Powerful insights for ALL partners
DISASTERS DO OCCUR
Do you have a disaster recovery plan? With Climate Change impacting many business it is now more important than ever to ensure the continuity of your accountancy business in the event of a natural disaster.
On a very wet day here in England we might have 10mm of rain – maybe a little more. This month in Bristol, where I am based the ‘heavens opened’. By 7am there had been 26mm and by the end of the day 35mm. The result? Severe flooding with ensuring chaos on the roads and homes and offices submerged as the local River Avon breached its banks.
With natural disasters occurring more frequently and with technology increasingly taking over our businesses, having a written and tested disaster recovery plan is essential. One of my clients told me that if everything was lost they could be up and running within 48 hours because everything is backed up remotely. You might not think your office is in a flood plain, in the path of a hurricane, in an earthquake or tsunami risk area but are you really sure you can survive a disaster? Recently, I visited the nearby city of Bath one morning and saw a small family jewellers shop had been burnt to the ground. Police stood by and blue and white police tape surrounded the area.
Did that business owner ever foresee disaster on such a scale? I suspect not. I only hope they were fully insured. Be prepared and be covered; your partners, staff, family and clients all deserve a well-protected professional service firm.
KEY QUESTION: Your Files – What needs to happen for your files to be more consistent?
MARKETING THOUGHTS AND OBSERVATIONS
Quotes from Managing Partners at a Round Table Meeting:
“You have a marketing culture when partners want to spend money on marketing and don’t seek to cut the budget in tough times.”
“Before telling managers they are in line for partnership they need to show they can win business doesn’t usually work. The time to start staff marketing is when they start working for the firm.
“Marketing is an all year round activity – even in busy season. It’s offensive activity not offensive. You almost certainly need to raise the bar, invest more and do more in this area.”
“Ask for referrals. It takes clients to find new clients.”
Private Equity – mergers and acquisitions will continue apace. In the UK and USA there has been rapid growth in PE. The injection of much needed capital. Baby boomers looking to exit. Just two of the drivers in an ever-changing marketplace. It may be your firm that is merging – or it may be another firm in your area. Depending on which situation you face, there is either a threat or an opportunity. Clients can be unsettled when their accounting firm makes a significant marketplace change.
If another firm in your area merges, take every opportunity to talk to the clients of the merged firm. Ask them “are you being served how you think you should be?” In reality, this is an opportunity for those clients who were dissatisfied before the merger to find a new accountant. Conversely, if you have merged or are planning to merge – you are on notice!
Often the focus of conferences for firms is how to motivate and better manage partners. Let’s start with accountability…
A few questions:
- Do you carry out partner evaluations?
- Do partners know what is expected of them?
- How are they being held accountable?
- Do they know what is not acceptable in terms of behaviour or performance?
- Are they playing by the rules?
The very best firms do a really good job in these areas.
One approach for enhancing accountability is to have staff rank the partner on a 1 to 5 scale for how it was to work with them. This focuses partners on helping staff to develop. Mentoring should be a high priority in every firm. The fact is that partners can be very poor at this, sometimes even dangerous! Start this approach at manager level – if you leave this until they become a partner it is probably too late.
Admitting new partners
“People need to know how to get ahead in your firm.” While some may be content to achieve a position which pulls up short of being a firm owner, others may have the desire to become an owner pulsating through their veins every day. They will and do have questions – you don’t wish to lose your brightest talent to another firm who will gladly open the pathway to the Holy Grail known as partnership. They might want to know the answers to questions like the ones listed below.
14 Key questions some new partners ask. Questions you need to be able to answer.
- Why should I want to be a partner?
- How long does it take before I am offered a partnership?
- What are the standard requirements for partner?
- Do all the current partners meet the minimum standards?
- Will I ever make it with all these lifetime managers in the firm?
KEY QUOTE: “Failure to address accountability issues only ensures that the problems will continue.”Sam Allred
Upstream Academy, USA
- Where am I currently on the journey to partner?
- What is the schedule for partner retirements?
- What is the firm’s commitment, including financial, to outgoing partners?
- What does it cost to become a partner and how does the financial transaction work?
- What is the risk associated with becoming a partner?
- Is there training associated with becoming a partner?
- What are the attendant responsibilities with being a partner?
- What is the increase in remuneration and what is the schedule for pay increases?
- How does firm governance work and what role do partners play in the firm’s governance system?
It is important to recognise that accounting firm economics for many are probably unable to sustain and meet everyone’s aspiration to equity partnership. There is now a well-established practice of firms introducing a salaried partnership position. Some may never make the transition to equity – and they may well be content to not take on the additional equity partner commitment.
Are you all making the best use of our time? Is your time being invested at the highest level?
Administration work is at best non-core for a partner. What do you need to stop doing? In response to this survey question, the following activities were listed as work done by partners:
- Chasing information from clients
- Admin duties data entry
- Setting up files data imports
- Making copies
- Preparing tax schedules
- Ordering office supplies
- Writing up books
- Payroll reports
- Bank reconciliations
- What are you doing that you should delegate to others?
Making best use of time: I recently met with the managing partner of a four partner firm whose time records show that 50 per cent of his time is devoted to administration.
As I pointed out to him those 900 hours could pay for four or more full-time administrators.
Partners – equity and salaried partners
Many firms typically have 30-40 per cent of non-equity partners. “The future? This could eventually be a 1:1 ratio.”
KEY QUOTE: “Ask not what your teammates can do for you. Ask what you can do for your teammates.”Earvin “Magic” Johnson
Los Angeles Lakers
Typically a salaried partner will remain non-equity for a period of at least five years and it is possible that during this time it becomes clear that graduation to equity will not be offered. There are many [happy] non-equity partners out there! In any event, if they are still salaried after five years then they will probably remain as non-equity partners.
Equity partners income share
The profession needs to move on from equal or historical profit sharing and embrace having partners earn their profit share. August Aquila, an American Practice management Consultant, has written on this subject at length, but for now I am going to suggest that what I have been told by many managing partners is that what works is a basis that comprises 50 per cent salary and 50 per cent profit share.
“Equity partners’ income share is typically 50 per cent salary with the balance comprising profit and performance share.”
“Salaried partners need to demonstrate that they can build a sustainable practice – some are just building a ‘famous partner’ role that could be unsustainable.”
One of the challenges that many firms face is that once a certain level of income or income share has been attained there is an expectation that this will continue. It is a fact that you will improve financial performance if there are financial consequences for non-performance. This will drive behaviour like nothing else.
Let me ask a question and then allow me to provide an answer. “Are you good enough to get better?” The answer is “yes.” How do I know? Well, you would not have got through the manual to this section if you didn’t have more than enough capacity to continue and succeed.
It is essential to ensure your planning and management create challenge and change in your firm. Central to your plans should be addressing how you can make the firm more responsive to the ever-changing marketplace.
What are your challenges and opportunities? While you are doing this your partners are engaged in their world of serving clients and billing for that work. Your job is to lead them through a series of changes. It was once said that the only people that like change are babies with wet nappies. However working with accounting firms for over 30 years I have learned that getting partners to change is achingly hard work. It is a fact that partners need horsepower to make change. Your partners need stretching – and that is your job. Perseverance, encouragement and a stick are all part of a managing partner’s weaponry. There are always partners who struggle to cooperate – these are the ones who throw out the anchor or put their foot full down on the brake. It is important for you to remember that you are not the only one who has partners who resist change.
A few more questions for you:
- What are the partners doing to make the firm more united?
- How are the partners helping the firm grow?
- What are the partners doing to keep the firm safe?
- Are the partners cross-referring on technical issues?
- Are the partners maintaining or enhancing our standards?
- What are partners doing to help build the staff for tomorrow?
- What are the partners doing to develop themselves?
Coming up in February: Further insights from those who have been there and done it. In these challenging times there are opportunities around every corner. Make sure you do ALL you can to maximise the moment. I look forward to sharing more insights next month.