IN OUR OPINION, PERSPECTIVE #40 — AUGUST 21, 2017
(A Continuing Series for Leading CPA Firms)
MOVING THE ROCKS
“Tiger Woods did not always win majors with ease;
after his narrow victory in the 1999 PGA,
he slumped and sighed as if he’d been carrying
rocks uphill all afternoon.”
— John Updike
A CPA firm must move many rocks that are on the path to growth. In Our Opinion, if a firm doesn’t effectively address these rocks, it will not be able to grow at a satisfactory rate.
Here are six “growth path” rocks and how a firm can begin to move them:
- Ineffective Leadership and Governance.
- Need for a Broader and Deeper Menu of Services.
- Lack of a Strategic Plan.
- Poor Strategy Execution.
- Inability to Align Strategy to Goal Setting and Accountability.
- Price is Always Why We Lose.
- Many firms with unsatisfactory growth do not know what effective management and governance or an effective CEO look like. This environment creates dysfunction, bickering and infighting among senior partners and is a rock that needs to be moved.
- Firms that aren’t growing at an acceptable rate usually have a CEO who grew up in small firm environment without exposure to what it takes to operate a growing, dynamic firm. In these cases, the CEO is usually the biggest biller or best business development partner. In a growing, dynamic firm, however, the CEO is not the biggest biller or the best business developer. He/she is a person who has the broad responsibility to create a one-firm, firm first culture that drives revenue and profitability.
- We find that these firms also have too many part-time committees that get little, if anything, accomplished. As firms grow, more corporate structure is required. In addition to the CEO, firms need only two standing groups to drive growth and achieve success
- A senior management team, serving at the pleasure of the CEO, that includes a COO and office managing partners.
- An Executive Committee, not involved in day-to-day operations, that oversees the soundness of a firm’s strategic plan and execution of operating budget, addresses all partner matters including mergers/acquisitions, new partner admissions, terminations, compensation and discipline, makes sure that the partnership agreement is up to date and reflective of a firm’s governance needs, and evaluates the effectiveness of the CEO and the senior management team.
- Without a broad and deep menu of services, a CPA firm will have difficulty growing. If a firm doesn’t move from a generic accounting firm model to a professional services firm model built on a foundation of go-to-market industry specialization and an array of advisory/consulting capabilities, the firm will be bump into another rock on the path to growth!
- A firm attracts and retains marquee clients by adding value through industry specialization that demonstrates a knowledge of an industry sector and the ability of bringing solutions that help address business challenges.
- The greatest growth and margin opportunities for a firm are in advisory and consulting area as clients outsource specialized skills to deal with business challenges that they cannot handle internally. Examples include:
- Bankruptcy and Restructuring.
- Computer Forensics and eDiscovery.
- Litigation Assistance.
- Governance and Risk.
- Transactional Advisory.
- Valuation Advisory.
- Management Consulting.
- Wealth Management.
- Many CPA firms do not have a living, breathing strategic plan that enables them to successfully navigate through their next two or three years. Lack of a well-executed strategic plan is another rock in the way of growth. A strategic plan that is properly executed is the compass that can navigate a firm through its life cycle. A strategic plan:
- Provides direction and gets partners on the same page. It instills discipline that requires delivery of reliable commitments as opposed to broken promises or lip service.
- Is a vehicle for individual partner setting, periodic monitoring, counseling and an annual evaluation that forms the basis for annual partner compensation adjustments.
- Many CPA firms undertake exhaustive strategic planning but don’t use the plan as a living, breathing tool that holds partners accountable through a performance management and compensation system. Another rock that needs to be moved! These firms go through an “exercise” that eventually sits on a shelf (perhaps in gift wrap and a bow) gathering dust in partner offices. That’s a missed opportunity because a well thought out strategic plan, if executed properly, is a great leadership and management tool that enable a firm to grow.
- The key to successful strategy execution is the alignment of firm’s strategic plan with individual partner performance goals. This is where so many firms fail and is another rock that needs to be moved!
- Actionable results need to be periodically measured against goals and, if appropriate, modified if certain goals are subsequently deemed unrealistic.
- Tie progress against goals into compensation adjustments. Partners know that a firm is serious about strategy execution if they can measure the impact their participation has in their wallets.
- Ensure appropriate training and coaching of line partners and senior management.
- How many times have you heard that price is main reason your firm loses clients or proposals? Too many times? Well, It’s a myth that is another rock!
- Price is a one-dimensional sales pitch – either your firm bid the lowest price or you did not – end of story and end of sales pitch. Any firm can sell price. If a firm’s growth strategy is to compete on price, a firm must have an organizational model and processes that enable it to be lowest cost provider – or the firm loses.
- Selling value for fee is what clients and prospects want as they seek a firm that will help their business grow and be more profitable – a firm that brings real value to the relationship.
Value is perceived benefits less perceived cost. It creates motivation to select your firm. Look at almost any firm’s website and 95% or more of it is about their services, their people, their areas of expertise and short client testimonials that no one really relies on to make any retention decision. Has anyone seen a firm website that has as its focus, the value it brings to its clients as opposed fair price, great service and top quality — “givens” claimed by all firms?
Visualize your partner group fitting into a bell curve. In Quartile #1, you have stallions — very high performers who produce outstanding contributions year in and year out. In Quartile #2, you have solid performers — while not stallions, they are reliable team players who do their best and are sincere in furthering firm. In Quartile #3, you have journey men — every firm has them. These partners give you a solid performance and do what they can to further the firm but generally act, look and feel like employees — not owners. In Quartile #4, you have poor performers. Some no longer have gas in tank. Some never had gas in tank and should not have been promoted to partners in first place. Every CPA firm needs more than 50% of its partners in Quartile #1 and #2. If your firm doesn’t, you will not be able to move the rocks that are on your path to growth.
Dom Esposito, CPA, is the CEO of ESPOSITO CEO2CEO, LLC — a boutique advisory firm consulting to leading CPA and other professional services firms on strategy, succession planning and mergers, acquisitions and integration. Dom, voted as one of the most influential people in the profession for two consecutive years by Accounting Today, authored a book, published by www.CPATrendlines.com., entitled “8 Steps to Great” which is a primer for CEOs, managing partners and other senior partners. In Our Opinion, is a continuing series of perspectives for leading CPA firms where Dom and his colleagues share insights, experiences and wisdom with firm leaders who want to “run with the big dogs” and develop their firms into sustainable brands. Dom welcomes questions and can be contacted at either firstname.lastname@example.org or 203.292.3277.