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9 steps to better change leadership

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The professionals in your firm need to deal with constant change, including technological advancements, regulatory updates, new processes and best practices and evolving client expectations.
While change is normal and, in many cases, necessary and beneficial, it can also be disruptive. In an environment of constant change, simply managing change isn’t enough. You need change leadership to empower people and make the most of the transformation.

What is change leadership?

Change leadership refers to the process and capability of driving and managing transformation within an organization.

It involves leading your firm through new challenges and opportunities by making strategic adjustments or complete overhauls in structure, strategy, process or culture.

Change leadership isn’t just about managing incremental change but about leading complex and significant shifts that fundamentally reshape the firm.

Unfortunately, successful change leadership involves navigating various obstacles that can impede progress. These obstacles generally fall into three primary buckets: awareness, alignment, and accountability. Here are nine critical considerations for overcoming these challenges.

Awareness

Employees need to be aware of upcoming changes and why they’re being implemented.

1. Create a common language. Establish a common language around change to ensure everyone understands the terminology and concepts involved in the change process. You can achieve this through emails, meetings, regular training sessions and workshops. A shared vocabulary helps prevent misunderstandings and fosters a unified approach to change.
2. Understand change management. Firm leaders must have a solid grasp of change management principles. This includes understanding the stages of change, from initiation to implementation and evaluation. Familiarity with models like Kotter’s 8-Step Change Model or Prosci’s ADKAR Model can provide a structured approach to managing change. According to Prosci, companies that rate their change management programs as “excellent” are 7 times more likely to meet or exceed project objectives than those that rate their change management programs as “poor.” But even moving from “poor” to “fair” increases the likelihood of meeting objectives by three times.
3. Address the human side of change. Firm leaders tend to forget that organizations don’t change — individuals change, and this drives organizational change. Addressing the emotional and psychological impacts of change on employees is crucial. Effective change leadership involves empathy, active listening, and supporting those affected.

Alignment

Ultimately, leaders must get in alignment with the vision and reasons for the change and visibly support what’s happening.

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Chad Anderson/Getty Images/iStockphoto

4. Develop a strategic plan. A clear and detailed strategic plan helps guide the change process. Your plan should outline the objectives, timelines and resources required for the change initiative and be aligned with the firm’s overall vision and goals.
5. Define the right roles for change. Identify and assign the right roles and responsibilities. This includes appointing change champions, leaders, and teams responsible for different aspects of the change. Each role should have clearly defined tasks and expectations. Effective role definition helps streamline efforts and ensures accountability.
6. Create a change leadership plan. Beyond the strategic plan, develop a specific change leadership plan that focuses on leadership actions and behaviors required to drive the change. It should include strategies for motivating employees, overcoming resistance and sustaining momentum.

Accountability

Pulling off lasting transformation requires accountability at all levels of the firm.

7. Focus on communication. Clear and consistent communication is the backbone of successful change leadership. Regular updates, transparent discussions and feedback loops are essential. Communication should be two-way, allowing employees to voice concerns and suggestions. According to a study by Towers Watson, organizations with effective change and communication programs are 3.5 times more likely to outperform their peers.
8. Determine and track key behavioral indicators. Monitoring progress through key behavioral indicators rather than just traditional metrics provides deeper insights into the change process. KBIs focus on behaviors that lead to desired outcomes, such as employee engagement, collaboration and innovation. Monitoring these indicators helps leaders adjust strategies in real-time and ensures that the change takes root.
9. Leverage outside resources and peers. External consultants, industry experts and peer networks can provide valuable perspectives and solutions by offering objective insights, specialized knowledge and advice from lessons learned. Engage with peers to facilitate knowledge sharing and collaborative problem-solving.

Overcoming change leadership obstacles requires a multifaceted approach that addresses awareness, alignment and accountability. By identifying the above challenges and taking steps to overcome them, you navigate change more effectively. Implementing these solutions will help you overcome obstacles and pave the way for sustainable growth and success.

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Accounting

In the blogs: Nothing’s perfect

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Mapping the talent hunt; what taxpayers don’t know; new blog on the block; and other highlights from our favorite tax bloggers.

Nothing’s perfect

Validation

Maintaining momentum

  • Boyum & Barenscheer (https://www.myboyum.com/blog/): What helpful suggestions can nonprofit clients mine from their own audit reports?
  • Palm Beach Financial and Accounting Services (https://www.pbafs.com/blog): Half a dozen smart ways for young-adult clients to use their refunds.
  • Institute on Taxation and Economic Policy (https://itep.org/category/blog/): The State of Washington came into the year with strong momentum — the Capital Gains Excise Tax on the state’s highest-income households and the new Working Families Tax Credit, for example. But lawmakers in Olympia now face a $16 billion shortfall, impending federal funding uncertainty and a new governor calling for billions in budget cuts.

New to us

  • Trout CPA (https://www.troutcpa.com/blog): This Pennsylvania firm offers an array of services in various industries (including agriculture, funeral homes and auto dealerships, among many others) and a fine blog. Recent topics include recent IRS revisions to the 6765 and depreciation recapture on real estate sales. Welcome!

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Accounting

How to manage client rental real estate investments

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If financial advisors ask clients the rate of return for their rental real estate investment property, they should expect to hear a number at least 5 percentage points higher than the actual one, according to the founder of The Real Estate Whisperer Financial Planning.

That’s because of calculations based on “optimistic assumptions, untracked costs and the absence of formal benchmarking” among many owners, said Rich Arzaga, founder of the Monument, Colorado-based firm, in a presentation at this week’s Financial Planning Association Retreat in Oak Brook, Illinois.

“It’s where ownership bias meets the reality of returns,” Arzaga added. “Whatever they say, knock out at least 5%.”

Despite the substantial role of real estate in wealth, the asset class may sometimes get overlooked by planners who leave an often-emotional decision that is critical to clients’ retirements to professionals from other fields who work more closely on investment properties. 

READ MORE: The tax benefits of real estate investing

A void in the profession?

Instead, more planners should maximize their value to clients by taking them through a realistic cash-flow estimate incorporating every expense that they can then apply to a long-term forecast of their assets in retirement, Arzaga said. Even for high net worth clients in particular who generate tens of thousands of dollars in rental income each year, the risks and costs of a property that isn’t meeting their investment expectations can eat up their holdings over time.

“I want to propose that this is an idea that you can use that will expand your thinking about the way we approach this business,” Arzaga said. “I think the way we approach it now is great, but I still don’t see it in any of the curriculum — whether it be the licensing certifications, none of the designations — none of them focus directly on real estate investments.”

Arzaga shared the case study of two 58-year-old clients from San Francisco he called Kevin and Lynn who had a net worth of $3.6 million and rental income of $75,000 per year through a property that was separate from their residence. Through debt service payments and other expenses, however, their costs on the property amounted to $76,000. If the couple followed through on their plan to retire when they turned 65 while keeping the same quality of life that cost them $312,000 a year, they would run out of their assets by age 84, Arzaga estimated.

“Somebody with a $3.6 million net worth, this is kind of not what they expect, right?” he said. “So that’s why they come to us. And luckily, they came to us.”

READ MORE: Ask an advisor: When is real estate an investment?

A better course of action

If the couple were to sell the property in a tax-advantaged 1031 exchange for a better-performing asset or simply spin off their rental holding, absorb the taxes and reinvest the holdings into their long-term portfolio strategy, their assets could amass value hundreds of thousands of dollars or even millions higher than their current scenario.

One of the main misunderstandings stems from the cost of maintaining rental properties, according to Arzaga. In his example, the clients mentioned their amount of income and told him that the number included their expenses. He saw that they had miscalculated when he examined their itemized deductions on Schedule A of their tax returns.

Operating expenses include taxes and the preparation of them, insurance premiums, legal fees related to entity filings and other matters and two major areas — maintenance reserves and property management. In terms of maintenance, the owners should build in costs of about $30,000 to $40,000 every decade for concrete, foundation work, a roof replacement or similar upkeep, Arzaga said. Property management poses difficulty as well.

“Most people like to do that on their own. Most people aren’t capable of that,” he said. “It’s important, and it’s a big asset. And some decisions they’re making are because they’re not professionals in this area.”

READ MORE: The top 20 real estate funds of the decade  

Providing value outside investment portfolios

These realities may be tough for the clients to hear, but they usually come around after planners lay out the cold calculation of the costs and risks involved with a lot of small-scale rental properties. Assisting clients in making smarter choices about their real estate is “more significant than beating the S&P 500” and a “much more noble cause,” Arzaga said.

“Understanding how real estate can impact a family’s finances, I think, is essential to being a comprehensive advisor,” he said. “You’ve got to be comfortable talking about these things. You don’t have to be an expert, but addressing them, to do a service for your clients.

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Accounting

Citrin Cooperman cofounder leaves firm

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Joel Cooperman, cofounder and former CEO of Citrin Cooperman, left the firm on March 31 after over 40 years.

Cooperman founded the firm, alongside Niles Citrin, in 1979 when two English rock bands provided the seed money needed to open shop in a small New York apartment. Now, the Top 25 Firm reports over $870 million in revenue, with 27 offices, 455 partners and 3,190 employees.

“I can assure you that Niles Citrin and I never had any plans to build a firm larger than the two of us and maybe a couple of others,” Cooperman said in a statement. “In the early years, accounting was still viewed primarily as a profession and not as a full business – this never really made sense to me. We felt that for long-term success it was critical to create a culture and environment that our partners and employees would enjoy as we all worked to build a thriving sustainable business.”

Joel Cooperman
Joel Cooperman

Citrin Cooperman

Citrin Cooperman was one of the first instances of a major accounting firm accepting a private equity investment, from New Mountain Capital, in October 2021. Then in January of this year, Blackstone acquired a majority stake in the firm from New Mountain, making it the first instance of an accounting firm to transfer private equity ownership from one group to another. And since its founding, the firm has acquired or merged over 65 professional services firms and added other lateral partners.

Cooperman offered advice to those early in their career: “I have always been surprised that so many people do not really understand how much they have to offer, how much potential they have.  If I could offer any advice, it would be to figure out what you are good at and what you love to do, make a plan, write it down, and then go after it every day.”

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