Motivating & Retaining Tax Preparers

By, Charles E. McCabe

After you have invested considerable time and money recruiting and training tax preparers, you must now determine how to make sure those valuable employees are productive and get them to remain loyal to your firm. Retention of tax preparers is essential to maintain client relationships and keep recruiting and training costs in line. Losing an experienced tax preparer almost always results in significant costs to your firm. The keys to employee satisfaction and retention are founded on strong leadership and sound management practices. If you can master these arts, you should have happy, loyal employees and clients, resulting in growth, profits and personal gratification. This article will discuss key factors in motivating and retaining good people.

Operating Systems

The foundation of an efficient and effective workplace is the structure, discipline and consistency provided by well-conceived systematic operating methods. World-class companies like Disney, McDonalds and Ritz Carleton all have well defined operating methods. A policies and procedures (P&P) manual is critical to ensure that employees understand what is expected of them and know how they should handle the myriad of duties and responsibilities in the day-to-day operation of the tax office. The P&P manual spells out how you would like things done in your office and your expectations for the behavior of your employees. As your operation grows larger, the system becomes more important because your ability to oversee and communicate directly and frequently with each employee becomes more difficult. Written operating systems are absolutely essential when you expand to more than one office location. Creating an Intranet is also a good idea for large operations. The Table of Contents of the Peoples Income Tax Office P&P Manual appears at the end of this article as Exhibit 1. (Note: Peoples P&P Manual is available from the NATP Bookstore, and is provided in hard copy and on diskette for easy modification.) To fully understand the importance of operating systems, I suggest that you read The E-Myth Revisited by Michael Gerber.

Employment Agreement

Legal agreements are a necessary evil to ensure that there is a meeting of the minds@ as to exactly what the parties agree to when they enter into a relationship such as that of employer and employee. As the employer, it is appropriate for you to establish standard terms and conditions under which you are willing to employ tax preparers. The agreement should specify the term (usually seasonal), termination, duties, responsibilities and compensation. At Peoples Income Tax, we incorporate our policies and procedures manual into the agreement by reference and provide each employee with a copy, for which they sign a receipt. We also attach detailed job description to the agreement as an exhibit. Confidentiality and non-solicitation provisions are essential. A non-compete provision is often used; but to be enforceable, it must be reasonable in scope, distance and duration. Other standard legal provisions must also be included. Samples employment agreements are included in Peoples P&P manual (for sale through the NATP bookstore). Make sure each tax preparer you hire fully understands the terms of the agreement, including the restrictive covenants that survive termination of employment. If employees understand up-front exactly what is expected of them and you make it clear that the clients belong to the company, they are less likely to shirk their responsibilities or try to steal your clients if they leave. For legal advice, be sure to consult with a qualified attorney who is familiar with the laws in your state and locality.

Training

After your tax preparers complete adequate education in income tax preparation (and training in your tax software), they will need job training before going to work in your tax office. This pre-work training should include a review of your tax office policies and procedures, with special emphasis on the most important subjects. (Each tax associate should receive a personal copy of your P&P Manual to read before coming to the training class.) In addition to training in tax office and tax preparation policies and procedures, customer service and marketing should be covered at length. Special emphasis should be placed on your corporate culture. New employees need more training than priors, but all employees should receive training each year. New employees should also have several days of on-the-job training with the office manager or an experienced tax preparer before serving clients; and they should not be left on their own in the office until they have prepared enough returns to feel confident. Many of the frustrations employees feel on the job--as well as most errors and client problems--are due to inadequate training. Comprehensive training will make your life as a manager much easier, and your employees and clients will be happier.

Tools to do the Job

Employee costs constitute the greatest expense in any service business. Not giving your employees adequate tools to do the job is penny wise and pound foolish. Computers need not be state-of-the-art, but they do need to be fast and reliable enough to minimize down time and reduce employee and client frustration. If your office is not operating with a Local Area Network (LAN), you should set one up without delay. A LAN manages printer sharing and centralizes client tax return files for easy computer cross-checking, e-filing, and report writing. Copiers should be reliable and fast, with automatic feed, and ample supplies always on hand. A fax is no longer a costly luxury for most tax offices, but a necessity. Internet access is almost as important as the phone for effective communication and is becoming more essential for tax research. Don't forget to provide the little things, like reliable staplers, staple removers, scissors, pens, post-its, business card holders, etc. An appointment book, a Rolodex (or software address book), and tax reference books and resources should also be provided. Comfortable, functional office furniture and adequate shelving and storage are also essential. Don't forget aids for employees with special needs, such as under-desk computer drawers and keyboard & mouse cushions. At Peoples Income Tax, we use checklists of office furnishings, equipment and supplies used to take inventory and request missing or shortage items. Attention to detail and providing adequate tools to do the job will eliminate a key source of employee frustration and increase employee productivity and satisfaction.

Office Atmosphere

How your employees feel about their jobs is greatly influenced by your office atmosphere. Extravagance is not necessary, but the office should be attractively decorated and a pleasant place to work. Little things like a fresh coat of paint and a wallpaper border make a big difference. A stereo (with ceiling speakers) tuned to a soft neutral music enhances the office atmosphere and creates an illusion of privacy. Don't neglect the back room and the rest room. We pay as much attention to decorating and appointing our rest rooms as we do our client reception areas. We also provide a microwave and refrigerator for the back room of every office and, space permitting, a table and chairs where our associates can eat. The impression you make on your employees is just as important as the image you project to your clients. Keeping the office clean and uncluttered requires the cooperation of all employees, and you should insist that ever employee pitches in to help. However, you should regularly hire contractors for heavy cleaning (e.g., carpet, windows and restroom). Your employees' attitudes are affected by their physical work environment; make sure it is positive!

Support

Your employees will appreciate having adequate support. They need someone readily available to help when they have questions or encounter problems. Support can be provided on-site by an office manager or veteran tax preparer, and by telephone or e-mail when on-site help is not available. Having adequate help to properly serve all clients in the office is also essential for employee morale. The important point is that your people should not feel like they are out there on their own with no one to turn to when they need help. If they feel this way, they might as well go into business on their own. Tax information can also be provided by NATP.

Corporate Culture

World-class companies always have in common World-class cultures. Leaders of such businesses recognize that their companies exist to satisfy a social need. Profits are not the goal, but are a byproduct of meeting the needs of customers and employees. Businesses also have a responsibility to give back to the communities in which they operate. Most employees also have a need to make meaningful contributions to society through their work. They also like to take pride in their work and deliver quality products and services. And they need to continue to learn and grow professionally. A good corporate culture enables employees to combine their strengths to meet these mutual needs as part of a dynamic team.

Your company's culture starts with your company's mission and values, which should be well thought-out and articulated in writing. A mission statement and set of guiding principles is typically developed by the company's owner or CEO to reflect his or her business philosophy. Input should also be solicited from key employees. The mission statement and guiding principles of Peoples Income Tax is provided as an example (Exhibit 2). When hiring new employees, it is essential to confirm their understanding of and agreement with your company philosophy. Your values must not merely be lip service, but should be internalized and practiced daily by all employees. As the owner or CEO, you must set the standard for your people.

Compensation

A performance-based compensation plan should be designed to encourage your employees to behave in ways that will result in attainment of the goals of your Company, while also meeting your employees' personal objectives. Company goals usually include growth, profitability, quality service, efficiency, effectiveness, and image and reputation. To attract desirable employees, your firm's base pay and earnings potential should be competitive within the tax industry (equal to or better than your main competitors for employees). The pay plan must be objective and fair to all employees. Rewards should be commensurate with contributions. The behaviors and attitude your pay plan should encourage include honesty, professional pride, continuing professional education, loyalty, thoroughness, accuracy, efficiency, teamwork, salesmanship, courtesy, concern for clients, self-direction, frugality and long-term thinking. Peoples' compensation plan, devised with these factors in mind, includes a competitive guaranteed wage as a draw against commissions for individual and office production. Additional commissions are paid for experience with Peoples, completing annual CPE, helping to generate office revenue growth and attaining and maintaining professional credentials (with the greatest extra commissions for attaining Enrolled Agent status). Establishing a sound compensation plan is one of the most important projects you will undertake. Once the plan is established, it is difficult to make radical changes. Your compensation plan is an essential element of your ability to compete effectively.

Benefits

Even if most of your tax preparers are seasonal, you can still provide benefits that are not cost-prohibitive, or even free. Providing whatever benefits you can puts you in a better competitive position to attract and retain seasonal employees. A profit sharing plan could be adopted for all employees to share in the profit pool in proportion to their annual earnings relative to total earnings of all employees. The profit pool could be some percentage (e.g. 10-20% as determined by management) of the increase in pretax profits over the prior year. Peoples Income Tax has a Fidelity 401k plan through its membership with the U.S. Chamber of Commerce that permits all year-round and seasonal employees to participate, and the company makes 3% contributions.

Some Peoples' seasonal tax associates who work part-time during the off-season providing client service and teaching an income tax school work enough hours to qualify for the company's group health insurance plan. Group life and disability insurance and other benefits can be obtained through professional associations such as the National Association of Tax Professionals. Even if the employee pays the full premium, group rates tend to be lower than individual coverage. Group discounts for products and services are often extended to employees through professional associations and company membership in the local Chamber of Commerce. Peoples Income Tax, as a small employer, was able to become a member of Virginia Credit Union, making all of Peoples' employees eligible for the benefits of credit union membership. Peoples also provides paid time off for its associates to volunteer for company approved charitable activities such as providing free tax service for welfare-to-work program participants and residents of homeless and battered women shelters. Be creative. Little perks, like buying pizza for the staff of the office on the busiest days of tax season, help to make your employees appreciate their jobs. Be creative!

Recognition

Numerous studies and surveys have documented the fact that money is not the primary motivator for most employees. In fact, as noted in article 1 of this series, people who are motivated primarily by money do not make good tax preparers. Recognize your people frequently for their good work and they will repeat the performance frequently. Praise must be sincere and should be distributed equitably, if warranted. When possible, praise people publicly in meetings or employee newsletters. Be sure to give people credit and rewards for good ideas they come up with that benefit the company. Reinforce the right behaviors. Avoid saying Great, but. Look for key measures to recognize employees, such as production, client retention rate, etc. Come up with contests to recognize your tax preparers, such as the most referrals for another service you offer, or the most new clients brought in. Give recognition certificates, plaques and prizes and other than money, such as tickets for movie rental or sports events, or gift certificates for merchandise or dinner. Giving something tangible makes a more lasting impression. Praising your best performers (the top 10-20%) will raise the bar for your weaker people. The goal is to encourage behaviors that build your business and recognize your people for practicing those behaviors as often as possible.

Communication

Lack of effective communication from management is usually the greatest cause for employee dissatisfaction and premature departure. The best managers listen to and communication frequently with all employees; and they make it easy for employees to tell them about problems and concerns. Communication should include training, group and individual meetings and, most important, daily discussions between you and your tax preparers. The larger your organization becomes, the more difficult it is to keep in touch with all of your employees, especially if you have multiple offices. Yet, as the manager, you must make the time to regularly talk with everyone. E-mail is a good communication vehicle, but the phone is more personal; and neither can replace face-to-face meetings. Publishing employee newsletters is a good way for larger organizations to enhance communication. An Intranet can also be an effective internal communication vehicle. Keep communication simple, provide adequate information and provide examples for clarity. Show your trust in your people and make them feel included by sharing with them financial and other company inside information. Management can make much better decisions by getting input from front-line employees. If your people know that their voices are heard and the feel like they are part of the decision making process, they will be much happier, loyal and more likely to support new ideas and programs.

Empowerment

Engage your employees in decision-making; give them the authority to act in the best interests of the company. Provide training in resolving client problems and then trust them to make the right decisions. Give your people some time to think and plan by building in some slack through adequate staffing and by providing clerical support. Don't criticize employee's mistakes; instead celebrate honest mistakes. Recognize that making decisions naturally results in making mistakes because no one is perfect. If you criticize honest mistakes, your people will stop making decisions. Failure is also OK, because it is a normal part of the road to success. Nothing is more gratifying than to see your people develop the skills and confidence to act independently and make sound decisions that are in the best interests of the company and your clients.

Leadership

Much has been written about leadership and you should take the time whenever the opportunity arises to read ideas on how to be a more effective leader.

Here are ten basic keys:

(1) Integrity: always tell the truth and always keep your promise, even if it hurts to do so. (2) Trust: You must first demonstrate your trust in people by making yourself vulnerable before you can expect them place their trust in you. (3) Respect: If you really don't care about your people they will sense your lack of concern and will not have respect for you. (4) Fairness: Treat all employees fairly and equally (including family members) regardless of your personal feelings. (5) Vision: To be a true leader, you must have an unfaltering vision, be able to communicate it to your people, and get them to understand and share in your excitement for the vision. (6) Optimism: You must always be positive and confident that the company will succeed; but you should also be realistic. (7) Decisive: A leader must make decisions and stick with them as long as they make sense. Consensus is not always better than an individual decision, particularly in a crisis situation. Remember, the buck stops with you! Trust your intuition. Intuition draws upon your experience, stored knowledge and information you may not even realize you have in your head. (8) Example: You must practice what you preach@ or you will have little credibility. (9) Teamwork: Insist on mutual respect, courtesy and cooperation among your people. This fundamental attitude was crucial in shaping our nation and is also essential to build your company. (10) Authority: Remember that authority is not vested in your position as the boss. Authority resides with the people who report to you and they have the power grant it to you or not.

Having Fun

People like to work in an environment that is enjoyable; they can get burned out if the work environment is totally serious and strictly business. Great companies like Southwest Airlines have come up with creative ways for employees to have fun. I think every manager should read the bestseller book, NUTS!, By Southwest chairman, Herb Kelleher. If you're not naturally good at getting people to have fun, designate a key employee to assume this role. A friend, Hugh Goldthorpe, who is a top executive with Owens and Minor of Richmond, Virginia, has adopted (and had printed on his business cards) his official job title as: Head Cheerleader.

Summary

Motivating and keeping tax preparers requires effective management practices and strong leadership skills. A good operating system and adequate training are essential. Your people need the proper tools and support to do the job. A performance-based compensation plan should be designed very carefully to ensure that your employees are encouraged to help build the business and are rewarded for their contributions, and provide as many extra benefits as possible. A positive corporate culture and a pleasant work environment are more important than money to most good employees. Recognition and communication are among your key responsibilities as a manager. Screening new employment prospects to insure they fit in and buy into your culture will prevent future problems. Employment agreements are a must and should be reviewed by and explained to new hires. A valuable project is to identify the 2-3 greatest frustrations of your employees and your clients and devise ways to eliminate these irritations. Employees should be trusted, included and empowered to make decisions and act autonomously. They also need to be part of a harmonious team working for the mutual benefit of the clients, the company and themselves. And they would enjoy being at a fun place to work! Ultimately, your management and leadership skills and efforts will determine your success in providing an atmosphere where your employees will be motivated to be effective and will remain loyal to your company.


About the author: Charles E. McCabe

Chuck, a 34-year veteran tax industry executive, has managed hundreds of tax preparation offices in the U.S. and Brazil. He earned his B.S. degree in management from Adelphi University and Executive M.B.A. degree from Pace University. He is founder and President of Peoples Income Tax, Inc., which operates 16 tax preparation offices in central-Virginia and licenses income tax school and tax practice management systems to independent tax firms nationwide. Chuck is co-author of two books on career education for adults and numerous articles on adult education, income tax, and management. He has taught small business management as an adjunct faculty member of Virginia Commonwealth University.

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