Introduction
Businesses undergo a lot of changes in the process of undertaking products changes and transformations. One of the areas that business need to asses and come up with prudent decisions in the process of organizational management is change. Product transitions are important in the process of improving the bottom line of organizations. However, many organizations usually suffer the problem of undertaking transition in product or service development. Product transitions undergo supply and demand risks that need to be critically analyzed in the process of undertaking change.
These risks apply to all organizations and this essay is going to analyze new matrixes of risks that a service firm might undergo in the process of managing change. These risks will be analyzed based on a professional line of work in accounting and management consultancy field.
Risk Matrix
Global organizations undertake a lot of risks in the process of maintaining organizational competitiveness especially in the process of undertaking product or service transitions. The field of tax accounting and auditing services is a purely professional field but laden with several risks and challenges. Accounting firms encounters several risks in the process of conducting business and these risks are categorized into product and supply chains as follows:
Organizational capacity
This is a product risk where we question the capacity and capability of the organization undertaking assignments for its different clients.
Based on its track record, has the organization grown its clientele base and does it have a record of offering premium accounting or consultancy services. Moreover, how is the accounting firm undertaking its accounting and auditing services. Other issue to consider within this factor is the issue of handling human resources or complexities to deal with organizational policy and legal framework of the organization (Luecke, 2008).
Internal Execution
In the process of undertaking management consultancy services, it is important for the firm to undertake a proper execution plan. Internal execution plan looks at how the services offered at the accountancy firm will be re-designed its services and offer better services compared to its competitors.
The management should define how they are going to handle and offer services to its customers. For instance, the firm might decide to offer bundled services to its clientele whereby they offer tax and auditing services bundled with management consultancy services (Rajagopal, 2012). Making use of this execution plan would ensure that the company package’s it services to benefits both its existing customers and new customers. Consequently, the execution of a service plan is one of the most difficulty and risky activities to undertake in the process of restructuring a company.
High Staff turnover
In the professional field, organizations hire staffs that are highly skilled with respective skills and qualifications.
This staffs are usually recruited for the purposes of operating in areas or jurisdictions with different laws and organizations. As a result, due to the high expectations within the service industry especially within the consultancy field, professionals usually have huge expectations. As a result, professional firms such as accounting and audit firms usually suffer from high staff turnover (Erhun, 2007). This is mainly attributed to competition and high independence rate at which professionals prefer undertaking their operations.
High Operations costs
This is a supply factor in that in the process of undertaking accounting and auditing services relies on how the service id delivered.
The major issue to look at is the cost of hiring and deploying professional accountants and staff to different global positions. Consequently, these professionals work in different locations in the world which have different legal and business operating systems (Rajagopal, 2012). As a result, one major risk that service firms such as accounting and audit firms face is the high operational costs.
Pricing
An accounting and audit firm operates under certain policies such as the way in which an organization prices its services. Pricing is a major risk that should be analyzed in proper manner since it affects all the factors of production. In the case of an accounting firm, what is cost effective manner of offering services to its clients without affecting the firm’s revenues (Erhun, 2007).
Pricing a service should be based on current market trends and the services offered.
Timing
One of the major managerial policies is timing of services that the accounting and audit firm offers. An accounting firm will face the risks in the process of coming up with services that are in line with legal and professional framework used in different regions and locations. Moreover, how does the organization offers or packages its services in relation to changes within the accounting and auditing field.
Marketing
Marketing is one of the major activities that an organization can undertake in the process of offering its services. The execution of marketing strategies is a major risk since it determines the image and value of services that an organization offers.
In the process of marketing an accounting and audit firm has to establish itself as value, cost or performance based firm (Luecke, 2008).
Competition
Within the service industry, competition is one of the major issues that organizations have undertaken mitigation plans. For instance, an accounting firm will have to undertake research on the current trends in accounting and offer customer targeted services. In most cases, accounting organizations have their employees quit and form firms which compete with their former companies. Consequently, organizations have to contend with competing with independent professionals. Therefore, competition is one of the major factors that are considered in the process of offering accounting and auditing tasks (Rajagopal, 2012).
The comparison between traditional accounting and auditing and a management consultancy firm would be based on the operation of these businesses. Some of the differences in these firms include:
Staffing
Accounting and auditing firms in most cases purely hire accountants while management consultancy firms hire all kinds of professional such as engineers, environmentalist and other professionals.
Core business
Traditional accounting auditing firms offers accounting and audits services while business consultancy firms give advice on all business aspects such as taxation, investments and human resources. Thus, the scope of a business consultancy firm is wide compared to that of a traditional accounting firm.
In the process of establishing a business consultancy firm, several factors have to be considered and these factors will bring additional risks to the business. Some of these risks are:
Increased operational costs
If the company comes out with a business consultancy unit then the firm would have to contend with high and increased operational costs. These costs include costs for hiring new staff, marketing and product development. As a result, the firm risks losing a lot of revenue due to the spinning off of a new unit.
Internal management issues
Due to the offering of new business consultancy services, the company would introduce new risks to its traditional line of business.
As a result, it would be difficult for management to oversee and run the company’s varied operations within the different locations. For instance, accounting and audits professionals might not understand some issues concerning business consultancy (Luecke, 2008).
Summary
In the scenario above, I would recommend for the accounting and audit firm to instead should acquire a third party firm. In this case, the firm would hire a fully operational firm with professional employees, established operations and clientele base. Thus the company would be able to complement it services with that of consultancy services. The major factors that would aid such a decision include reducing in costs, expansion of clientele base and easy/effective organizational oversight.
By purchasing a third party firm, the accounting and audit firm will reduce or avoid the costs associated with setting up a company and scouting for professionals. Moreover, the firm will expand its clientele base to include the clients of the management consultancy firm(Erhun, 2007). While in some cases, the consultancy firm will compliment the services that are offered with the accounting and auditing firm. Consequently, purchasing a firm that has been in the business for a long period of time is relatively easy compared to coming up with a new or upstart firm. The process of coming up with a new firm created new and unanticipated risks compared to purchasing an already existing consultancy firm.
References
Erhun, F., Gonçalves P. & Hopman J. (2007). The Art of Managing New Product Transitions. Boston, MA: MIT Sloan.
Luecke, R. (2008). Managing change and transition. Chicago, IL: McGraw Hill Professional.
Rajagopal, D. (2012). Darwinian Fitness in the Global Marketplace: Analysing the Competition. London: Macmillan Publishers.