BKD’s Secret Sauce – Inside One of the Nation’s Premier Firms
Marc Rosenberg, CPA
My Chicago MP roundtable group brings in a renowned leader of a major regional CPA firm once a year. Our most recent guest was Ted Dickman, MP of BKD, the 12th largest firm in the country with annual revenues of $500M, 260 partners and 34 offices. Here is BKD’s “secret sauce.”
How is BKD so wildly successful and profitable?
To be a partner, you’ve got to believe you can make BKD money. No partners are allowed to coast. Team play is highly valued at our firm. Realization is very important to us; we don’t want to compete on price. Specialization is required. We’ve focused on developing niche practices for 25 years – this is not new to us. Our culture drives our success.
Strategy and culture
To succeed at BKD you need to specialize. We believe there is tremendous potential in A&A and tax and will continue to focus here. Our goal is to provide unmatched client service. We carry no debt and have healthy reserves. We push for above-average earnings to attract and retain the best. We have a culture of “running the play that’s called.”
How does BKD teach practice development skills?
Our in-house Sales Training Institute – everyone above 7 years’ experience attends. We strongly encourage partners to take staff along on sales pitches. We have many internal firm initiatives such as accountability for targeting clients. Bringing in business is a criterion for being a partner.
Merger strategies
“No one merges to make less money.” Unless a great opportunity comes along, we have little interest in developing a major presence on the coasts. Chicago is a target market. Merger candidates must share one or more of BKD’s specialties. Sellers with weak metrics (profitability, billing rates, realization, etc.) are a turnoff to us because of our high standards for profitability. We generally are not interested in retirement-minded sellers. Though our policy for mandatory retirement at 62, for mergers, we will go to 65, that’s it.
BKD has two types of partners
“We want everyone to have skin in the game.” We do not believe in the non-equity partner concept. We have two types of equity partner: Tier 1 consists of newer partners and others who have yet to qualify for Tier 2 status. In most cases, it takes 5 years to progress to Tier 2, which is 90% of all partners; they are the main builders of our practice.
Partner compensation system
Performance driven; no formulas. Essentially no comp committees. Instead, comp is driven by 17 key PICs, all of whom have very small client loads. Local office profits drive earnings of partners within each office. No one year makes or breaks a partner’s earnings. Tier 1 partners’ comp is closed; Tier 2 partners’ comp is open. We have a one one-tier compensation structure: no interest on capital or bonus. Capital requirements are adjusted to be proportional to earnings; 35-45% of comp. Overarching performance criteria: team play and growing the business.
Partner retirement system
Mandatory retirement at 62; average BKD partner retires at 59. Few work part time after retirement. Full vesting comes at 30 years of service and 20 years as a partner. Tier 1 partners receive 1 x average comp and Tier 2 partners receive 2 x comp. Payout is 10 years.
For more insight into the management practices of the most highly successful firms consult our monograph CPA Firm Management & Governance.
4 Comments
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I was initially put off by Mr Dickman’s comments. Money (BKD money!) seems to be his main focus.
But then I realized – after reading this article, I know more about how to make partner in BKD than I know about how to make partner in two cpa firms that I had worked in!
BKD has a value system, and a partner development track, and Mr Dickman gave a clear, succinct articulation of it.
My firm may have different values, but I can see now that I haven’t been clear and direct about articulating them.
Jim. Great thoughts. How can you fault a firm for being crystal clear about its strategies and culture, even if others might not be comfortable with it. If you get to know Dickman and the BKD culture, you would see that they are very passionate about maintaining high standards in client service, work quality and treatment of its people, all in addition to maintaining a strong culture. Many think that commitment to these standards is mutually exclusive to making good money. But CPA firms CAN simultaneously pursue both. CPA firms CAN walk and chew gum at the same time.
He said they don’t believe in non-equity partner concept. Their website shows managing directors. Are they simply what other firms would refer to as managers? Where does that level fit in their hierarchy?
A big factor in the success of the non-equity partner position at CPA firms is making it clear to the outside world (clients, referral sources and especially, internal personnel)that these people are “partners.” The non-equity partner concept is doomed if they are treated as second class citizens by the equity partners and/or the equity partners make it clear to certain people that “so and so” is just a non-equity rather than an equity partner. BKD’s web site says “Partners and Managing Directors.” I honestly don’t know what a Managing Director is. At some firms, they are the equivalent of equity partners. But I’ve also seen firms use this title for non-equity partners as well as a level below non-equity partner and above senior manager. I wouldn’t put a lot of mental energy into what BKD is doing with their titles because there are so many firms that have their own way of handling titles, which is their prerogative. Thanks for the comment!