There have been multitudes of books published about the “innovative mindset.” We have all seen the continuous publishing of articles titled ‘the 5 or 8 keys to building an innovative mindset.’ This buzz word is everywhere. Google talks about a culture of innovation. There are blogs, podcasts, white papers, studies and more talking about this concept.
How does an innovative mindset apply to a tax firm?
Traditional tax practices are ripe for innovation despite the field being something far from where you find innovation in its most recognized form. Innovation does not always equate to new and better technology, although technology can hasten the innovative curve. To foster a culture of innovation in a firm, we first need to break down barriers.
“We do it this way because that is the way it has always been done.”
This one sentence sums of the gist of my personal experience in multinational public accounting firms. SALY (same as last year) written on workpapers as a reason for performing procedures is a constant. Traditional public accounting asks you to follow the prior year, do not deviate, do not think for yourself, do not pass go, do not collect $200. There is a reason for how it was done. Never question authority.
Except training young team members in the authoritarian mindset of the traditional firm is exactly the opposite of what will create true innovation. People do not improve if they are not given the space to be creative. The space to think for themselves is crucial to improvement.
Question everything. Being extraordinarily curious allows someone to truly understand the fundamentals of the business to be able to think about places for improvement.
“My staff does not need to know everything about my business.”
On the surface there is nothing in this sentence blatantly obstructing innovation. However, innovation does not occur when people are put into boxes and only privy to small pieces of the puzzle. Yes, everyone has a job to do. Yes, it is difficult keeping everyone up to date on big picture items. However, not only will it increase team retention, it will open up more brains to solve bigger issues.
If you show your team the profitably on different types of projects, they might be able to give insight into why one is more profitable than another. They will then have the opportunity to use the lessons from one side of the business to fix issues on other sides of the business. Maybe, they will identify a bad process that takes forever and eats at the profits. Maybe they will find a place to add some automation (have you checked out Zapier lately?).
“I just don’t trust the technology.”
Sometimes, firms know there are places for improvement, but they choose not to use it. Or, someone on the team ignores efficient tools because they do not like change. Embrace change! Embrace it with open arms as change is the only constant in life (plus death and taxes). Do not let one person on your team ignore efficient technology or advise their staff not to use it because they do not understand it.
“I expect perfection.”
Perfection is a myth. Perfection is the lie we tell ourselves should be the goal. The goal is not perfection. The goal is constant modifications leading towards a consistently-improving service. I prescribe the Japanese philosophy of Kaizen which addresses continuous improvement in a methodical and ongoing pursuit. Kaizen breaks the American concept of “put one process and set of tools in place and repeat it until it dies.” Tax firms are notorious for ignoring the incremental innovations in favor of the traditional processes. What year did we all go paperless? 2005? 2015? The IRS started accepting e-filed tax returns in 1991. The technology for tax preparation was already computer-based at that point and digital filing cabinets existed. The IRS, which lags the development of technology, was promoting paperless in 1991 – let that sink in for a minute.
If tax firms identified one small piece of inefficiency each year and improved upon it, imagine what could happen! Incremental improvements that are not perfection are good.
“Let me think about that idea and get back to you.”
We have all heard this – this boss never actually gets back to you; it’s their politically easy way of saying I don’t care enough to consider your idea. Innovation is fast. Thinking too long or over-analyzing if there is a viable change can lead to stagnation. An innovative mindset requires decisiveness and an effort to empower the team to work through change. If someone on your team has an idea for improvement, it likely means other firms have had the idea as well. If you want to use your innovative culture to its fullest advantage, you have to be willing to move quickly with good ideas and get in the habit of continuous change for the better.
“But what if it fails?”
It will fail. Something you try and improve will not work at some point – it’s inevitable. Accepting failure as a fundamental piece of improvement will allow the expansion into a true innovative mindset. Risk is tolerable and the more you practice taking controlled risks, the better your firm will end up.
Taking this a step further, what-ifs are a sign of fear. A fearful mindset is not an innovative one. Fear enables emotional decisions. It takes boldness to question everything in a creative way to solve for less than ideal situations.
“I do not know of another firm doing it that way.”
There are firms doing amazing things. Stop watching your neighbor and start thinking about how you can do it the best for your team and your clients. Technology has come a long way in being able to automate many pieces of the tax return preparation process – and even tell you when a tax law changed for a specific tax position taken a group of your returns. There is amazing innovation already happening in our space, however, we see many people bury their heads in the sand.
If you’ve gotten this far in the article, you’re not a typical tax ostrich and likely see value in learning how to cultivate innovative thinking. Start with small changes and build your way up to the big ones. Incorporate the entire team in the process of finding ways to change for the better. Encourage your team to be creative and empower them with decisiveness on approving recommendations and testing assumptions. You can benefit from an innovative mindset and your clients will too.
