Commercial Awareness – why it’s so important for junior staff to develop early
This is the time of year that firms are taking on new joiners. Last month we were involved in an induction programme for a top 20 accounting firm. One exercise had the delegates reviewing a series of statements – ranging from good teamwork and a positive working environment, to meeting the budget and deadlines and being proactive. They were then asked to rank them in order of importance – to themselves, to their firm and to their clients.
One statement read ‘maintain good client relations through understanding their business and demonstrating commercial acumen’. Not one of the new joiners picked it. Meeting budgets and deadlines was much higher up the list, as was demonstrating initiative and impressing the client with their technical ability.
Why was that? From the subsequent discussion we found that much of it was due to a lack of confidence in their ability, few believed they had enough experience to feel that they were commercially aware.
There was also a general lack of understanding around what we mean by ‘commercial awareness’. It’s a much touted phrase but what does it actually mean, what do you need to do to demonstrate you have it and how do you get better at it? The trainees were confident that they would be able to learn how to complete a tax computation, prepare a set of financial statements or conduct an audit. But commercial awareness – that sounds like something that comes with experience, not something they could proactively learn.
Perhaps there is some truth in that. But with the relentless progress of automation, it’s surely critical that the profession hones commerciality skills sooner rather than later.
So what is commercial awareness?
A very simple definition is an understanding of business. It means being interested in businesses and how they operate. Being attuned to the factors that drive a business’s ability to succeed or indeed fail. Knowing what’s going on in the world and the impact on you, your firm and your clients.
Why is it so important?
- Key for Client Relationships (see above). In a survey of clients conducted by the same firm we ran the induction programme for, commerciality came in the top five skills valued by clients. Clients have a huge choice of professional advisors. Whoever they chose needs to be interested in their business and demonstratively so.
- Key for the Business Development. We need to be able to look ahead and offer advice pertinent to the business strategy of our clients. We need to be one step ahead, anticipating their needs.
- Key for Quality of work. If we’re conducting an audit then risk assessments mean a good understanding of the business is vital. You can’t perform audit tests and analytical review effectively if you don’t understand the business drivers. Tricky areas of judgment in financial reporting require you to be clear about how the business works.
- Key for motivation. Being commercially aware just makes the job more interesting!
How to develop it.
Experience is obviously key. Knowledge is key. But what is really important is being encouraged to be curious. Showing an interest, asking questions. Learning about the client’s business from the client.
Often junior staff think the only way to impress is with their knowledge. But they often make a much better impression by showing real curiosity in finding out how the client’s business works and being interested in it. It’s about what you’ve been told and asking the ‘so what’ question – what’s the impact here, what’s the implication.
And also tuning into what’s happening in the world. I can remember being told on my first day as a trainee to read the FT cover to cover. Brilliant advice … except I found it a real struggle and it never became a habit! These days information is everywhere and can be accessed in bite sized chunks via social media, podcasts and even old-fashioned print. Keeping up to date with the news has never been easier.
Most trainees will cover business analysis models, such as SWOT, PESTEL and Porters 5 forces in their studies. But so many leave what they know in the classroom and fail to apply the techniques to real clients. In our ‘Commercial Awareness for Audit Seniors’ programme we’re going to challenge participants to apply these to case studies.
More than anything, though, we need to encourage conversation, questions and curiosity. We’re hoping there will be lots of these in the session – do join us!
Nicky Clough and Richard Hemmings present Commercial Awareness for Audit Seniors on 21st October 9.30-12.30