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CPA
Leadership Report |
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CPA Leadership Report is made possible by the generous support of the sponsoring companies. |
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Promoting Continuous Improvement in CPA Firm Leadership. |
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We conducted a survey of 30 of the most influential consultants to the accounting profession to ask their opinions of the state of accounting firm management. The comments made by many of the respondents will be of great value to the profession. Our survey question was: How effective is the management of middle market CPA firms? Please rate on a scale of 1 to 10 with 1 being very ineffective and 10 being highly effective.
The average rating by these astute observers was only 5.21. The consultants
were asked to take into consideration any of the specific elements of
“management” such as: structure, recruiting, planning, decision making,
learning, administration, etc. Here is a summary of their comments: • Most practitioners are effective in one, maybe two management skills, but not all. • Management simply is not valued highly. • Leadership is often by committee or requires consensus. This hampers the ability to implement change. • Firms are ineffective in offering additional services to their clients. • There is not much long-term planning beyond defining specific niches or specialties. • Firms that plan well do not implement well. • Firms are over managed and under led. • While there does not seem to be a correlation between great management and profits, many profitable firms will be challenged in the near future. • There is a pervasive lack of accountability and commitment. • There is an eternal conflict between rainmakers and their unwillingness to follow firm policy. • The managing partner is often the top rainmaker and has little time for managing.
• Marketing professionals are not involved in guiding their firms’ practice
development programs. Breadth of Management Skills Making Auditors Proficient in Abilene, Texas, says that “effective management involves so many aspects that for a middle market CPA to be able to manage all the pieces is difficult. . . . Some may manage the technical practice issues well but not the personnel issues. Others are strong in people management but weak when it comes to managing the firm for maximum financial profitability.”Management is Not Valued Highly Allan Koltin of PDI Global in Chicago, relates a true story of a partner who was on a restroom break from a partner meeting and returned to find that he had been elected the new managing partner. This kind of organizational behavior goes hand in hand with the unwillingness of partners to be managed. “But, in the truly great firms,” says Koltin, “partners have embraced leadership and are not only willing to set individual goals but are also of the mind-set that it is good to be coached and held accountable for greater achievement.”Organization Structure and Leadership by Consensus Rick Solomon of The Solomon Company in Stony Brook, New York, believes that the primary cause of failure of CPA firm management is structure Solomon says: “Very often I observe firm leadership by committee, or leadership that requires consensus. Unless everyone agrees, which does not happen very often, not much happens. The problem is aggravated by the partners’ awareness of issues that need attention and they often have solutions that make sense. However, they are hampered in their ability to implement change because of this management structure. My suggestion is a CEO type of leadership with accountability and reselection after a specified term.”
Charles McCann, consultant in Kansas City, Missouri, says:
“Too often the firm’s organizational
structure together with the way it compensates owners gets in the way of
progress. Improve the structure and the compensation methodology and let
management have a chance.” Firms are Ineffective in Offering Additional Services to Their Clients Bob Lewis of Visionary Marketing in Palatine, Illinois, says that firms are deficient in the client mining process. Lewis reports that firms send letters offering services to all their clients instead of those who fit the appropriate profile. For example, there may be only 50 clients who are at the appropriate age and income levels for estate-planning services, but the firm sends out 1000 letters. “The return from the 1000 is limited because 950 do not need the service. The firm becomes conditioned to expect this type of marketing to have limited success so they do less of it. The 950 clients who get communications about services they do not need become conditioned to ignore any correspondence from the firm,” says Lewis.Limited Long-Term Planning “There is often not much planning beyond defining some niche or specialty,” says Rick Solomon. “Firms would do well to develop more in-depth strategies in chosen market areas, create action plans for implementation, and establish measurements along the way to monitor progress so they can make corrections as necessary.”
Irwin Freidman, retired managing partner of a top 25 firm and now a
consultant in Chicago, says that
"generally firms that decide to plan are pretty good at it, but poor at
implementation. When specific action plans with responsibilities and target
completion dates are established, there are little or no consequences for
failure.” Firms are Over Managed and Under Led Troy Waugh of Waugh & Company in Brentwood, Tennessee, notes that “MAP studies and consultants have helped guide better management, particularly in the areas of profit planning, billing and collections, scheduling, and the like. However, leadership of accounting firms is woefully in short supply. Answering questions such as: What are we about? Where are we going? Whom will we serve? Who is going with us? and then influencing good CPAs to carry out this mission and vision is only being done by a select few firm leaders. Many accounting firms are content to over manage a dwindling or stagnant supply of clients and staff.” CPAsnet.com in Princeton, New Jersey, gives us a formula for the right kind of management for middle market firms, which he defines as firms with $5 - $25 million in revenue. “These firms,” he says, “continue to be managed by entrepreneurs who are looking to establish sustainable organizations based on niche or technical specialty. They attract good technicians, seek non-CPA expertise when needed, and are turning over administration to nonpartners.”No Correlation Between Great Management and Profits?
Sam Allred of Anderson ZurMuehlen &
Co. in Helena, Montana, observes that there is not a high
degree of correlation between great management and profits. He says,
“Many firms though will be challenged in the near future as they retire
key partners who have played significant roles in building their firms. They
do not have transition plans in place to retire these partners and most
firms are facing an unfunded retirement of partners.” Lack of Accountability and Commitment
Allred also notes: “Firms are struggling to
deal with under-performing partners and with a lack of accountability,
commitment, and a compelling shared vision that really motivates all
employees to give their very best efforts every day.” Conflict Between Rainmakers and Firm Policy
Says Irwin Friedman,
“Firms are afraid these partners will get
upset and leave with their clients. The firm agreement should provide severe
financial penalties for such actions and give management better leverage to
deal with these individuals.” Managing Partner is the Top Rainmaker
Rich Rinehart of
Grant Partners
in Denver, says:
“When the managing partner is the top
rainmaker and has the largest book of business, there is little time for
managing a thriving organization. It’s no wonder so many middle market firms
find themselves stalled at their current size.” Marketing Professionals are Underutilized Sally Glick is chief marketing officer of J.H. Cohn in New Jersey. She observes: “ Many firms encourage their marketing directors to be coordinators involved in tactical implementation rather than strategic planning. Few of the accounting marketers I meet at AAM (Association for Accounting Marketing) are really involved in guiding their firms’ practice development. There are some senior, highly talented and experienced marketing professionals, but on average they are still not receiving respect and credibility from the firms. This may be related to the age old charge- hour problem.”
If you would like to contact any of the consultants quoted in this article,
please click on their name to send an emails:
Jerry Anderson
Allan Koltin
Rick Solomon
Charles McCann
Bob Lewis
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