Inside Look: How Plante Moran is Managed

My Chicago MP roundtable group brings in a renowned leader of a major regional CPA firm once a year.  Our most recent guest was Gordon Krater, MP of Plante Moran, the nation’s 11th largest CPA firm. 

Accounting Today reports their annual revenues at $375M.  Gordon has been MP since 2009.  His firm has been recognized by Fortune Magazine as one of the country’s best places to work for an astounding 16 years in a row.

According to Krater the firm’s philosophy is:  Optimize, not maximize.  “We could be 20% more profitable (PM’s income-per-partner is in the stratosphere as it is), but we’re not here to make the most money we can.  We make long term investments.  We are somewhat resistant to rules.  We’ll walk away from profitable clients if they are not a good fit for us.  We favor doing profitable work over low-realization work just to keep people busy.”

Succession planning.  “We just lowered our mandatory retirement age from 65 to 62.  If you want people to succeed you, opportunities for younger people must be continually created.  A constant question we ask our partners is:  Who are your successors?”

Acid test of being a good mentor:  “If a staff person you work closely with comes to you and says he/she is leaving, you haven’t been doing your job being close to the person.  I want to have the kind of partners where staff say:  “I want to be like him.”

How we achieve a people culture.  “Very simple.  As you move up the organization as seniors and managers, you need to demonstrate skills developing people.”

Developing new partners.  “If you are a manager on a job, you’ll become responsible for the client as a partner because it’s easier for partners to build their book this way vs. going out and finding new clients.  We actually limit our partners from having too large a book.”

Partner compensation.  “A big part of our compensation process is performance measurement.  We look at each partner’s staff development results, critical thinking skills and how entrenched the clients are with the firm.  Taking care of people is just as important as practice development.  Every partner has a two-partner advisory team that recommends income to our comp committee.  Our partners understand that the compensation process is more about the report card than the money.  We feel strongly that as long as the process is pure, the result will be good.”

All equity partners must do these two things:  “No one is exempt from practice development and developing staff. Equity partners have to be builders.  If you’re not building, you shouldn’t be an equity partner.”

The firm sets 2 main criteria for promotion from non-equity to equity partner.  Practice development and developing a specialty.  Staff development is required for becoming a non-equity partner.  “Half of our non-equity partners are permanent; the other half go to equity.”

Plante Moran struggles with getting staff to bring in business, just like other firms.  Here’s what they do:  (1) Partners do a lot of taking staff along on pitches.  (2) Classroom training in PD.  (3) We school staff on building their networks and staying connected.  (4)  After 6 years, we expect to see concrete data evidencing efforts and results.

Wealth management and partner compensation.  “Our wealth management group has $12B under management.  They obviously make a significant contribution to our bottom line, but all the profit goes into a consolidated pool.”

A final Gordon Krater nugget.  He calls every partner on his/her birthday.

Effective management and leadership is the #1 determinant of success at a CPA firm.  More than business-getting.  More than technical skills.  More than productivity.  Even more than talent.  Why:  because it’s management and leadership that makes all the other things happen.  Read our monograph CPA  Firm Management and Governance   to learn more about how managing partners do their job and how CPA firms should be properly managed and structured.