Stuart A. Black , Paul Thompson  | 

In the first part of this two-part series, we looked at how to select key performance indicators (KPIs). Now we’ll look at benchmarking and using the data.

Benchmarking

Benchmarking is essentially about measuring the quality and effectiveness of a firm’s policies, products, and service delivery, etc., against your own past performance, industry standard, or peer measurements in order to identify what and where improvement is needed. Blake Christian argues that comparing firm metrics against those of peers can help firm leaders set realistic goals. The problem of course is getting access to the key strategic data of the industry and competitor firms. It doesn’t help that most firms are privately held and, as such, do not publicly disclose their information.

We can learn from the benchmark data on accounting practices in other countries by converting monetary values to percentages. While there are differences due to culture and processes, the reality is that the work accountants undertake in every country is more similar than it is different, and, therefore, there is substantial congruence between the KPIs in different countries. Even when you have no access to external benchmarks, there is still benefit in benchmarking against your past performance. The benefit of benchmarking does not usually come from making a large change in one KPI, but rather in making small incremental changes in your firm KPIs.

A number of organizations collect and publish benchmarks in different jurisdictions. One of the largest firm practice management survey projects of its kind is the American Institute of CPAs (AICPA) PCPS/TSCPA National MAP Survey. It collates, summarizes, and analyzes the KPIs from thousands of US practice units across a range of practice management areas, including staffing, training, and technology. KPIs are broken down by firm size and region so that it’s possible to make meaningful comparisons among firms. Participants get access to the full results when complete and, in so doing, get useful insights, including where they stand in relation to their peers.

An AICPA checklist of tips is available to help firms make best use of the data and to get a snapshot of some key trends uncovered in the survey. Firms can use the survey as part of their strategic planning process. The survey data can be used to highlight strengths and weaknesses, advise of impending threats that need to be addressed, and identify opportunities that can give them a competitive advantage. As well as charting their progress and current position against the general population of participant firms, they can delve deeper and benchmark their results against similar firms. For example, staff and manager utilization may be out- or under-performing as compared to firm and industry norms, indicating the need for a rebalancing of workloads and/or modifying processes.

Using the Data

Without a system of goal-setting and monitoring results against a target or benchmark, accounting firms may struggle to achieve sustained improvement and higher returns. Data can be presented in customized dashboards that show, at a glance, whether or not the firm and its partners are performing above or below their peer groups, and can help leadership decide where to focus their efforts.

As well as helping evaluate past performance, the data can help establish realistic future firm and partner budgets. Once these budgets are implemented, management should measure performance at regular intervals throughout the year, at least quarterly, and take corrective action as required. Waiting until year-end to find out that targets haven’t been met is too late. Firm leadership need to continually remind staff of the importance of meeting the targets set and should continue to regularly monitor targets and provide feedback, both positive and negative.

Please share with us your experience with benchmarking and using data. 

Stuart A. Black

IFAC SMP Committee Member

Stuart A. Black spent 37 years in public practice, starting in the audit section of a Big 4 firm and moving on to a SMP where he specialised as a trusted advisor in family business, retiring as managing partner in 2013, to move on to the next stage of his career as a professional director. He is a past president of the Institute of Chartered Accountants in Australia, a member of the Australian Accounting Professional and Ethical Standards Board and a member of the IFAC SMP Committee. Stuart was made a Member of the Order of Australia in 2012 for services to the profession of accounting, to ethical standards, as a contributor to professional organisations, and to the community.

A man smiling at the camera
Paul Thompson

Technical Director, European Federation of Accountants and Auditors for SMEs

Paul Thompson is the Technical Director at EFAA for SMEs and a World Bank consultant dedicated to thought leadership and building capacity of the global accountancy profession.

From 2004 to 2016 Mr. Thompson worked for IFAC latterly as Director, Global Accountancy Profession Support, a role that extended to overseeing the IFAC Global Knowledge Gateway, research and innovation, and activities in support of small- and medium-sized practices (SMP) and professional accountants in business (PAIB).

As a World Bank consultant he works on various initiatives to improve corporate reporting and the capacity of the accountancy profession in the South Caucasus. He also advises developing professional accountancy organisations in Asia.

Previously Mr. Thompson worked for Touche Ross & Co., London before going on to lecture on corporate reporting and analysis at universities in the UK, Singapore, and Malaysia.

He has a number of publications in academic journals and the professional press in the areas of ethical finance, corporate sustainability reporting, corporate governance, integrated reporting, practice management and the future of the profession.