Episode 11:

Steve, welcome to The Upstream Leader.

Thanks, Jeremy, glad to be here.

I’m excited to be talking to you today. I know that you all are doing a lot in the way of using analytics and technology to transform your practice management there at the firm. But before we get into that, I would like to learn, how did you become the leader you are today?

Well, I’ve been in this role for over 15 years. I got in relatively early as Managing Partner, and I think one of the things that was inherent in me is that I was curious. I always wanted to know how things worked, and why they worked, and I think that that led me to helping implement changes in the firm that improved how we did things, and when and where and why, and expanded what we did for our clients. I think that it started with curiosity.

But the other things that I think I learned on the way that now in hindsight I’d say I thought I was good at, but I really wasn’t, were things around teamwork. Part of the mindset sometimes is that, “I can do it on my own, I can work harder than everybody else, I can just carry it across the finish line.” And probably the greatest lesson I’ve learned is that I don’t know at all, and I never will, and I never did. Building a team, I think, has helped us as a firm grow way beyond where it ever would have without that approach.

And then also the value of relationships—again, like you find many companies, many firms live in a silo often. And to be able to grow outside of that, it takes a value of relationships. And that’s an investment as a leader that I think is probably one of the most critical, is that the people around you, you need to know them, and you need to know how to support them, and you need to know what makes a difference for them.

So those two things, I would say, as a beginning leader, I probably didn’t have the value on that I do now. Now I believe they’re probably the most important attributes that you can focus on.

So did you surround yourself with others that helped you learn those skills? Where did you pick those up?

Probably more mistakes—screwing something up, and then figuring out afterwards, that it could have been done differently. And also, really kind of recognizing that everybody wants to help. So asking for input, asking for thoughts and ideas from other people, just makes it way better. There are times where I could have thought, “It’s more satisfying for me to take an idea and implement it,” because I had a clear vision of what I thought wanted to be done, but I would often miss steps along the way, and bringing others along on the front end would have made that process so much easier.

I think an easy example is like, when we went paperless in 2002, I had an absolute crystal idea, “this was something we needed to do.” I said, “We’re gonna do it.” I didn’t involve really anybody else at the time, we were about 35, 40 people in the firm. I scheduled the training, I said, “Here’s what we’re going to do.” And I watched two or three people with their arms crossed going, “I’m not interested in this.” And I saw very clearly now—or at that time—you got to bring people along, because they want to be involved. They have ideas that are going to really make it better. And again, I don’t have all the answers. So that was a good realization and a good lesson. So you always learn more from your mistakes than any successes you have.

Yeah, that’s two really good, really good lessons for leaders of all stages in their careers. You ask the questions and bring people along with you, and be willing to fail. And in my view, it’s not really failure, as long as you learn something from it.

Yep.

It’s a stepping stone to success. Now, if you don’t learn something from it, yeah, that’s probably a good thing to categorize as a failure. But it seems to me if you’re learning something, and you can grow from it, that’s actually a good thing.

I think a good reflection on our group too, and part of it’s relationships, part of it is that we have trust in the organization—is that we were willing to fail, we’re willing to do things. We’re an organization that will change things. I like change. I like things different. And there’s different degrees of how people accept that. But I think that in our organization, patience with new ideas and experimenting on things—that’s probably been in our DNA for the past 20, 30 years.

Sure, and if you were going paperless in 2002, I know I talked to some firms that the pandemic helped force them to go paperless. So we’re, you know, we’re 19 years on from that, 18 years, I guess, on from that—some firms are still making that transition. If you went paperless in 2002, it definitely speaks to the fact that you’re willing to experiment to push the envelope to try new things, which really doesn’t surprise me to hear, knowing what you all are doing around analytics.

So you were the driver behind going paperless—new technological adoption back nearly 20 years ago, which is hard to think about really, at this point, that it’s been that long. What was the impetus behind using analytics to start transforming how you did practice management? Was that an idea you had? Did another leader bring that to you? How did you go about that decision?

Well, that’s interesting, too, because I think it has the same DNA that we operate using EOS or Entrepreneur Operating System to run our firm. It’s super popular around this area, and I think it’s gaining popularity throughout the country. One element of that is a focus on a scorecard. And it’s so basic and straightforward to pick the five things that really move the needle in your firm. But that’s easy in concept, and it probably helps make the book easier to understand, but when you actually start putting things together and doing it, you’d look at the investment and time that people have to accumulate things, and put information together. You know, it could be something simple, like billable hours—okay, that’s straightforward and easy. But okay, are you going to look at that by your segments, your service lines? How are you going to do it? And now I need somebody to run that information and accumulate it, and you know, we’ve had conversations with other firms, and in some firms, there can be two or three people that really are just accumulating data that is yesterday’s news, and comes from time and billing system.

I just believe there’s a way better way to do it, but it was more the big picture. We thought that data would be really important in our audit practice and our tax practice, and, again, applying it to the firm was an easy case study. You know, we got a lot of information, and most of the information we put together just comes from our practice management system: hours, rates, clients, profit, productivity, all those things. We just asked ourselves a series of questions when it came to the practice: “How do we want to know whether we’re successful or not?” And it was probably that basic. We had 15 or 20 questions that we wanted answered. That was the easy part. I can get into the more difficult part.

But data’s been out there, or the talk of data analytics has been out there for five to ten years, and I felt like we were falling behind, you know, because so much conversation was out there about it. And I think what I found is that we weren’t necessarily behind. There’s a lot of organizations effectively using data, but I think there’s different results that I’ve seen from talking to other people. I think most people you talk to—if they’re forward thinking—understand data can help improve their understanding of the information that’s there. But it’s hard to get an initiative going that produces results that can give you meaning in the information.

Yeah, and we’ve worked with a lot of firms. You’re definitely not behind in our profession. Now is our profession, perhaps, behind other industries in the application in the use of data? It’s probably fair to say that we are, but I don’t know that that surprises anyone necessarily. We’re not exactly a profession that is known for living on the bleeding edge of technological innovation.

I think there are firms, yourself included, there at Abdo, Eick and Meyers, that is much more progressive, and I would call leading edge—not the bleeding edge, but the leading edge—in looking at technology, and that’s where we’re starting to see that adoption. So you’re definitely ahead in that regard. And I want to go back real quick. You mentioned EOS, that is from the book Traction by Gino Wickman, is that correct?

Yeah. Attraction is a book about EOS that Gino wrote, and it revolves around pretty simple concepts. But it’s helped us build our organization chart—how we run the firm and how we vet initiatives and do those kinds of things. So at least in Minneapolis, there are, I can think of five or six firms, at least, that are decent size that are using EOS as a model to run. It takes a commitment. It’s the kind of leadership and management commitment that once you get to a certain size, I think you have to have, and it gives you a good structure to follow.

Yeah, I’ve heard a number of firms that are using that. I’d say maybe one—it depends on the group that I’m talking with—one in five, one in ten, somewhere in that vicinity. It seems to be getting pretty widespread adoption across. And you talked there that it sounds like it really helps you with processes in place and running the firm. So let’s talk a little bit about that, in the context of what you’re doing with analytics around practice management.

In my view, it’s not just our profession, but in industries even beyond our profession, in working with companies over the years, when I was in public accounting, doing analytics, before I was with Upstream, and I had my own company doing analytics, and helping people see that—the big challenge that I’ve always seen is that organizations want to look at results, and metrics, and KPIs, and they use the data to calculate those. That doesn’t drive any change, that doesn’t drive behavior. But what you just talked about, about process—when you get data that helps you understand the process, that’s always appeared to have more success in driving change in organizations. I don’t think accounting firms are any different in that regard. So are you all using data in combination with the processes driven by EOS? Or how exactly are you using that?

I think in a couple, it shows in a couple of ways. I think it’s become, okay, our source of truth, which is from my position, when I’m talking to leaders in our firm about how things are going in their area—in the past, we would often run into three or four different versions of what’s happening, I may create a version that—based on the numbers I’m looking at, and the whatever run I’m doing—can be completely different than the person that’s in charge. And what I’ve witnessed is that when we’re in meetings talking about, for example, how our manufacturing industry group is doing, where we’re off track, maybe we have done poorly on four or five different clients, because I can sort that information on the fly, and I can see it: “we can see who, now, these five clients are triggering 90% of our bad results, let’s go through them.” In the one hour meeting I was in, in a 15-minute conversation, we had actionable items about how we were going to improve those five clients. We narrowed down into common attributes of those five, which could have been our planning approach, or something in the end, something like that. But it gave us actionable information.

Another area was around people and capacity. Because we can visually see capacity in the whole firm, we can, in one click, break it down by department. And we could see, one of our departments had target hours that were substantially more than what their actual were, and that was way less than relative to the firm. So we ended up in conversation with the leader of that group, and the next day, they were talking to their person finding out that they weren’t coding time to a client. They were doing billable work and not posting it. So it led to like, really good conversation about our value, and how do we measure value, and how do we talk about value, from a billable hour perspective.

You know, time and billing is important, and in our firm, I think it always will be. I’m definitely more oriented towards value, but this information got us into a conversation that I think was very helpful in getting a solution in place to help get this employee back on track, and we could see it throughout the department. So you know, I think like, if we made a one percentage point change in our utilization because of these conversations, that turns into quarter million dollars in our firm. So just having that access to that information, and the types of conversations we’re able to have, I think we can move the needle that way, where in the past, we’d be chasing this down.

It would be a conversation because I ran a report on March 30, it said this, and then I forget about it and don’t go back to it. Or I run it now in July, it tells me something different at that time. So being able to stay on top of it like to the day to the minute without somebody having to run that report for me, or me go run that report, or combine something—because that was another thing. Like I’ve talked to 10, 15 firms. I think everybody hates their reporting. I haven’t heard very many firms go, “It gives me everything I want. I don’t want any more.”

Yeah.

I feel like what we have now answers all of those questions that we had in the past. And I can only think of a handful of times since we’ve had this in place over six, nine months, however long it’s been, that I’ve gone and ran a report in our practice management system.

Yeah. And with that—you’ve said a few things that I think are really important. First, you’ve got this single source of truth. It’s no longer “my data, your data, some other partners data, the office administrator’s data, the COOs data, the whoever’s data”—there is one single source of truth and any data-fluid culture has a single source of truth that everybody agrees upon, and that’s then what we use.

But it’s not just the data. I know we’re talking about data, we’re talking about analytics, we keep talking about access to the data. It’s the actionable insights that are meaningful. The data by itself doesn’t do anything.

Right.

It’s the actionable insights, we’re able to use that. So as you think about those actionable insights, I’ve got to believe you’ve had some leaders that have come back and said, “My gut tells me that’s not right. I realize the data says it, but my gut just says, ‘that’s not the case.’” How do you reconcile or balance, you know, somebody with maybe 30 years of experience that’s been going off their gut for that entire time to now being confronted with this data that says, “No, you’re wrong?”

Yeah. Well, it’s questions. So when that comes up, and it’s this or that, it’s like, “Why do you think that? What situation has come up that may tell us that’s not right?” And if it gets into a posting issue, or a project issue, or something like that, that leads into, “Well, let’s fix it.” Because I’m a strong believer in the systems that we have. We use projects for everything we do. In our time and billing system, we have a process where if you’re going to do a new project, and it’s going to be more than, say, $500, it’s expected that a project gets set up to track the work on it. So anything that’s sort of misleading or wrong, usually is some violation of our process.

Hmm.

And we can, you know, just through questions, because I think you’re right, that there certainly is a “my experience matters,”   and it always does, you know. Experience is a great teacher. But I think, again, like we kind of come at the data with no judgment, either. In terms of like a bad outcome, we come from, “Hey, this is information to make us better.” And if we live that way, we don’t beat people up with the data, I think that’s probably a key process.

You know, we can’t use this to say, you know, “this employee is good, bad or otherwise,” just because of the data. There’s so many more factors, you know. We probably deploy more subjective factors in our evaluation of our managers and partners, through our evaluation process. Subjective data probably weighs a heck of a lot more than objective data.

Yeah, that makes sense.

So in 2002, you said that when you went paperless, you had some leaders, some individuals in the firm, that came with arms crossed and said, “No, we’re not getting on the paperless bus. Sorry, that’s not happening, we’re not we’re not jumping onto this.” I would imagine you had the same thing when you said, “Hey, we’re gonna start using analytics to help transform our practice management.” As a leader, how do you overcome that hesitation? What approach Did you take, Steve?

I’m just really confident in these things. Again, it’s like I think I’ve read, I’ve stayed on top of it, and I’ve shared that information over the years. I didn’t have a lot of hurdles to jump over—again, it kind of comes back to our culture. I think that everybody in the firm, especially those in leadership, have a strong belief in “we’re gonna make things better.” And I think that it allows some leeway, or some flexibility, when we’re doing new things that, “Hey, it isn’t gonna like, be instant results.”

Yeah.

You know, if something’s really going off track, you should have this process to kill it early. But we do carry things a little bit further than that, just to see if we can maximize some opportunity in this. And I think that it gives a role for everybody. It gives growth for everybody in the firm. I really like that our second, third year people can see examples where they can get involved, and a new initiative. Or if they have an idea, that they can implement it. I think that’s one of the things, like, that contributed to my career early on, was that if there was something that I wanted to do, and I thought it made sense, I felt supported from, you know, the partners that were there at the time. And that’s kind of the legacy you’d want to leave for the whole team.

Yeah. So you really created a culture of this back 19, 20 plus years ago. I mean, predating you as the managing partner, even you just said, you felt that you had the confidence, that you were supported, you could bring a new initiative up. So for our younger leaders that are up and coming leaders that are listening to this podcast, and they think, “I’m not exactly sure how I would do that.” They’ve got to start figuring out how do they create that as a culture? How do they create that? And for the up and coming leaders, it’s probably difficult to do that. But you know, I think the approach that you just said, that probably resonates the most, and would be most relevant, is looking to make things better.

I don’t know a managing partner that would say “No, we really have no interest in that. Let’s just try to keep it as we are, maybe even backtrack a little bit.” Every managing partner I’ve talked to in the last I don’t know how many years has said, “You know, we’d like to make things better.”

Yeah.

So yeah, using that as the basis for new ideas, new initiatives is really helpful.

And you’ve expanded this recently. You were using this just for your firm, as far as practice management, as you mentioned, you know, the last six to nine months, and I’ve seen what you all are using. I absolutely love it. I’m a data junkie, so I enjoy the opportunity to geek out and see your solution, and how it drives that actionable insights. You’re now willing to go help other firms with this. And I’m curious, how did you arrive at that decision, because it seems like it could be sharing your secret sauce just a little bit?

Yeah.

As to how you’re running a successful firm. And you might be doing that with your competitors, so how did that decision come to pass?

I’m a big believer in sharing, no matter what. It’s like, we’ve always been part of, just being part of Upstream, or with our DFK Association. You know, all of that stuff is really predicated on being an open book and sharing what you know. And our intent isn’t to go, you know, give this away for free just to benefit somebody. But we see a huge opportunity. And again, like, pain points are always resonating with me. And the way I think about this kind of stuff is that everybody has access to the same ideas, and more than likely has thought about it, or done things, but there’s a whole different world between having an idea and executing on it.

I think execution is the difference. That’s why there’s 42,000 CPA firms in the country, and 400 that are greater than 7 million. And there’s a number of reasons: some really like to be a million dollar, two million dollar firm, that suits, that fits them. We’ve just chosen the path that we want to continue to grow and add value. I think that requires execution, and back to the kind of things we talked about: Leadership and growth have to be important.

So when it comes to thinking about offering this out, we just saw it as like, and we’ve seen this when we’ve talked to firms, that it’s like, we had this reaction that one of the companies we presented to it’s like, they looked at the number and said, “That can’t be right.” And, you know, we could say with certainty, “Yes, that’s right.” “I’ve been here for 20 years, and I never knew that.” And it’s like, that was in five seconds of looking at the information. And I think that that’s the reaction that motivates us to want to continue to work with firms and help answer those questions on, “How do I get better?”

You know, I don’t ever worry about competition, because this whole business is about relationships. It’s not about, again, like, I think you’re going down that path before—it’s not about the data.

Yeah.

What I’m giving you isn’t necessarily going to help you with your relationship. But it sure will help you identify those things. And if we help other firms improve, I think that would be successful.

And it goes back to what you said very early on in how you became the leader you are today about teamwork, and bringing people along and relationships. Very few firms will ever be all things to all potential clients out there. But if you have those relationships with other firms, it’s one of those where, you know, the rising tide—all ships rise with the rising tide. I probably butchered that quote. But it really does. It helps other firms, it helps your clients down the road as well. And it truly is about those relationships, like you said.

Yeah. And I think like you mentioned, like, people figuring out, how do they want to grow as a leader or, or do other things. And it’s like, it’s those relationships with people that are doing what you’re doing. I’ve just found amazing value from the peer groups that I’ve been part of, and the opportunities to meet people from other firms and talk about what they’re doing. But my experience has been, everybody loves to share about, “this is my reality, this is what I know, this is how I do it.” People like to talk about that stuff. So you know, I think younger people coming up: recognize that and build on those kind of networks, because there’s a million good ideas, and if you’re somebody that likes to execute and bring results, I think that’s the best, fast way to do it.

Yeah, it’s the power of community. It really is.

Mmm hmm! For sure.

Steve, thank you so much for the conversation today. I really appreciate you taking the time to talk with me and share your insights with our listeners.

Really appreciate it. That was a lot of fun. Thanks, Jeremy.