Why Does it Take So Long to Make Partner?
Earlier this year Accounting Today published a very interesting piece of research titled The Long Path To Partner. The polling question was: how many years does it take to make partner at your firm?
The results were:
- Less than 5 years 9%
- 5-7 years 12%
- 8-9 years 12%
- 10-13 years 30%
- More than 13 years 17%
- Don’t know 20%
I’ll wager that the “don’t know” firms are mostly in the 10 years or more categories, with the majority more than 13. So, I extrapolate that at roughly 50% of all firms it takes 13 or more years to make partner, which translates to a minimum age of 35. Why does it take so long?
The quick, expected response
I have asked this question of CPA firm partners on numerous occasions. Most say that it takes 14-20 years to make partner because it takes that long to acquire the necessary skills: technical, supervisory, leadership, interpersonal, ability to gain credibility with clients and bringing in business.
Contrast this to the medical and legal professions. Doctors are ready to practice in their late 20s and early 30s. Lawyers often make partner in their early 30s. Certainly no one would assert that the skills needed to be a CPA firm partner are more technically demanding than being a partner in a medical or legal practice.
A “business” reason?
At many firms, the promotion to equity partner depends on whether or not the firm can “afford” to add a partner. At some firms, there wouldn’t be enough clients to go around, so there may not be sufficient income to add another partner. Of course, if new partner candidates develop large enough client bases on their own, then there usually is no delay. Since 80-90% of new partners have yet to develop anywhere near a full client base on their own, the “business” reason for the long tenure often prevails.
How to Bring in New Partners is written for firms with staff who have the ‘right stuff’ to be partners and are seeking the best approach for bringing them on board. This book addresses ►what a partner is these days, ►the non-equity partner position, ►how firms develop staff into partner, ►determining how the buy-in amount ►what a new partner gets for the buy-in, ►how new partners get compensated, ►what ownership percentage gets determined, ►how voting works, ►how a new partner’s capital account is maintained, ►non-compete and non-solicitation agreements covenants, ►22 provisions of a well-conceived partner buyout plan
Is it a “be like Mike” issue?
Average partners at typical local CPA firms are in their early 50s, manage just over $1M of clients, have 20-25 years or solid experience, are very street-smart and earn $410,000 per year. At many firms, the existing partners want new partners to be like them – an awfully high standard for new partners to meet.
Why am I raising this issue?
Because the traditional model of operating a CPA firm is crumbling and that model has driven away many young, highly skilled staff unwilling to wait until they reach their late 30s or early 40s to make partner.
The fallacy in the “business reasons” for taking so long to make partner
The problem doesn’t lie with the new partners failing to qualify for a partnership. The real problem is that many existing partners often don’t perform two critically important partner duties: bringing in business and developing young people into leaders under their tutelage. Let me explain.
At larger, well-managed firms, clients are serviced with a firm vs. an individual orientation. Partners are expected to continually bring in new business and are not allowed to coast once they build up a $1M+ client base. Take this example that I have observed at many excellent firms.
When people are promoted to partner, many of the clients they serviced as a manager become their client responsibility as a partner. Also, other partners may transfer clients to new partners to build up their client responsibility. These two actions combined with the new partners’ own origination results in an overall client responsibility amount that is respectable for a first year partner.
What happens to the existing partners who “lose” clients when new partners are made? As true partners, they are now responsible for bringing in new business to replace the clients they transferred.
This process has two system requirements. First the firm must track business originated (Finding) and client responsibility (Minding) for each partner. At many firms, the Finder and the Minder are often two different people. Second, the firm’s partner income allocation system must be sophisticated enough to avoid (1) unfairly penalizing partners who transfer clients to others for the good of the firm and (2) windfalls to new partners who are the fortunate recipients of client transfers.
A complementary process to the above is the use of the non-equity partner position as a middle step between manager and equity partner. The non-equity partner slot becomes a partner-in-training position to train personnel to handle a large client base and to evaluate their ability to do this successfully. Once proficiency is attained, they may be elevated to equity partner.
With these systems in place, it becomes easier to offer partnerships to star managers at a much earlier age.
Shorten the path to partner.
Firms should take a serious look at their systems and criteria for making someone a partner. For the vast majority of partner-potentials, it doesn’t take 14-20 years to develop the skills and personality necessary to function as a partner. This will go a long way towards retaining the best and the brightest because they see an opportunity for rapid advancement coupled with the firm’s early recognition of their strong skills and personality traits.
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