What it Takes to Become Partner: Staff Kept in the Dark

A CPA firm manager writes: I am a 32 year-old manager at an 8-partner firm who has no clue what it takes to become a partner. The partners never share any information regarding buy-in, etc. It’s really hard to plan for the future without all the facts. Since the firm was created only one person has been promoted to partner, and it seems that he has very little input on decisions. Should I be asking for this information from my firm? It seems like it’s a big secret. I would be really disappointed if my time arrives and I’m asked for a large buy-in. If there is no ownership percentage, how are decisions being made? I’m just all new to it. Thanks.

ROSENBERG’S REPLY: Partners, trust me. This comment is absolutely typical; such uncertainty is the norm, not the exception. The manager raises several points which I will address one at a time.

No clue what it takes to become a partner.  Partners tell me these days staff don’t seem to want to be partners. This is not entirely true. Staff tell me they do – but first, they want to know the criteria for becoming partner and how the financial aspects work. It’s perfectly reasonable to hesitate making a huge financial move until you know what the deal is.

Unfortunately this manager’s firm, like so many others, is keeping its staff in the dark. Firms reason that not putting partner criteria in writing enables them to retain total control over the decision, whereas if they publish the requirements, unqualified managers will wave these written guidelines in partners’ faces and begin applying pressure to be made partner. Worse yet, they feel that informing managers they’re not ready could cause them to leave the firm.

Most firms address this issue by publishing written guidelines for making partner that clearly state that the partners’ subjective, intuitive judgment will be an important criterion.

Well-managed, growth-oriented firms that want to develop young people into leadership positions need to be counseling staff – especially the stars – early and often about what it takes to become partners. If they don’t, they risk losing good people because their futures are unclear.

Partners don’t share any information on new partner buy-in. My friend and consulting colleague Jen Wilson constantly tells me that young people want transparency. If staff are on a partner track, they want to study details well in advance of becoming partner – how the buy-in works, how the buyout plan works, how their compensation will be determined, what the partnership agreement looks like, how decisions get made, etc. No one likes surprises.

Since the firm was formed, only one person has been promoted to partner. Without knowing the age and size of your firm it’s hard to say whether or not your firm is making new partners at an acceptable rate. But you should be assertive and proactive in every aspect of this process (stopping short, of course, of being obnoxious). Seek out as much information as you can. Ask questions.

It seems that the new partner has very little say in decisions. If there is no ownership percentage, how are decisions made? This is probably one of the most misunderstood aspects of managing a CPA firm. Very few firms of any size decide matters by voting. Most of my clients tell me they never take votes. They discuss the issue at hand. They look for consensus. And they make decisions. I love this quote from Tony Kendall, MP of 15-partner Mitchell and Titus: “I can’t manage this firm if I have to take a vote every time I want to make a decision.” So, how does a new partner impact decisions? By persuasively stating a case and getting other partners to follow. Just like any other partner. Voting has almost nothing to do with the vast majority of decision-making.

Another important aspect of this issue: Most well-managed firms follow the corporate rather than partnership style of governance. That means that most decisions are made by people elected or appointed to make them, mainly, the managing partner and the board. Exceptions are huge issues like merging, making someone a partner, etc. New partners need to understand that becoming a partner doesn’t carry with it the inalienable right to participate in every decision, large and small.

Developing staff into leaders is key to the succession planning process, but that’s only where it starts. For a step-by-step approach and examination of the different options available, consult CPA Firm Succession Planning: A Perfect Storm.