Bad Behaviors By Partners… And What Management Should DO About It
Marc Rosenberg, CPA / Jun 10, 2020
In my experience, roughly 60% of all CPA firms (below the Top 100) have either major partner conflict or a pronounced lack of effective partner communication and/or relations.
This is a huge problem because unless the partners of a firm work reasonably well together, it is very difficult for their firm to be truly successful. I’ve always been a believer of the adage “partners who play well together do well together.”
How do conflicts arise? What causes partner relations to suffer? Perhaps the biggest factor is bad behavior by specific partners. As I write this, I feel like a grade-school teacher talking about his students, but sad to say there are more similarities between the misguided behaviors of grade school students’ and CPA firm partners than you think.
When these negative behaviors are exhibited, partners are annoyed and upset at the conduct of the misbehaving partner. Partners’ natural anxiety over dealing with conflict usually results in the key players avoiding the disputes. But the negative feelings don’t go away, resulting in sort of a cold war or stalemate when bad behaviors are not addressed.
Here are some bad behaviors I see over and over again by partners.
1. Partners say that the firm’s staff are just as important as clients, but they don’t act like it and they certainly don’t allocate their time like they mean it. The worst behavior is when a partner treats staff disrespectfully or abusively.
2. Always coming up with excuses why they didn’t perform a basic partner duty (bill on time, collect receivables, deliver client reports on time, delegate, etc.).
3. Partners are jealous of those who outperform them instead of feeling overjoyed because the firm is fortunate enough to have highly productive owners. Some of these lower-paid partners (not low paid partners) are resentful of higher-performing partners’ higher compensation. Making matters worse, some high-performers “rub it in.”
CPA Firm Partner Agreement ESSENTIALS is the resource for the 75% of firms with partner agreements that are outdated or missing critical provisions, and the 20-30% of firms that don’t even have a written partner agreement. This book incorporates hundreds of best practices including ► voting, ► ownership percentage and capital ►non-solicitation covenants ►partner duties and prohibitions ►mandatory retirement ►non-equity partners ►death and disability ►managing partner authorities ► executive committees ►clawback ► new partner buy-in ►ownership percentage
4. There is a tendency for partners to feel like they’ve “made it.” Almost like a monarchy, feeling like their actions are never to be questioned. Their attitude towards accountability, never voiced publicly, goes something like this: “I’m all for partner accountability as long as it doesn’t affect me.”
5. Objections by lower-performing partners to making the partner compensation system more performance-based because they don’t want their “free ride” to end. A frequent refrain: “I don’t need comp to motivate me.”
6. Partners reach a point where they manage a large client base, have been partners for many years and earn a great income. They become satisfied, somewhat complacent and coast. A feeling like “I would be perfectly fine if things stayed the same and nothing changed” (a recipe for stagnation if there ever was one). Other partners who are hustling every day to grow the firm naturally become resentful of the coasters.
7. A partner does too much staff-level work instead of delegating it to staff, offering as an alibi that the staff aren’t qualified to do the work because they aren’t trained well enough. This of course is a Catch-22 – part of the reason the staff are poorly trained are that some partners hog all the work.
8. Rainmakers consistently abuse the firm’s policies and procedures. They think they can get away with anything because they feel the firm lacks the courage to do something about it (and they’re probably right!).
9. Partners publicly agree with the firm’s vision and practices but privately, bad-mouth them or fail to comply with them.
10. Lacking good organizational and time management skills, partners give staff last-minute projects with a tight deadline. Then the work sits in the partner’s office for 3 weeks.
11. No one knows where certain partners are.
12. I asked a partner a while back: “Why don’t you market? His appalling response: “No one else markets so why should I?”
13. Negative Nellies: “Goal setting is not for us. We tried it a few years ago and it didn’t work.”
How to deal with underperforming partners
Performance and behavior issues must be addressed as they arise. Don’t ignore them hoping they will go away and resolve themselves. Remember, shoving problems under the carpet only creates lumps.
Identify the conflicts and problems. People can only change when they acknowledge that they are part of the problem. The offending partner must not attack, defend or withdraw.
Clarify expectations. Make it crystal clear what the firm expects of all partners and what the role and expectations are for each specific partner. Then, each partner is formally evaluated against these criteria.
An intervention by the MP. The MP should meet with the underperforming partner and have a serious conversation about necessary changes and repercussions if they are not made.
Peer pressure. One of the worst feelings partners can experience is when their fellow partners make it clear how unhappy they are with their behavior. This is why peer pressure can have a profound impact.
Performance-based compensation, which includes a meaningful factor for adhering to the firm’s core values. If you want to blatantly disregard the firm’s culture and policies, you’ll pay for it with lower comp.
Make sure your partner agreement includes a provision to terminate a partner for bad behavior. If this provision is missing in your partner agreement, there could be legal repercussions involved for this type of termination. (Let’s hope this provision is never invoked, and is instead addressed via the tactics above.)
Every firm needs to ask: Is our partner agreement current? Does it protect the firm? Do we even have one? This book covers every major section of a properly written agreement: partner buyout, new partner buy-in, ownership percentage, voting, non-solicitation covenants, partner duties, mandatory retirement and non-equity partners.Learn More