Motivating Partners to Develop a Firm of Trusted Advisors

Source: Accounting Today
By Mary Ellen Biery

How can a CPA firm differentiate itself?

Is it by having lots of expertise? No, many firms have expertise in accounting matters.

Is it by the years of experience of their partners and staff? No, many firms have people with decades of experience.

Is it by providing quality accounting and tax work? No, lots of firms provide accounting and tax work that satisfies their clients.

CPA firms routinely struggle to describe how they legitimately stand out from competitors, according to Marc Rosenberg, CPA, a nationally recognized consultant on CPA firm management and partner issues and a perennial pick for Accounting Today’s list of the Top 100 Most Influential People in Accounting.

But the answer to differentiation is actually straightforward, he says.

“The real successful model of a CPA firm is one that’s proactive, that can satisfy the client’s needs—maybe in ways that they don’t know,” says Rosenberg, who is also founder of The Rosenberg Survey, an annual survey of midsize CPA firm performance statistics. “Accounting is all about people—listening and providing and being with your clients and inspiring and mentoring your staff to figure out what clients want and delivering it—and then some. Accounting is just a tool to get to what clients really need: advice on all affairs directly and indirectly related to financial.”

Rosenberg says that many firms buy into the idea of accountants being proactive advisors; many construct strategic plans to develop such a firm, but they fall short on execution. “They might devote part of a retreat to it once a year. They might even come up with a document, but they don’t have a clue how to implement it.”

Other firms may say, “We partners all got together and decided this is what we want: to be trusted advisors to our clients.” But as long as each partner is individually left to determine to what degree he or she will be a trusted advisor and how to become one, that strategy goes nowhere, Rosenberg says.

Rosenberg says there are three requirements to moving beyond the strategic plan and actually becoming a firm of trusted advisors: discipline, accountability and management.

Discipline: When each partner averages 1,100 to 1,500 billable hours per year securing clients, meeting with clients, getting the clients’ work done and overseeing work being done for clients, they find little time to actually manage their firms and nurture the staff. But Rosenberg says active management is critical to developing a firm of trusted advisors. Delegating duties to others and sticking with the delegation requires discipline. “Well-managed firms hate to see their partners doing work that could be done by a staff person,” he says. “Walking the talk is the magic answer. You know that’s the right answer, but what are you doing to make it happen?”

Discipline is also required to develop leaders through mentoring programs to ensure that staff rise to become partners and ultimately become ready and capable of taking over the clients of older partners as they get close to retirement. Rosenberg points out that failing to do this is part of what has caused the recent merger frenzy in the accounting industry. “The vast majority of the firms that are merging up into bigger firms do so because over a period of many years, they were unable to develop staff into partners to succeed them and are thus unable to keep the firm going,” he says. “Eighty percent of all CPA firms fail to reach the second generation, and we’re not just talking about sole practitioners.”

Accountability: To develop a firm of trusted advisors, Rosenberg says, everyone—including partners—has to be held accountable for their role in becoming consultants. “If there are no consequences to failing to achieve a goal or an expectation, then it’s less likely that the goal or expectation will be accomplished,” he says. “There’s a reason why the top 100 firms are the top 100 firms. They get it when it comes to things like partner accountability.”

Rosenberg once worked with a firm where a partner had been a partner for 30 years but was committing numerous transgressions against the firm. “He was late collecting his receivables, he was late billing clients, he was abusive to staff, his client base was shrinking, nobody knew where he was during the day,” Rosenberg says. “At the group meeting, of seven or eight partners ... I started out by saying, ‘I don’t know what’s worse, the fact that he has committed all of these transgressions or that all the rest of you let him.’”

“Partners really have a tough time holding partners accountable,” says Rosenberg. “It’s the firms below the top 100 that struggle mightily with accountability.”

Management: Intervention and coaching by management is necessary for helping personnel at all levels to achieve the firm’s core values. “The real thing you need is a managing partner or a management group that really takes their role seriously in managing the performance and behavior of other partners,” Rosenberg says. “It’s not hitting them over the head—‘Did you do the goal? Did you do the goal?’—but it’s ‘How are you doing, and how can I help you?’”

Good managers will also set firm-wide goals that will incentivize and nudge their partners to offer advisory services and to develop staff appropriately, and these goals should be tied to partner compensation. “Don’t just allocate income strictly based on hard-core production statistics. Those are important and they should be a big factor, but we’ve got to look at other things. We can’t just talk about them. You have to have specific goals.”

Achieving accountability can be difficult, but finding a way to hold partners responsible ensures that partners meet their own goals and that the partners’ goals will mesh well with the firm’s overall objectives. Rosenberg says firms have many means available to achieve partner accountability. Below are 10, in order of usage by firms but not necessarily in order of the most effective, according to Rosenberg:

1. Compensation
2. Meeting with the managing partner for some “behavior modification”
3. Upward evaluations of the partners by the staff
4. Peer pressure
5. Partner evaluations
6. Partner goal setting
7. Client satisfaction surveys
8. Living and breathing the firm’s core values
9. Clarifying the roles and expectations of each partner, “with crystal clarity”;
10. The “door” (i.e., termination)

To learn more about the partner-level changes that successful accounting firms make, download the complimentary eBook, Next-Level Accountants: Your guide to growing a firm of trusted advisors.

Mary Ellen Biery is a research specialist at Sageworks, a financial information company that provides financial analysis and valuation applications to accounting firms.

Motivating Partners to Develop a Firm of Trusted Advisors | NOVACON INSIGHTS | NOVACON, The Payroll & Accounting Company