accountability, but by Phase 3, each team member is accountable to the other members of the team. Although predetermined meetings provide some level of accountability, a more formalized tool should be put in place to ensure even the most senior team members are being held accountable. This fosters an increased level of shared leadership, as all members understand that everyone is vitally important to the team’s and organization’s success. The periodic retrospective is a meeting where results are evaluated, shortfalls are examined, areas for improvement are identified, and the question “What should we do next?” is asked.
The third tool is a problem/solution session, whereby periodic meetings are held to generate ideas by identifying problems and potential solutions. This gives the team members the ability to identify opportunities for improvement, both internally and externally. By having sessions specifically designed to identify and solve business problems, an organization can take advantage of the knowledge being generated in the field. This also creates a shared leadership environment, as team members are vested participants in developing initiatives that will be executed going forward. These problem/solution sessions are less frequent than the weekly standups and period retrospectives.
Phase 3 of the transformation process will be defined by a significantly increased adaptability to the external environment. With the attitudes and structure in place, interaction within teams continues to increase, but the focus moves from primarily internal to more external. The team members become heavily involved with the outside environment and begin to understand “best practices” and identify benchmarks based on other organizations that are thriving in the current environment. By this stage of development, the mindsets, skills, and behaviors of the firm’s employees have been transformed, and they will be able to independently identify their clients’ desires. Employees will not only have a particularly good understanding of the firm’s capabilities to meet these client demands, but also a better understanding of how to transform the firm’s capabilities based on industry best practices. The interaction style of the teams and organization will be one of harmony, as the newly developed shared leadership capabilities and external focus will create greater synergies in communication. The mindset of the team members at this point in the process should be one of achievement (i.e., “We can accomplish what the best are doing.”).
Phase 4: Self-Governance and Peak Agility
The fourth implementation phase is one marked by teams’ independent self-governance. At this point in the implementation process, the teams will have an in-depth understanding of how to implement, execute, and evaluate the goals and objectives that align with the organization’s mission. The cumulative team knowledge obtained through the first three phases and the immersion into the firm’s mission gives members the ability to become fully vested in setting the future vision of the firm. Phase 4 represents the peak of the agility transformation.
During the fourth phase, executives should start to see a greater focus on firmwide innovations and “outside-the-box” solutions. Rather than asking “What do our customers want?” the firm’s employees begin to ask the question “What are our customers missing?” During this phase, employees will move from a best practice or benchmarking approach to a more innovative one. Having already transformed the status quo internally, the focus of employees will begin to challenge the status quo externally, which entails moving beyond benchmarks and best practices. The team interaction style will become incredibly dynamic. As these challenges to the status quo are implemented and executed, the firm may become an industry leader. The mindset at this point in the process will be one of emergence (i.e., “We can do what hasn’t been done before.”).
The Agility Imperative
The organizational agility imperative provides firms with an understanding of how to adapt and innovate in this ever-changing environment. Firms with organizational agility will not only be able to foster a knowledge-sharing and idea-generating culture but also will have a structure in place to leverage this knowledge and implement good ideas. Many organizations attempt to implement agility by using discussion to change the mindsets of their employees. But without the necessary structure in place, the necessary skills and behaviors will fail to fully develop. Ideas might be generated, but will ultimately fail to be realized.
The cumulative team knowledge obtained through the first three phases and the immersion into the firm’s mission gives members the ability to become fully vested in setting the future vision of the firm. Phase 4 represents the peak of the agility transformation.
There is an abundance of literature available that defines organizational agility and its benefits, yet there is little guidance on how to introduce agility into an organization. The research provides a description of a structural mechanism CPA firms can utilize in transforming to an agile culture: a set of firm-centric teams. This mechanism is different than project-oriented mechanisms such as Scrum (Newmark, Dickey, and Wilcox, 2018). Firm-centric teams involve the implementation of strategic initiatives rather than the management of individual projects. Firms will identify the most important environmental changes, and the strategic initiatives associated with capitalizing on these changes, when creating and developing their firm-centric teams.
This article provides an overview of how the firm-centric teams function and the results the authors discovered through the first phase of the implementation process. We also provide proposed solutions to help firms effectively transition through the second and third phases. Finally, we provide a vision of what a fully implemented set of firm-centric teams will look like and the impact that full implementation will have on a firm’s overall culture. The result is a practical roadmap for CPA firms looking to use firm-centric teams as a mechanism to cultivate or enhance their organizational agility.