The Focus of Firm Management

By L. Gary Boomer, CPA, CITP, CEO

While there are seminars and on-the-job training for managing partners, there is no book or school on how to manage an accounting firm. Too often managing partners get strapped with administrative duties and fail to lead the firm toward strategic objectives. It is often lonely in the managing partner’s role, as they have to enforce discipline, manage partner disputes, deal with financial issues and in many firms simultaneously manage a book of business in order to retain security and status. This is not a formula that entrepreneurial coaches prescribe. At the recent Winning is Everything Conference, Michael Gerber author of The eMyth Revisited stated “most entrepreneurs are technicians who had an entrepreneurial seizure”. This statement definitely applies to professional service firms. The technicians prefer to work in the business rather than on the business. Accounting firms simply do not manage themselves; and those that have a full-time managing partner (without a book of business) tend to grow much faster than those that have a part-time leader and part-time practitioner at the helm.

Therefore, most firms are looking for the management strategies that will produce the greatest returns on their investment in the shortest period of time. There is no magic formula; however, focus and accountability are keys to success. The following list is not intended as a complete list; but rather a list of high priority strategies that firms should focus on if they desire to succeed during a period of transformation.

  1. Get the right people in the right jobs
  2. Focus on revenue per full time equivalent (FTE)
  3. Train and learn
  4. Improve your processes
  5. Manage to a written strategic plan
  6. Delegate
  7. Establish standards, policies and procedures
  8. Improve the experience for the client
  9. Improve cash flow
  10. Focus marketing and sales toward existing clients

Get the right people in the right jobs. Everyone has unique abilities and the trend in most firms is to hire “Mini-Mes”. Several years ago, we found an excellent tool called the Kolbe Index™ to match candidates to job descriptions as well as determine how well people will work together on a team. The test takes about 20 minutes over the Internet and costs around $200 with professional interpretation. Firms are generally faced with the decision to terminate those employees who don’t fit the culture or are unproductive. The tendency is to wait too long before making the tough decisions. Slow decisions regarding non-performers tend to promote mediocrity and demonstrate that no one is really in charge of the firm. The trend in well managed firms is to conduct performance reviews on a quarterly basis. With the right tools and processes this works very well and requires an insignificant amount of partner time.

Focus on revenue per FTE. Most firms are very profitable the first four months of the year and then hang on for the rest of the year. Start by determining and benchmarking your current revenue per full-time equivalent. (2080 hours represents a FTE. Include all personnel in your calculation of total hours.) Too many firms have partners working 2,700-3,000 hours. Working too many hours does not make sense, causes burn out, and reduces leverage and profitability. Often firms overstaff for the busy season and then retain unneeded people during the balance of the year. Temporary employees and outsourcing can make significant differences in firm profitability if you properly manage the required head count.

Train and learn. This is cultural and a key to the attraction and retention of quality personnel. Training and learning is a two-way street where everyone in the firm learns as well as teaches. This is the formula for leadership development at all levels of the firm. Combine technology, soft skills and traditional continuing professional education in the training function. Also focus on process improvement and implementation of best practices (firm and industry). According to the Gartner Group, capacity increases by five hours for every hour invested in training. Two areas where training will have the greatest impact are the administrative personnel and partners. Don’t say you are too busy to take time to sharpen the saw.

Improve your processes. Process improvement and standardization are keys to training as well as developing consistency in client service. Technology and the Internet are increasingly playing greater roles in process improvement. Work flow and scheduling systems are being developed that follow your firm’s processes and track work throughout the entire project. In smaller firms, the risk is having as many processes as you have partners. It is easy to identify firms that are comprised of sole practitioners sharing overhead from those firms that have the one-firm concept. The one-firm concept promotes teamwork, training and learning. Efficient processes are keys to competing in a commoditized industry as well as creating a better client experience and increased value.

Manage to a written strategic plan. To often firms manage to a budget (or even worse to the check book) rather than to a strategic plan. Resources are limited (time and dollars), therefore it is imperative to identify the firm’s strategic objectives, measurements of success, initiatives, assignments and due dates. People must be held accountable, especially at the top of the firm. We suggest using 90-day game plans for all personnel including partners. This provides alignment with the strategic objectives as well as accountability. Most firms spend too much time trying to develop consensus over a vision, mission statement and core values. While these are important, the strategic objectives and related strategic initiatives are far more important. You should be able to communicate your plan easily to everyone in your firm and clients. If you can’t, I suggest you get some help in this area.

Delegate. For the most part, technicians are generally not good managers or delegators. Remember that authority should follow responsibility in the delegation process. With good systems and processes, you can ensure quality work from lower level staff. Too often the attitude that no one else can do it as well as I can prevails. Partners should be responsible for ensuring that people have the training and resources necessary to succeed rather than thinking they need to be involved in every engagement. As accountants enter the profession, they enter in the zone of incompetence. They generally become competent, specialize and, if fortunate, get to work in their zone of unique ability. Too often they make partner about the time they enter the zone of their unique ability and gravity changes pulling them back out into the zones of competence and incompetence. Identify unique abilities and then delegate. This will increase leverage and job satisfaction.

Establish standards, policies and procedures. Standards can apply to many areas of the firm from things as simple as software selection to more complicated issues such as records retention and document destruction. These policies and procedures should be written, training provided and enforced. Enforcement is the responsibility of firm management. Frequently we see firms implement departmental solutions rather than integrated enterprise solutions. Determining best practices and then implementing them is a responsibility of the Managing Partner. While the implementation can be delegated, it requires involvement in peer organizations and networking with peer firms in order to have the required knowledge necessary to make good decisions. Task forces can play a major role in developing standards, policies and procedures. They also develop future leaders and build consensus during the processes. Don’t be afraid to re-engineer the firm. Some say, “If its not broke don’t fix it” while others say “break it and put it back together again better than it was before”.

Improve the experience for the client. There is nothing you can do that will have a greater impact on client retention and moving away from commoditization than creating a unique client experience. Uniqueness can be as simple as following some simple referability habits: do what you say, be on time, and say please and thank you. Cycle time is also important to most clients. Improving cycle time will increase the chances of creating a positive client experience. Good processes and procedures also increase the chances of accuracy and quality. Discussing fees and terms upfront also improves the client’s experience and differentiates your firm from most competitors.

Improve cash flow. Setting expectations upfront is important in the client-accountant relationship. Avoiding the discussion of terms is not wise and will only create future problems. Many firms do not bill with the delivery of personal tax returns. Their excuse is they don’t have all of the time recorded and are too busy during tax season to prepare an invoice. Remember that to the client, the value of the service only decreases after the delivery of the service. The personal experience of the client is also improved if someone delivers the returns, explains them and asks for payment. You can increase fees and improve cash flow by simply timing your billing when it has the greatest value. Personal tax returns are not the majority of most firm’s business, therefore, progress billings, deposits and billing frequently will all improve cash flow. The managing partner must enforce firm policies and procedures when it comes to billings and cash flow. Hold partners accountable.

Focus marketing and sales toward existing clients. The tendency is to fish the entire pond rather than to fish deeper. Your existing clients are your marketing channel. You have already developed relationships and have the opportunity the sell additional services. Ask for referrals. Successful clients tend to have successful friends and business acquaintances. Simply listening to your clients and finding out about their dangers, opportunities and strengths (DOS) will allow you the opportunity to provide additional services.

Many firms present the appearance of limited capacity due to the fact partners are spending too much time working in the business and not enough time on the business. Often clients tend not to make referrals due to the fear their own work won’t get completed in a timely fashion. Cross marketing of services is not a novel concept, but one that most firms find challenging due to the “my client” versus the “firm’s client” philosophy. Don’t compete against yourself.

Conclusion. Management of an accounting firm is not an easy task. It requires a team of professionals who are focused on managing to the firm’s strategic plan rather than to just a budget. It requires leadership, management and discipline. Focus and the allocation of limited resources to strategic projects are keys to a firm’s success. Don’t be afraid to implement the advice you would give clients in your own firm!


By Boomer Consulting, Inc. If you would like further information about an item you have read here, or would like to find out more about Boomer Consulting, Inc., email us today at askboomer@boomer.com


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