There are lots of reasons why small and mid-sized CPA firms don’t realize their full potential and, in some situations, fail. In Our Opinion, the downward spiral of a firm usually starts with a Managing Partner (the heart and soul of any firm — the quarterback of the partner group) who didn’t fully understand the key objectives and day-to-day responsibilities of the position and therefore, failed to operate their firm on all cylinders.
At many small and mid-sized CPA firms, it is not unusual for Managing Partners to “grow-up” in small firm environments having had little, if any, exposure to what it takes to move a firm to the next level. Instead, these Managing Partners are usually the biggest billers, best business development partners or partners with the most billable hours. These are not good reasons for becoming a Managing Partner. Quality Managing Partners come from the ranks of very effective partners who: (1) can step up their “games” and achieve success in carrying out significant responsibilities, (2) understand how to properly leverage themselves and hold others accountable, (3) have had experience and success in pulling themselves out of the day to day weeds to think about where the “puck is headed not where it is”, and (4) drive profitable growth. Further, the thought of giving up a substantial portion, if not all, of the client relationships that have been developed over the years is very scary to many. Potential Managing Partners ask: “What happens if I’m not successful or if I don’t like the job? In the spirit of trust, I lose most of my client responsibilities and begin to lose touch with my outside referral sources. I’ll have nowhere to go but to exit the firm when I’m no longer Managing Partner.” Our advice is that firms consider “protecting” a new Managing Partner with a compensation and severance package that ensures employment and the ability to rebuild client relationships for two to three years after stepping down as Managing Partner. And while this is not commonly done today, such an agreement could very much enhance the ability of small and mid-sized CPA firms to attract the best and brightest talent to the Managing Partner position and therefore help improve the possibility for continued success.
While a successful Managing Partner, regardless of firm size, usually carries a very small client load to stay grounded in client service and to remain credible with the partner group, billings and client chargeable hours are truly a very small part of the job. In fact, a Managing Partner’s clients are principally the firm’s partners; giving each and every one of them the opportunity to maximize their strengths while minimizing their weaknesses. It is a very challenging and daunting responsibility.
Managing Partners at many small and mid-sized CPA firms would be much more successful if they went into the job with a better understanding of their key objectives and day-to-day responsibilities as summarized below:
To say the least, a Managing Partner’s responsibilities are significant and can only be successful fulfilled with the trust and support of the partner group. It is critical that a small and mid-sized CPA firm select the best possible leader to successfully navigate the rapidly changing landscape of the CPA profession.
Dom Esposito, CPA, actively leads 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.