One of the biggest challenges for managing partners, other partners, and firm administrators is to figure out how to design a partner compensation system that is effective, yet fair.
I hope you will join me on Wednesday as I discuss the most common compensation systems in use today and provide my perspective as a former managing partner of a top 200 firm. I will help you determine what is right for your firm and how a firm evolves from one system to the next as it grows. I will also give you some tips on setting up a performance-based system in your firm and how to align your compensation system to your firm’s strategic plan.
Wednesday – – September 4, 2019 – 1:00 to 1:50pm ET
The webinar is in conjunction with CPA Leadership Institute and is free to members. Become a member for only $49 and have access to all webinars.
Click here for more information and to register.
The managing partner is faced with many challenges. It is a juggling act, trying to keep a group of partners happy and continually push them out of their comfort zone.
You are now facing major changes in the profession and it is your job to pull the wagon of change up a steep hill. You are the leader and it is your responsibility to lead. Sure, you want to be loved and respected but forcing change and being loved usually does not go hand-in-hand inside a growing firm.
Certainly, you need to listen to your partners and discuss major changes. What I often observe is that the listening to partners and discussing can go on for months and even years!
As a leader, you need to take action and force change. It might not make you the most popular partner but you were given the role of leader, so lead.
Once you have all the input from the partners and the staff, make the decision, a decision that is in the best long-term interest of the firm. Always make your decisions based on “the good of the firm.” Never let individual interests over-shadow what is best for the long-term prosperity of the firm, as a whole.
Some new ideas result in failure. Take the blame and move on to other challenges. If the new idea is a great success, give credit to all those who helped make it possible.
As managing partner, daily you are walking a tightrope. Work on your balance!
The traditional way a CPA firm finds and uses a management consultant is to ask around and find out the names of consultants that other firms are using or have used. Or, you might identify someone you have heard speak at a management conference then hire them to facilitate your partner retreat.
The firm has budgeted a certain amount for the retreat facilitation and after the retreat, the consultant moves on to other engagements and the firm often does not want to spend the money to have them do follow-up work or assist with implementation and accountability
Find a consultant that you think fits your firm, based on size, service lines, people needs, partner problems, etc. You find these people by hearing them speak but also by assessing them in relation to their writings, use of social media, and ability to keep pace with current trends in business.
Initially, they will facilitate your retreat or conduct a planning day or two with your partners or management leaders. Then they attend your monthly partner meetings or executive committee meetings (60 to 90 minutes per month via Skype or another virtual resource) to continually contribute and to hold you accountable. The firm budgets an amount for the 2-day planning session and another amount for the 12-month on-going involvement.
Result: You have a much better shot at actually getting things done, at moving your firm ahead, at recruiting and retaining top talent and developing a culture within your firm of continual change and improvement. That’s the culture the new workforce wants to experience.
As the firm leader, you have many very important responsibilities. Sometimes you do what is easiest and sometimes you do what you like the best.
For example, you really need to focus on guiding the firm to a better workflow process but, a client calls with an interesting project and you take it on yourself rather than delegating. Putting client work first is an easy-out for many partners and especially managing partners. It’s something you know, understand and enjoy.
Almost daily, you feel pulled in too many directions and it’s not just your office life, it includes your home life, too. You are faced with:
- Exercising for personal health
- Home responsibilities, like yard work
- Hobbies, because you enjoy them (like golf)
- Taking on the duties of assistant coach for your son’s soccer team
- Giving attention to those scores of emails in your inbox
- Returning phone calls from clients
- Filling out that performance review questionnaire on a staff person
- Scheduling mentoring meetings
- Conducting goal sessions with the other partners
- Meeting with the firm administrator to handle operational questions
- Meeting with the technology director about security issues
- Review work on client engagements
- Checking firm production for the previous day (or week)
- This list could go on and on……
First of all, you are not alone. Most of your partners and staff feel the same way!
Just remember, you don’t have to do everything yourself. Help is there, if you ask. Delegate as much as possible to your firm administrator (practice manager). Allow the staff to take on more difficult client assignments. It will help them stretch and grow.
There is an old saying, doing ten things half way is not the same as doing two things as best as you can. Make thoughtful choices and never forget, it is okay to simply say, “No”.
I have occasionally heard the phrase, “I Led Three Lives.” I never realized where it originated so I Googled it. It was a TV series that aired during the 1950s about a spy.
The managing partner of a CPA firm lives three lives. Two lives in their professional life and, of course, their personal life.
Their two professional lives are comprised of the outside-the-firm life and the inside-the-firm life.
The managing partner is the face and voice of the firm. The MP represents the firm in the business community and in the civic/charitable community. The MP speaks on behalf of the firm in media relations and as part of the Chamber of Commerce or other business related organizations. The MP often serves on several outside Boards of Directors and may even be active, on behalf of the firm, on social media.
Of course, all partners in the firm should also be leading two lives at the firm – inside and outside, just like the MP/CEO, but maybe not quite as high-profile.
I often observe that while some client service partners fill a prominent role inside the firm, they rarely venture outside to be visible in the business community or on social media. Yes, they do interact with clients but rarely generate new business themselves.
It is a partner’s responsibility to generate new business. If this is something you are not comfortable with, make it a goal for 2018 to be more involved in the business community. Take it a step at a time. Maybe you can begin by accompanying a rainmaker to an event or join with your other partners and their spouses to support a local charitable event or banquet.
Don’t forget that third life – your personal life with friends and family. Too many partners work too many hours. I have often heard a partner confess, “Work is my life.” When partners show workaholic tendencies it discourages younger accountants from ever wanting to be a partner in your firm and often they leave to join a competitor.
Throughout my managing partner career, I read a lot of books and articles by David Maister. I also heard him speak many times over the years. His comments, almost always, hit home with me.
Until his retirement in 2009, David Maister was widely acknowledged as one of the world’s leading authorities on the management of professional service firms (such as law, accounting, and consulting firms, and companies providing engineering, advertising and executive search services).
For three decades, he advised the top firms in these professions, around the world, covering all strategic and managerial issues.
He often talked about a topic that has stayed with me. I have also been involved in this issue many times during my consulting and retreat facilitation activities:
Why do accountants in public accounting continue to work with clients they dislike…. even dread?
Maister learned from a survey of professionals around the world, that they enjoy their work 20 to 30 percent of the time, and can tolerate the rest. The report also found that professionals like the clients they work for and find the clients’ sector interesting about 30 to 40 percent of the time. Again, the rest is acceptable.
Maister’s (and my) question for you is: If you don’t love what you do or those you do it for, why would you want to go out and get more of it?
Some CPAs will honestly tell you that they continue to put up with clients they do not like because those clients are willing to pay. So, they are doing it for the money.
If you didn’t have to spend so much time on these unlikeable clients and doing work you hate, you would have much more time to work with likeable clients doing work that is challenging and interesting. It would be fun!
Isn’t it time, as a partner group, to commit to reviewing the firm’s complete client list and out-place about 20% of your clients? Then, do it again next year?
As Jim Rohn once said, “We generally change ourselves for one of two reasons: inspiration or desperation.”
As I work with CPA firms around the country, I am finding that the BIG topic of change has been ignored, delayed or swept under the rug. It seems many partner groups are thinking, “If we procrastinate about these ideas and initiatives, maybe we won’t have to change after all.” Not true. In fact, it is a much bigger topic than working on “the firm” and making it better.
The bigger issue is, if you want your firm to change, you have to change yourself. If you want your firm to become better – a top-notch, well-known, progressive firm, then you, as an individual, have to change. You have to become better, a top-notch, well-known, progressive professional. Keeping up-to-date isn’t good enough, you must commit to personal, stretch goals.
If you are the managing partner, you should hold all of your partners accountable for reading inspirational self-development books and working harder on their own self-development goals.
Among CPA firm partners, we often belabor the topic of partner compensation. What I would like partners to ask themselves is, “What am I becoming?” and not, “What am I getting?”
To prepare your firm for the future, you need to focus on people, technology and culture. Better people, technology and culture will not ever happen if firm leaders are not preparing themselves for the future.
If you wait too long, it will no longer be an issue of finding the inspiration to change, it will become an issue of desperation because your competition and the business world have changed and moved on without you.
Many young accountants working in public accounting have a strong desire to work their way up the ladder and become a partner someday.
There are a few problems with this scenario. First of all, “someday” is not nearly descriptive enough for young accountants just beginning their career.
Most non-partner accountants have no clue what they have to do to become a partner nor what they must do once they become a partner. Even worse, many current partners in accounting firm really don’t have a clear understanding of what is expected of them, even if they have been a partner for years.
You have heard it and read it many times, people entering the profession of public accounting want to know what their career path looks like, beginning on day one. They want to know what the next level, and all the levels after that, look like and how long does it take at each level.
I have observed that many firms have realized they need to document the career path process at their firm for their new hires. But, what about the current partner group?
I remember, several years ago, listening to Sam Allred of Upstream Academy describe a few things that CPA firm partners need to do:
Give up The Right to Remain Silent – When you become a partner, you must speak up at THE meeting (the partner meeting). It is not acceptable to nod your head and then go door-to-door after the meeting talking to the other partners. Not speaking up, in the proper forum, creates artificial harmony.
Keep an Open Mind – I relate this one to the 7 Habits, “seek first to understand and then be understood.”
You Give Up the Right to Make All Decisions – Sole-practitioners have this right. When you make the decision to be part of A FIRM, you give up that right.
Learn to Make the Proper Commitment – Saying/thinking, “I will stay out of the way” is not making commitment. It’s a case of “grudging compliance” vs. “spirited commitment.”
Willingness to Get Outside Your Comfort Zone – You cannot stand still. Becoming partner doesn’t mean you “made it” and now you can coast.
You Become a Leader for Change, Not an Anchor – You are helping row the boat, not sitting in the back and throwing out anchors when something doesn’t go your way.
I recently read an article via Accounting Today titled, “Make your firm great again: Raise the bar for new partner admissions” by Dom Esposito.
I agree with Esposito on two points: Growing a successful firm begins with the quality of the partner group. And, too many firms choose partners because of needs as opposed to qualifications.
Back in the late 1990s and the early 2000s, accounting firms made many partners because of the then, war for talent. The partners were afraid that some great technical managers might leave the firm for greener pastures, so they brought them into the partnership.
During the recession that hit in 2008, many firms recognized the weak links in the partner and manager ranks and downsized accordingly. However, I would guess that the majority of local accounting firms have never actually fired a partner.
Of course, being technically competent is the foundation of being a CPA and for becoming a partner in a firm. But, there is so much more needed if you really want your firm to become one of the leading firms in your market.
During the partner selection process, ask yourself:
- Are they technically competent?
- Can they continually bring in a stream of new business to the firm?
We are now in a renewed and serious quest for top talent. Retention is a big issue right now at many firms. Be careful as you consider making new partners.
At my firm, we used a two-year partner-in-training program. It was well-documented and gave the current partners and the partner candidates time to assess each other, as partners.
Be sure your firm has a thorough process for admitting new partners. Most firms continue to be too top heavy.
Something at the firm is not going very well.
It could be one or more of numerous processes you follow. It could be non-stellar results in hiring the best students. It could be a significant increase in turnover. It could be a lack of timely financial information flowing to the partner group. It could be poor realization or poor utilization. It could be poor performance in attracting clients to one of your niches.
When something is not going well, the leadership group unites and begins asking probing questions of the managing partner, the COO, the director of audit, the director of tax or that high-profile niche leader. Often it turns into a finger-pointing, blame game frenzy with several people attempting to dodge the bullet and deflect the blame on others. The managing partner is overwhelmed with questions and maybe even accusations of poor leadership. It seems many people enjoy jumping on the bandwagon of doubt and uneasiness.
How much feedback happens when things at the firm are going really well? – – Not much
Do you reward your managing partner and other leaders when things are going really well? Probably not because you expect things to go well. After all, isn’t that why you pay the MP lots of money?
It’s not all about money. Try paying your firm management leaders lots of compliments.
We tend to blame leadership when things go awry but we forget to thank them, reward them or acknowledge them when the firm is successful, profitable, and recognized locally, regionally or nationally.
At some firms, when things are going well, the partner group thinks and says it’s all about “us”. When hiccups arise or the new idea is not implemented well, it’s “his/her” fault.