The making of the Karbon Practice Excellence Scorecard

Accounting firm partners, just like any business owner, want to know how they compare to their peers.

However, there is no easy way to gauge how one firm compares to the industry as a whole. Not just in general characteristics or revenue, but in the areas that really drive their performance, such as strategy, management, efficiency and growth. Proficiency in these four areas is what we have determined will lead to Practice Excellence.

With no way to measure this proficiency and compare results to other firms of a similar geography, firm size, revenue and service focus, we decided to come up with a solution — The Practice Excellence Scorecard.

Defining Practice Excellence

We have found that the biggest challenges facing firm owners do not relate to technical knowledge, but rather their ability to be a successful business owner and entrepreneur. Firm owners across all sizes lack training and confidence managing and growing their business. In addition, their pains and issues are not the same as the business clients they serve — they face challenges unique to the accounting profession. So, we set to qualify and quantify these business aspects of accounting and bookkeeping firms.

After countless hours of research, and discussions with firm owners and staff, we identified 12 areas that influence a firm’s overall proficiency:

  • Operations management

  • Business processes

  • Technology

  • Strategy adoption

  • Business strategy

  • Innovation

  • Marketing

  • Sales

  • Client management

  • Organizational management

  • Talent management

  • Change management

These 12 areas each fall into one overarching pillars:

  • Practice strategy

  • Practice management

  • Practice efficiency

  • Practice growth

Excelling in each of these 12 areas — and their 4 overarching pillars — is what will result in achieving practice excellence.

Now that we knew what we needed to measure, we needed to develop a way to do it.

12 areas of competency (and their 4 overarching pillars) that measure Practice excellence proficiency

The assessment

The Practice Excellence Scorecard was designed, built, tested, iterated, and tuned over the course of six months. Our first attempt was a failure.

We developed an exhaustive survey of more than 100 questions that took at least 30 minutes to complete. The average and median of the responses we received were far too high, and the standard deviation looked nothing like the traditional bell curve we were striving for. The analysis itself was completely unreadable — it looked more like the work of a mad scientist. Back to the drawing board.

We realized that we needed to make the survey much more concise, the questions had to be indicative of what was happening within a firm, and the results needed to not only be comparable across all firms, but also able to be meaningful when narrowing down to specific segments within the profession.

We gradually learned what worked and what didn’t. The survey got shorter, the questions more specific, and the results more balanced. After several iterations, multiple testing rounds and constant data wrangling, we nailed down the current assessment survey, with hundreds of captured data points to provide the baseline necessary for an accurate analysis.

Now, a simple 5–7 minute survey measures the four pillars of practice knowledge. All of this lies on top of the accounting firm’s technical expertise (which is not measure by the scorecard). This combination of practice knowledge with firm competency is our definition of Practice Excellence.

The scoring

From responses to this survey, a practice can obtain scores and insights across multiple levels. The firm’s level of proficiency per each dimension of practice knowledge is categorized in one of five levels: Novice, Proficient, Skilled, Expert, and Master.

Levels of proficiency across the four practice excellence pillars

The complete data is brought together for a single composite Practice Excellence score ranging from 0–100, which can be used to compare a firm against the collective dataset. At the time of writing the overall firm average measures at 52%.

Finally, one of five labels are provided to describe the firm’s progressiveness: Traditional, Transitioning, Scaling, Expanding, or Leader.

Practice Excellence scorecard showing average firm results

What to do with a firm’s score

The scores and labels a firm is given allows them to understand how they are collectively performing against other firms, and also identify which specific areas they are performing best it, and what they need to improve. This personalized information shows them what they should focus their future efforts on if they want to improve their overall practice excellence.

Firms who take the 7-minute Practice Excellence Assessment will receive a scorecard with these valuable insights, along with recommended resources (free articles, webinars and videos) to help them improve in these key areas.