12 Practice Management Blunders: Part 3 of 3

Providing consulting services to CPA firms is a great job. We get to work with dozens of successful, hard-working firms every year, which puts us in the enviable position of observing best practices and practices that are, well, not so good. The latter enables us to share with firms how to make changes that will improve their practices.Professional with head on desk.

We see 12 practices over and over again that are either ineffective, poor choices or misguided. In this three-part blog series, we share these practice management blunders with you. This is Part 3.

View Part 1 of the series here.

View Part 2 of the series here.


8. Waiting until a partner is a year away from retiring before beginning succession planning

We learn a lot from our clients. One of the best MPs we ever worked with shared this gem: “Succession planning at our firm begins on the day we get a new client. We immediately begin servicing new clients by introducing them to a team. We want our firm to be firm-centric instead of partner-centric. This way, if the lead partner should suddenly leave the firm or retire, the clients will stay with us because they value their relationships with other firm members and the expertise they have.”

Waiting until a partner is close to retirement is too late. Successful succession planning takes many years to achieve:

  • Training and mentoring staff, helping them learn and grow, thus grooming them to be partners is a life-long duty of partners.
  • Transitioning deep, long-time client relationships takes much more than a year – more like three years or longer.
  • Transitioning the expertise, especially if it’s a specialty area. It takes many years for the successor to learn the new area.

Succession planning is a never-ending process, not a one-time event.


9. Never having partner retreats

A partner retreat is (hopefully) an annual event where the partners get away from the office to discuss “big-picture” issues: planning for the future, getting to know each other better, enhancing communication between the partners, creating or revising the firm’s strategies and vision, forming goals and resolving problem areas. Firms that convene regular partner retreats are usually more successful than those that don’t. Many firms point to past retreats as watershed events where successful strategies originated and key decisions were made.

You may read the above paragraph and wonder: “Why wouldn’t a firm convene partner retreats?” Here are reasons/excuses we hear all the time from CPA firms:

a) The firm has never had a partner retreat and really doesn’t understand what a retreat is.

b) The partners had retreats before and there was no follow-up. This is why some partners feel that retreats are a waste of time. Does that mean that retreats are a bad idea? Of course not. It simply means that either the retreat was not organized properly or that there was no accountability or follow-up. Or both.
c) The partners feel that spending time at the retreat takes them away from doing client work, which is the obvious way the firm makes money.
d) The firm convened retreats in the past, with the MP leading the meetings. This is often a mistake because (i) the MP is too dominant and the partners don’t speak up, (ii) the relationship between the MP and the partners is such that the partners stop listening to the MP, or (iii) the MP really doesn’t understand how to lead a retreat. This is why many firms –most over $5M – hire an outside facilitator, ideally one with years of experience working with CPA firms.

A skilled facilitator:

    • Helps organize the meeting.
    • Gets participation from everyone instead of letting a few dominate (MPs, are you listening?).
    • Ends each segment with goals and action steps to implement.
    • Engages the group in a discussion about how the firm will implement retreat ideas and where accountability for carrying out action items rests

The late W. Edwards Deming said: “An organization cannot understand itself. People within an organization may know what they are doing, but they will not by themselves learn a better way. Their best efforts and hard work do not provide an outside view of the organization. This is why a consultant, particularly one with expertise in your industry, can have a profound impact on an organization.”

If your firm is not doing retreats, it’s not because they don’t work.


10. Developing staff is a minor factor in allocating partner income

Virtually all CPA firms will say that their staff is just as important as their clients. But they fail to walk the talk. If their staff were that important, then it should be a major factor in allocating partner income. Just like bringing in business, managing a large client base and billable hours. Maybe not as important as these big three metrics, but an important factor.

Sadly, in our work with hundreds of firms on partner compensation, developing staff is a very minor compensation factor. Indeed, at many firms, there is NO factor for staff development, especially at firms that use compensation formulas. What a huge mistake.

At a partner retreat a few years ago, the partners were moaning and groaning about the inadequacies of their staff. After the umpteenth partner repeated this refrain, we asked the partner group: “What have you done to help the staff become successful?” Dead silence. Then one partner asked: “Are you suggesting that we, the partners, should help our staff advance? No one mentored us when we were their age!” This preposterous perspective contributes to higher than average turnover.

There’s a saying in the management arena: “You get what you reward.” If there is little or no factor in the partner compensation system for developing and mentoring staff, how in the world can you expect partners to dedicate sufficient time, effort and focus to helping staff advance in the firm?

CPA Partner Compensation: The Art and the Science explains ►Partner comp 101 ► the 12 systems used by all firms ►how to design your firm’s system ►open vs. closed systems ►the role of “book of business” ►differences between large and small firms’ systems ► the MP’s compensation ► trends and controversies and ►overall best practices.

Purchase your copy today!


11. Creating a strategic plan before a means of partner accountability is established

We love strategic planning. We firmly believe effective strategic planning can be a game changer for firms. But of all the consulting areas in which we help CPA firms, far and away, strategic planning is a project we turn down initially more often than others. Why? Because the rejected firms concede that they have little or no partner accountability. We can get to strategic planning, but accountability has to be addressed first.

A strategic plan doesn’t get implemented by itself. The goals and action steps that support the strategy and vision must be assigned to human beings, mostly partners, to get done. But if there are no consequences for a partner failing to achieve a goal or action step, it is unlikely that anything will be achieved.

So, before you spend a lot of time and money on creating a strategic plan, make sure you have the means of holding the partners accountable for their performance and behavior.


12. Keeping your staff in the dark about how the firm operates

For reasons that make no sense, many CPA firms are unnecessarily secretive about sharing internal financial and operating information with their staff. They seem to go out of their way to keep things secret that don’t need to be. This is a huge mistake.

This from Keith Lamb in an Inc. magazine article: “Engaging your employees – involving them in the business – can drive revenue and profit growth. An educated workforce can also make better decisions, work more efficiently and seize opportunities faster. Teaching your staff to be smart businesspeople can be a big investment but it’s one that can have a significant return.”

Staff should know:

  • How they fit into the firm.
  • How the firm makes money.
  • What holds back profitability.
  • What basic metrics and ratios are used to manage the firm, what those statistics are, and how they compare to industry averages (partners, don’t get upset; we are not suggesting you divulge what each partner earns).
  • Current trends in the CPA industry.
  • How firms are managed.
  • How firms get and keep clients.
  • The best practices of well-managed firms.

When staff know how they fit in, are told the “score” and made to feel that they are an integral part of the firm and not just peons, they will be happier, more productive and engaged.


The 12 Blunders Wrap-Up

If you’ve followed this three-part series, you’ve heard 12 practice management blunders we see time and time again. Surely some of them are not a problem for you. But, just as likely, some may sound a little too familiar. What’s next for those items? Start with accountability, then prioritize the others and get to work.

Need help along the way? Get in touch with our team – we’d be happy to offer guidance to our readers.

Get our expertise delivered to your inbox.

"*" indicates required fields