Using RSS to keep up with your favourite sites

If you want to keep up with this blog but don’t want to have to remember to check back on a regular basis, one option available to you is the RSS feed.

RSS (Really Simple Syndication) is a family of Web feed formats used to publish frequently updated content such as blog entries, news headlines or podcasts. RSS makes it possible for people to keep up with their favorite web sites in an automated manner that’s easier than checking them manually.

To take advantage of this technology, you’ll need a feed reader. The software is either web-based, which has the benefit of being able to be accessed anywhere in a browser, or client software, which arguably has more features. Google Reader and Bloglines are two of the most popular web-based options, and on the client side, RSS support is built into Microsoft Outlook 2007, Internet Explorer 7, and Mozilla Thunderbird, to name but a few.

The technology lends itself well to the typical email software layout, as blog posts or articles appear in feed reader software much like an email — the sender is the site itself, the subject is the headline, and the message is the body of the article.

I personally use Google Reader to read my favourite blogs. It features typical Google simplicity and an interface very similar to Gmail. I have a feeling, however, that RSS is really going to take off in the mainstream now that it is in Microsoft Office, in Outlook 2007. Up until this point, you needed one of several plugins to read RSS feeds in Outlook 2003. In 2007, the technology is baked right in.

As far as my feeds go, you can subscribe the RSS feed using a reader, or you can have the RSS feed delivered as email. There is also a feed just for the comments on this blog.

Taking the wraps off materiality

Materiality is an important concept in auditing. The point of an audit is to certify the financial statements as being free of material misstatement. A material misstatement is one which would affect the decisions of a user of those statements.

This recent blog post at the VeraSage Institute, more known for their pioneering work in the area of value pricing for professional services firms than their work revolutionizing the audit report, brings up an interesting idea:

During a specific conversation on materiality and how it should be determined I suggested that maybe the first step to improving our audit reports would be to include the level of materiality used in performing the audit.

[…]

Would the reader of audited financial statements utilize and appreciate knowing the level of materiality used to test and determine the correctness and completeness of the associated financial statements?

I think it’s pretty clear that the answer is yes. I also think it would go a long way to closing the expectation gap when it comes to audited financial statements. It further emphasizes that an audit doesn’t mean 100% of transactions are examined, and that there is a level of acceptance for errors within the statements.

Unfortunately, it doesn’t seem to me (with my limited experience) that much is done within the profession until it is mandated by the governing bodies or various governments. Going above and beyond what is required isn’t seen very frequently in terms of the disclosure in financial statements, either in the audit report or the explanatory notes appending the statements.

I don’t think it is entirely the auditor’s fault. The statements are still the responsibility of management, but it is the auditor who is in the unique position to make the suggestion to management that additional details would be helpful. For that matter, auditors need to start making the suggestion to their governing bodies as well.

We’re essentially in the business of ensuring that complete and useful information is provided, and this might be a situation where we aren’t doing a great job.

Value creation mode isn’t just from 9 to 5

I was recently asked what I thought about value pricing as it relates to professional services firms. The billable hour is typically how firms price their engagements, but the idea of value pricing is gaining momentum and acceptance is growing.

I believe in a competitive market, value pricing would occur naturally. Misinformation from vested interests in the status quo and professional inertia are slowing the evolution of the audit market into one priced on value.

That being said, value pricing is the only way a product like an audit should be priced.

When I’m truly creating value, it doesn’t occur according to the clock. I’m not necessarily in “value production mode” from 9AM to 5PM, Monday to Friday. Eureka moments occur in the middle of the night when I’m getting a glass of water, or when I’m shampooing my hair in the morning.

They follow no schedule, and they take no time to create. They are split-second flashes of inspiration that can transform the quality of an audit, but for which the widely used time-based model attaches no value.

Further, the value of individual audit tests stems from the design of the test, which may take time but certainly isn’t defined by it. Actually performing the test will take time but it is only worth the results it provides. A five hour test may be better than one that takes an hour, but there are no guarantees.

The greatest advantage for firms is growth through retaining current clients and earning new ones through referrals. But a secondary incentive will be growth by retaining the best staff and motivating them to develop professionally and build strengths they’re passionate about into niches.

Value pricing for clients is one thing, but firms will need to push to establish its concepts within an existing culture. There is still a strong belief that hours worked equals audit “production”. The firm that is value priced both externally and internally will get the most out of it.

Using wikis or blogs to manage knowledge in firms

A recent article on WebCPA confused and inspired me:

Accounting firms need to become more intelligent businesses by better leveraging the time and knowledge of their professional staff, according to a survey…

[…]

Firms with a formal knowledge management program benefited from its implementation.

Hmm… Intelligence, good. Leveraging knowledge, check. Formal knowledge management program, bingo! Wait a minute, “formal”? Why must it be formal? With all the tools kicking around these days like wikis and blogs, does knowledge management really need to be formal anymore? Was that ever the best way to manage knowledge?

I think it becomes formal, informally. Wikis are self-organizing, and great at managing knowledge bases. Look at Wikipedia — better at organizing the world’s information than Google.

Wikis aren’t great at building community or starting conversations, however. This is where blogs shine. As for knowledge management specifically, blog posts are tagged, categorized, and searchable.

By formal, what they must really mean is traditional, hierarchical, top-down, autocratic systems that mean well but end up stifling the creativity of those they were meant to help. We really don’t need any more of that in accounting firms!

So, firms: Set your knowledge (and knowledge workers) free. If it organizes itself automatically in wiki or blog form, it’s yours forever.

Traditional partnership model being tossed aside

The way most professional services firms are organized is the partnership, which more often than not is based on the premise that the people who bring in the most business earn the biggest cut of the take. Some firms have begun to question the wisdom of this model, and are moving to an organization that splits up the income evenly amongst all partners.

Is this good for growth? In what dimensions is growth measured? Revenue or profit? Client satisfaction? Is revenue growth a proxy for a satisfied client base? What about other goals like developing and retaining top talent?

A recent survey conducted by Grant Thornton of mid-size professional services firms inquired about the two opposing partnership models as well as value pricing, which is another idea finally seeing the light of day.

Mr. Moore says there are storm clouds on the horizon and firms that don’t address the changing environment risk failing.

One of those clouds is the focus on an eat-what-you-kill business model. It promotes stars and rainmakers, those who bring in the bulk of business, who are tight with clients at the expense of the health of the overall business.

I don’t see a problem with promoting stars, and neither should firms that want to grow and prosper. Bringing in business is good on all levels of the firm, from the lowliest junior staff to the managing partner, and there’s no reason why firms should stop encouraging this.

Mr. Moore says more law firms need to adopt a team-based model that stresses firm-client relationships over individual-partners relationships and which deploy alternative billing schemes.

I think we’re already doing this on some levels. Clients build working relationships with the lead partner but also the tax partner and other concurring partners brought in for their specialized skills. Senior managers and managers are increasingly being brought in right from the beginning, and even senior staff if they have certain special skills.

I’m not against the main premise of the article — the so-called “eat-what-you-kill” model attracts a certain type of person and promotes a certain type of culture. And an organization that is essentially the opposite will affect the opposite. It will foster greater teamwork as it attracts those more inclined to lean on their teammates.

But I’m not convinced that those are the firms that will outlast the other ones just yet. Nor am I sure whether I would prefer at this point in my career or later on to work at one of them.