|
F
or this month’s profile of one of America’s best
accounting firms, we have chosen Goldenberg Rosenthal, LLP, located just
outside of Philadelphia. Goldenberg Rosenthal has been selected as one of
America’s top 25 firms by
The Bowman 100 Special Report. These firms are referred to by
Bowman’s
as the “Best of the Best.”
Average statistics for the top 25 firms in 2002
were:
|
Net Income per partner . . . . . . . . . . . . . . $ 451,000
Partner compensation . . . . . . . . . . . . . . . $ 441,000
Growth rate . . . . . . . . . . . . . . . . . . . . . . .
13.5%
Charge hours per professional . . . . . . . . . .
1,378
Net fees per charge hours . . . . . . . . . . . . .
$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.”
Among the many fascinating features of GR
is that its earnings are not
as high as the average for the “Best
of the Best” and this is a matter of choice. GR is not a
bottom-line-driven company according to Barry Braun, managing partner
for the last four years.
“The
bottom line is important, but not as important as the quality of life,” says Braun.
“If my partners said tomorrow they
wanted to increase the bottom line by ten percent, we could do it,”
he adds. Chargeable hours at other firms
are greater than GR. Partners average 1100 to 1200 chargeable hours per
year, managers around 1400 to 1500 and other staff a little over 1600.
“We may want to change that a
little, but not to the extent that we would sacrifice the quality of
life that is such an essential part of our firm’s culture.”
Yet GR equity partners earn an average of
$340,000 per year. Not bad for a firm that puts home life ahead of work
life. This should be heartwarming to many CPAs who want a high standard
of living plus the time to enjoy it.
We would like to point out that while our
profiles are generally of larger firms, readers from smaller firms
should not dismiss the comparisons to their firms. The practices of
large firms are what made them what they are, and those practices were
adopted when they were smaller firms.
GR was established in 1918 and now has 145
people including fifteen equity partners and six non-equity partners. In
the Delaware Valley, they are the largest firm after the Big Four.
GR is a high
quality firm with high quality products and a strong marketing culture.
They believe it is the firm of choice for any company that does not want
or need to be with a Big Four firm. Its depth and quality of services
cannot be matched by smaller firms, is equal to or better in some areas
than that provided by the Big Four firms, and offers better value and
better service. How does it do it?
Getting the
right people to do the right things is one of the answers. A few years
ago everyone in the firm read the book,
Good to Great: Why Some Companies
Make the Leap . . . and Others Don't
by Jim Collins. Inspired by this book, the firm arranged its business
into five areas: human resources, practice management, client services,
practice development, and quality control. Every partner participates in
these groups. Every group develops ideas and processes and sets
objectives to make the firm better. One of the pervading themes is
putting people in the right places. Everyone is valuable and no
one is discarded. Yet, Barry Braun still feels they will never achieve
greatness; but that may be an expression of humility. Furthermore, how
do you incorporate the quality of life into the equation that defines
greatness?
GR has been around a long time, and as a
result it has well-established, stable clients and an excellent
reputation with banks and other referral sources. Success breeds
success. But the management can’t allow its quality to diminish
because a reputation will not survive a diminished level of quality for
very long.
Barry Braun believes that firms whose
vision does not incorporate a mandate to continue to improve will
stagnate.
Services
In terms of
service delivery, GR is organized by industry niches. Its largest
practice areas are real estate and not-for-profit and it is very strong
in auto dealerships and technology companies. One unique area is
services for women entrepreneurs.
We wondered
why the auto dealer niche is still growing despite the considerable
amount of consolidation in that industry. Barry Braun says that
they have not been affected by consolidation. None of the large
consolidators have penetrated their marketplace and many entrepreneurs
who sold their businesses have either bought other dealerships or bought
their own dealerships back. So they have not lost business and their
practice continues to grow by bringing in additional dealerships.
Moreover, their revenues have increased because of an influx of cost
segregation, estate planning, management consulting, controllership
services, and investigative work for dealerships.
GR tries to
be a profit center rather than a cost center for its clients. That is a
key reason why clients come to the firm. It is their vision to be the
dominant non-national firm in the marketplace offering high quality
services to entrepreneurial, closely held businesses and help them to
become more profitable and meet their goals.
Recently, in
response to the requirements placed on public companies by the
Sarbanes-Oxley Act, GR has begun offering services to private companies
in the areas of internal audit, high level risk assessment, internal
control assessment and documentation, and internal audit development and
support. GR sees SOX as a strong growth area because private company
boards see value in adopting the practices required of public companies.
GR does no SEC work but is strong in audits and tax preparation and
consulting.
Marketing
Eighty percent of the new business is brought in by 30% of the partners.
“Some
younger
partners have gotten very good at practice development, but most
partners don’t really change that much,”
says Barry Braun. “If they were not
business generators from the beginning, they probably won’t become
business generators,”
he says. But some have improved by use of
outside trainers and personal relationship training. Partners have goals
based on their capabilities. Even non-rainmakers are supposed to
generate new business and 10% to 15% of partner compensation is based on
new business generated. “It’s enough to motivate partners to bring in
new business and that’s the lifeblood of any firm,” says Braun.
GR believes
it is important to be a niche specialist and that is the trend in the
accounting profession. Companies want accountants who have knowledge of
their industry. While rainmakers tend to generate business in areas
outside their areas of specialization, others do not. When
non-rainmakers become better business developers, they usually do it by
becoming knowledgeable and known in an industry. GR has encouraged
its partners and managers to become involved with the industries in
which they specialize and to stay in front of the bankers and attorneys
who work in those areas.
Every partner
has a formal marketing plan and the marketing director helps them
develop their plans and monitors their progress. Working with partners
to keep them focused on target clients is one of the most important
parts of the marketing director’s job. Working with staff people who
want to develop marketing and selling skills is also an important part
of the marketing director’s job.
CPA Leadership Report
believes that firms who use their marketing
directors (or partner in charge of marketing) in this way experience
greater growth than other firms on the whole.
Managing
Partner
The most
significant part of the managing partner’s role is to make sure people
reach their goals. “I am a
cheerleader and a little bit of a disciplinarian,” says
Braun. “But discipline is not really a big part of
our culture and it is not what I want or what the firm wants,” he adds.
“We don’t have a really competitive environment here. We position
ourselves with the right people and capabilities in each area to
optimize our growth. Partners have goals for new business and chargeable
hours, and there is a mentoring program to help partners improve. If
they don’t meet their goals, their income may suffer, but we are not
driven to a point that we will push someone out who hasn’t performed for
a couple of years.”
The
compensation system has been constructed in such a way that it pays
partners to bring other partners on a prospect call.
Conclusion
Having concluded this profile, we were not surprised to learn that GR
was chosen one of the 100 best places to work in Pennsylvania in the
50-250 employees category. The first part of the two-part process
of choosing these companies consisted of evaluating each nominated
company's workplace policies, practices, philosophy, systems and
demographics. The second part consisted of a comprehensive employee
survey. The winners were chosen by the Great Place to Work®
Institute using the same formula as the Fortune
"100 Best Companies to Work for in America."
|