The Stockdale Paradox In Action

Recently, I met with one of our functional teams to thank them for the bold bets they made this year, and the many things they did that went well.?I also acknowledged the misses…the things that didn’t go as planned, but yielded important learning.

I shared the story from one of my favorite lessons from Jim Collins’ work.?As Jim says, “Every good-to-great company embraced what we came to call the "Stockdale Paradox": you must maintain unwavering faith that you can and will prevail in the end, regardless of the difficulties, and at the same time, have the discipline to confront the most brutal facts of your current reality, whatever they might be.”

As we finish the last couple months of our fiscal year, and I reflect on our Q3 performance and tax season, this paradox seems incredibly relevant and true.

For sure, the tax industry this year was anything but normal - it didn’t grow as expected, more consumers had smaller refunds, more consumers had a balance due, very low income consumers who filed a return the last couple of years to receive stimulus payments did not file this year, and multiple states extended the filing deadline past April 18 including California. ?

At Block, our assisted tax prep business lost clients this year for three reasons; 1) consumers under $5,000 of income (likely stimulus filers) did not return - this was about 1/3 of our client loss; 2) we did not do a good enough job attracting Earned Income Tax Filers - this was about 1/2 of our client loss; and 3) the filing deadline extension in several states, including California, likely made up about 15-20% of our declines.?These are our brutal facts.

At the same time, across each of our three strategic imperatives, we had great successes, for example:

• Our DIY strategy worked, we grew clients over 2%, many of whom switched from Turbo Tax.?Our largest segment of new clients was Gen Z, between the ages of 18-25.
• We launched an industry-first AI technology in our DIY product
• We grew our assisted client base among higher income filers, with the fastest growth coming from those with income above $100,000
• Our Tax Pro Review product grew double-digits for the 10th year in a row
• More than 30% of our assisted clients utilized one of our virtual tools
• Our Small Business services continue to show great promise especially in demonstrating our value versus local CPA’s
• Wave grew revenue 10%
• Spruce now has over 290,000 users and $288 million in deposits
• We continue to be named by leading publications for innovation and diversity

The transformation of H&R Block continues to make progress, and despite the season not playing out as we expected, it is the successes like these; and the franchisees, associates and tax pros that I get to work with every day, that give me unwavering faith. ?

#KeepClimbing #BlockPride