1. CPA Leadership Institute Dustin Hostetler LSS Master Black Belt Office: 330-345-1646 Mobile: 614-288-6426 Email: Dustin@flowtivity.com Twitter: @Flowtivity Six Sigma for CPAs © Flowtivity, LLC

2. Agenda Introduction to Lean and Six Sigma 5 Principles of lean 9 Categories of Waste 5-Step Process Improvement Model 3 Universal Lean Strategies to Improve Processes Challenging the Status Quo in CPA Firms Tax and Assurance Specific Examples Delighting Your Clients © Flowtivity, LLC

3. What is Lean? Velocity! Efficiency Capacity Value “Moving fast is not the same as going somewhere” © Flowtivity, LLC

4. What is Six Sigma? Quality! Consistency Capacity Value “There’s never time to do a job right, but always time to do it over” © Flowtivity, LLC

5. 5 Principles of Lean Customers define value Customers define value Identify the value stream – what is value added and what is “waste”? Identify the value stream – what is value added and what is “waste”? Make the process flow Make the process flow Implement “pull” to the process Implement “pull” to the process Continuous Improvement Continuous Improvement © Flowtivity, LLC

6. 9 Categories of Waste in Processes D efects O verproduction W aiting N ot utilizing people’s talent T ransporting I nventory M otion E xcess Processing + A ttitude © Flowtivity, LLC

7. Lean Thinking - Summarized Definition: The focused elimination of wasteful activities “The wise do only what needs to be done” © Flowtivity, LLC

8. Powerful Model for Process Improvement “Begin with the End in Mind” Define What is the Current State? Measure Put the process under the microscope Beat it up! Analyze Target improvement ideas to create the Future State Improve Develop and Sustain Buy-In Control © Flowtivity, LLC

9. The Lean Six Sigma Team The Lean Six Sigma Team TOPS model Lean Companies Use: Team-Oriented Problem Solving Team-Oriented Problem Solving – Champion – Team leader – Facilitator – Cross-Functional Subject Experts “No one knows the work like the people doing the work” – Henry Ford © Flowtivity, LLC

10. Lean Six Sigma Lean Six Sigma Challenge the Status Quo – Avoid saying: “We’ve always done it this way?” – Why? “Progress requires change. If you never change, you’ll never progress.” © Flowtivity, LLC

11. Lean Six Sigma Lean Six Sigma Let’s Summarize by Getting back to Basics: “Voice of the Customer” (VOC) “Voice of the Customer” (VOC) “Voice of the “Voice of the Process” (VOP) Process” (VOP) © Flowtivity, LLC

12. 3 Key Lean Strategies Reduced Transportation Level Loading Focused on constraints Smoother Process Flow Reduced Batch Sizes Controlled WIP

13. Challenging the Status Quo © Flowtivity, LLC

14. Expectations and Accountability Are you building in quality from the start? Are you building in quality from the start? Are you effectively and consistently setting expectations? Are you effectively and consistently setting expectations? Who’s taking ownership and when? Who’s taking ownership and when? Your people want some expectations set! Your people want some expectations set! E.g. Quick Checks E.g. Quick Checks © Flowtivity, LLC

15. One-Way Workflow Why do we love circles? Why do we love circles? Can you think of a client that has as many circles as you have? Can you think of a client that has as many circles as you have? No Egos Allowed – we know you’re smart! No Egos Allowed – we know you’re smart! Is that Point helpful in any of the following ways? Is that Point helpful in any of the following ways? Helping the firm make money? Helping the firm make money? Helping a client make money? Helping a client make money? Meeting a Standard? Meeting a Standard? E.g. Collaborative Review E.g. Collaborative Review © Flowtivity, LLC

16. Safety Nets What is a “Safety Net”? What is a “Safety Net”? How many do you have? How many do you have? Why don’t you build a stronger one at the top (earlier in the process)? Why don’t you build a stronger one at the top (earlier in the process)? More safety nets = more quality issues More safety nets = more quality issues E.g. Level Loading E.g. Level Loading © Flowtivity, LLC

17. Managing the Front Door Quit blaming the client Quit blaming the client Make it easier to do business with you Make it easier to do business with you Invest time to save time Invest time to save time Is your team on the same page before starting? Is your team on the same page before starting? E.g. Gatekeeper E.g. Gatekeeper E.g. Planning Meeting E.g. Planning Meeting “Invest time to save time” © Flowtivity, LLC

18. Project Management Are your managers “managing”? Are your managers “managing”? Staff Staff Partners Partners Workload Workload Client Client Do you promote based on a) years of experience or b) demonstration of management skills and capabilities? Do you promote based on a) years of experience or b) demonstration of management skills and capabilities? Who’s the manager on the job? Who’s the manager on the job? E.g. First question staff ask is not about the client E.g. First question staff ask is not about the client “Being chargeable can really get in the way of being productive.” © Flowtivity, LLC

19. Dealing with Exceptions Do you let your technical personalities dictate a new process / add on to the process for every exception? Do you let your technical personalities dictate a new process / add on to the process for every exception? How many processes do you have inside your firm for the same product line? How many processes do you have inside your firm for the same product line? Set up your process for the majority Set up your process for the majority Don’t let them say “But this client is unique because…” Don’t let them say “But this client is unique because…” E.g. Rollout excuses E.g. Rollout excuses © Flowtivity, LLC

20. Examples Tax Process Improvements Quick Checks, Safety Nets, Collaborative Review, Managing the Front Door, PBC Lists and Organizers Assurance Process Improvements Project Management, Time Shift (e.g. use of Interim), Collaborative Review, Managing the Front Door (e.g. verifying client readiness), PBC Lists

21. Kano Model of Client Satisfaction © Flowtivity, LLC

22. Process Change Relies on Buy In… Remember, understanding comes before commitment. Remember, understanding comes before commitment. Using the methodical Lean Six Sigma process and tools helps build the case for change. Using the methodical Lean Six Sigma process and tools helps build the case for change. Allow for continuous improvement of ideas…continue to challenge individuals to further improve the process. Allow for continuous improvement of ideas…continue to challenge individuals to further improve the process. Remind everyone, there will always be exceptions. We can’t set up the process to meet every exception. Remind everyone, there will always be exceptions. We can’t set up the process to meet every exception. © Flowtivity, LLC

23. Benefits of Lean Implementation Increased throughput and capacity Better quality from the start Improved morale and work-life balance Less partner time in “the mud” – allows time for high level activities and identifying value-add solutions for clients Increased Client Service & Satisfaction! Increased Client Service & Satisfaction! Are you ready to grow? © Flowtivity, LLC

24. Specific Firm Results Increased realization from 87% to 101% over a 2-year period (Top 100 Firm, Multi-Office) Increased throughput results (Top 150 Firm) – Increased throughput by 9% by March 15 – Increased throughput by 6% by April 15 – 3 Less FTE’s compared to previous year – Fewer Chargeable Hours Increased realization from 79% to 91% in 1-year (Top 200 Firm, One- Office) Decreased Cycle Time from Fieldwork to F/S Issuance by 10 days in first year (average 2 week turnaround) Are you ready to grow? © Flowtivity, LLC

25. Thank You! www.flowtivity.com Twitter: @Flowtivity Email: Dustin@Flowtivity.com © Flowtivity, LLC