Jan - Feb 2004    

CPA Leadership Report
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Firm Profile
One of the "Best of the Best"

 

 Whittley Penn has been consistently chosen as one of America’s top 25 firms by The Bowman 100 Special Report. Bowman’s calls these firms the “Best of the Best.” Average statistics for the top 25 firms in 2002 were:

•  Net income per partner $ 451,000
•  Average partner compensation 441,000
•  Growth rate 13.5%
•  Charge-hours per professional 1,378
•  Net fees per charge-hour $141
•  Total utilization 69.8%

      The Best of the Best firms are, according to Bowman’s, “the overall best through wise management and near excellence in performance that exceeds others in all areas of financial measurement. They grow faster, get paid more for their services, manage expenses better, take more revenue to the bottom line and enjoy higher compensation.”

Whittley Penn believes it is successful because of its faithful adherence over the last 20 years to two powerful principles—quality service and goal orientation. Larry Autrey, managing partner of Whittley Penn since 2000, observes that many CPA firms follow an illusive path to excellence—they attempt to do their best and hope for the best. That philosophy does not provide a standard against which to measure progress. Without a standard, the firm cannot know when to make changes. Autrey says “we really plan and work to our plan. If members of the firm are missing their goals, we try to help them find out why and how to reach them. We don’t just let it happen.” Whittley Penn rewards people for achieving their goals, but it also protects the quality of the work and the integrity of the firm. If members of the firm at any level feel pressured to do something they perceive to be wrong, they are urged to report it either to the quality committee or the managing partner. The firm solicits input from the members of the firm and urges them to present issues to the quality committee (consisting of all the department heads). Any reported issue must be resolved before a report or tax return can be issued.
 

There is a well-defined client development culture in the firm and all partners are expected to develop new business. If their business development skills are not strong, they get training to improve. Autrey says: “People who can build a business and get clients to like them enough that they will do everything with them are hard to find.” At Whittley Penn, few, if any, pure technicians become partners. The method of making partners is elegant in its simplicity. “You become a partner,” says Autrey, “when you have a $1 million book of business and the staff and the community think of you as a partner.” Competition is critical to the achievement of goals. Every month there is a posting of charge-hours with a comparison to goals. It is crucial to meet those goals and everyone struggles to stay out of the bottom half. Motivation is also key. One of the partners is a superb business developer and he campaigns every year to get his charge-hour goals reduced. His request has been rejected because he is evaluated on an overall basis, so if he exceeds his business development goals, it compensates for the deficiency in charge-hours. But, it is difficult to motivate the staff to meet their charge-hour goals if their leaders are not meeting theirs even though they know the deficiencies are counterbalanced in other ways. Since everyone is better at some things than others, this has been, and continues to be, a management challenge.

And though it is onerous for some of them, partners don’t shirk their business development responsibilities. Though partners’ unique abilities do not have equal value, compensation is relatively equal among the partners, a policy that Autrey characterizes as “socialistic.” The variation in partner compensation from lowest to highest is only about 20%. “My struggle,” says Autrey, “is that some day we won’t be able to treat everybody as equal any longer. What if a partner decides to slow down and forgets to tell us? What if someone does something of extraordinary value to the firm and wants this to be recognized beyond the bonus component in the compensation program? These are issues that are going to present management challenges for us in the future.”
 

4. Mentoring other partners. The firm believes that the managing partner must stay involved with clients in a significant way. Autrey bills about 1100 hours per year and the average partner in the firm bills about 1250. “The managing partner of a $10 million firm should bill about 1000 hours and for every $2 million above that there could be a 10% reduction."  It is their philosophy that all partners should be “working partners” including the managing partner. The managing partner isn’t the only one with management responsibilities. All partners have management responsibilities either as department heads or in some other roles such as liaison with one of the affiliated organizations.

The firm recently brought in a director of business development who will help the partners but not take over their responsibilities, and will also be responsible for training and marketing. Many of the partners are natural rainmakers.  In any given month about 30% of them bring in business. Those that are not natural rainmakers do everything they can to continuously improve. The previous managing partner and one senior manager are now going through the  The Rainmaker Academy. The best rainmaker went through it and is now teaching other partners. Troy Waugh, the CEO of The Rainmaker Academy, says that the course is designed for the “interested introvert,” someone who is interested in being a business developer but not in becoming an extrovert. Personalities don’t have to change to become rainmakers.