You Need More Partners: How Do You Get Your Managers Interested?

We all know that promoting from within is often the best path to continue a CPA firm’s success. The ability for long-term managers to carry on the client service practices you’ve developed over the years is easier than getting lateral hires up to speed and in alignment with your culture.

On this topic, we received the following question from a reader: “What are ways that we can accelerate the next generation to be partner material – to fill voids from retired partners and to generate needed growth? We have the strongest team of managers we’ve had in a really long time – one of our greatest assets. It would be a waste to not have four or five of them join the partnership in the next four to five years.”

Let’s take a look at common obstacles to promoting talented managers to accounting firm partnership, and what can be done to counteract them.

(We’re using the term “partner” to refer to anyone who has achieved a top leadership role as it relates to client service and people management. Some aspects of this article relate more to an equity owner, shareholder or equivalent; others, to income partner.)

Obstacle 1: They don’t know what it means to be a partner.

Sure, they know you work crazy hours and must make tough decisions sometimes. But do they also know that you love that risk/reward equation? That your compensation reflects the upside of this? And that you enjoy long-term relationships with your clients (even if they move to or start a new business)? Or perhaps that you’re talented at departmental, industry, office or organizational leadership – which has less to do with debits and credits and more to do with people and business strategy?

What to do

When was the last time you hosted a partner panel in which you had a fireside-chat type conversation sharing all the things you love about being a partner? Offering a look at behind-the-scenes responsibilities that partners take on, which managers might not even know about. What happens in partner meetings? How is the business of the firm conducted? It’s a mystery to them. The audience for this talk should primarily be partner candidates, those you think have some potential to continue to develop at the firm and possibly be a partner someday. Can it include some talented seniors who seem to have the “right stuff”? Absolutely.

Obstacle 2: They don’t know if they’re qualified, or if you’re interested.

Some managers may feel uncertain about their technical or interpersonal abilities. This lack of confidence may be a call for skill development, or an indication they think partners know “everything” (and they feel they don’t even come close).

What to do

Have you told them how you tackle situations in which you don’t know the answer? What resources you turn to when you need to solve a problem? For ongoing investment in their skills, offer to provide development on specific topics they want or need to learn, in a format that best suits them; e.g., formal learning, shadowing opportunities or 1:1 case studies/walk-throughs.

When was the last time you grabbed lunch with each talented manager and shared your genuine interest in their continuing growth as a leader, perhaps joining the partnership sometime? Have they heard this message from more than one partner? It feels good to be wanted. As a partner group, identify your firm’s future leaders and be sure someone is tasked with taking the time to have these conversations.

One other box to check is to be sure you have a path to partnership laid out for your firm. This is a written document that talks about what it takes to become a partner. What are the baseline requirements? What additional strengths or skills would be beneficial? Can they be imperfect and still be a leader? If they check all the boxes, will they automatically be made partner? Who decides? What economics does the firm need to have to admit a new partner?

How to Bring in New Partners: A Guide for Firms and Future Partners is written for firms fortunate enough to have staff with the right stuff to be a partner. Topics include: What a partner is these days • The path to partner • Skills and attributes that partner candidates must possess to thrive • Best practices and key concepts in bringing in a new partner, such as buy-in amount, ownership percentage, compensation, capital, and how voting works • The non-equity partner position and how it compares to an equity partner • What a new partner gets for the buy-in • Non-compete and non-solicitation agreements • Intricacies of the firm’s partner retirement/buyout plan works

Purchase your copy today!

Obstacle 3: Partnership (the job) isn’t attractive to them

Okay, okay, you’ve probably had all those conversations I described above, and you most certainly have at least a one-pager on criteria to be considered for partnership. But what if your favorite manager still gives you the side-eye as they text to their friend, “as if I’d ever want that job”? You’re getting strong vibes that, while you think partnership is pretty nifty, they seem to feel otherwise. What are they concerned about? And how can you shine a light in the shadows of their hesitancy?

What to do

• If they’re fearful of the legal liability or risk associated with CPA firm ownership
  • Share how you mitigate that for yourself. Being an owner in a CPA firm isn’t without risk, but in the grand scheme of things it’s not so bad. If they need a comparison, suggest deep sea welding.
  • Perhaps they have an outsized concern here because they’ve seen something go wrong with another business (other than deep sea welding). You may be able to compare and contrast with the more likely reality of a situation at your firm.
• If they’re not seeing a model of the life they’d like to live
  • If you’re the partner who’s working 3,500 hours per year, you don’t need me to tell you that no employee is excited about joining those ranks. But you’re likely not going to change your habits on a dime. Read on.
  • This may be an opportunity to showcase the many paths available at your firm, assuming you have at least some partners working closer to 2,200 hours, or better yet, a part-time partner who spends more hours with their family or on their hobby.
  • Don’t have that? If it works for your firm to have a partner with a more moderate production commitment, see if one of your managers wants to set the example. For every firm, it had to start somewhere!

Obstacle 4: Partnership (the economics) isn’t attractive to them

“You just have to pay us $500,000, and then in five years, you’ll start to see a big increase in your pay. And then, when you’re super old*, you’ll get a ton of money as a buyout.” A line like this used to have enough sway with partner candidates, maybe even yourself, but today, future leaders are more leery. How do they know the firm will continue to have financial success? How can they feel comfortable paying more than their mortgage to this business?

Huge buy-ins and/or low new partner compensation aren’t attractive to most of your Gen X and Millennial partner potentials. Huge buyouts are another red flag, as are unexpected additional contributions to join in on the real estate deal for the office, say, especially if their promotion raise was modest at best.

Not surprisingly, your firm isn’t the only one looking for new partners. There may be better offers with other firms or companies your fine managers might want to entertain.

*Super old to them, dear reader, not to you.

What to do

If you still require large buy-ins (> $250k), detail the economics of how their income allocation will be sizeable enough to cover paying this in over time, without needing to go on food stamps. Often an entitlement** to a share of profits makes this feasible. (**Make a note to give me a call about the whole entitlement piece someday.)

Even if you have a lower buy-in (say $50k–$150k), many partner candidates still struggle to understand how they could possibly have an “extra” $20,000 per year to pay to the firm for five years. Explain how compensation increases upon promotion to partner. If your firm’s philosophy is that new partners will not take home less than they did as a manager, let them know that. No one wants to, in a single conversation with their spouse, say, “I’m getting promoted to partner! We’re going to have less money for a while.”

Be transparent about all commitments required of partners. Beyond buy-ins, what are retirement payments and terms, and what about buying into other affiliated businesses? If it’s a great deal, explain how that works and why they shouldn’t worry too much.

And, of course, your profitability and philosophy on new partner compensation needs to be competitive with the marketplace.

Your plan?

There’s a lot here, and prioritizing a few key actions to shore up your partner-candidate pipeline could well be worth the investment of your time. If you choose only one thing to change or implement at your firm to increase the probability of getting more partners promoted from within, what would it be?