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PRACTICE MANAGEMENT

How to drive partner accountability and unity

Oversight and review systems can boost firm performance.

By Dom Cingoranelli, CPA, CGMA, Jennifer Wilson and Bill Reeb, CPA/CITP, CGMA
February 2013

How to drive partner accountability and unityPartner accountability and unity are essential for accounting firms to maximize their productivity and profits. Unfortunately, partner harmony is hard to find, especially at larger firms. Consider the findings of the most recent CPA Firm Top Issues Survey conducted by the AICPA Private Companies Practice Section. The biennial poll of U.S. public accounting firms found that “partner accountability and unity” was the top concern at firms with 21 or more partners and the No. 2 concern at firms with 11 to 20 partners, behind only “bringing in new clients.”

Partner problems are not limited to large firms. Any accounting practice with multiple owners can run into trouble with partners failing to follow through on commitments or perform to expectations. When that happens, the result is a big problem that firms of all sizes need to address.

Accounting firms seeking greater accountability, or “count-on-ability,” among the partner group must first clearly define what each partner is expected to do, effectively communicate those expectations, and establish ways to measure, monitor, and reward or penalize partner performance. The responsibility for setting up the system falls on the firm’s leadership team, be it a board of directors, an executive committee, an equity partner group, or something else.

Once the system is designed, the firm’s leadership team must obtain buy-in from the partners and implement the plan. This article looks at the elements a partner-accountability system should contain and the steps firms can take to successfully establish such a system.

OBTAIN PARTNER BUY-IN

It takes persuasion and perseverance to convince partners to accept and commit to a system that grants someone the power to hold them accountable for meeting performance expectations. Partners resist such an arrangement because they simply don’t want anyone telling them what to do. The problem with that thinking is that when CPAs are promoted to partner, they are being rewarded for accomplishments achieved while under somebody’s supervision. Why then should CPAs who attain partner status go from a managed environment to one with total autonomy? The answer is simple: They shouldn’t. CPAs who become partners remain very much part of a team. As such, partners should remain part of the firm’s overall performance and accountability framework and yield to the authority and support of the firm’s leadership (see Exhibit 1).

Firms must recognize that obtaining partner buy-in is not something they have to do just once. Partners must agree to a regular review of their goals, which should be updated to reflect changes in the partner’s role and responsibilities, as well as changes in economic and market conditions. The best way to do this is to establish partner goals in individual meetings at or before the beginning of each fiscal year.

The responsibility for setting up and running these meetings belongs to the managing partner or, in larger firms, the service-line leader or department head. These leaders must understand that it is their job to help each partner hit his or her performance targets. Managing partners and other firm leaders must not abuse their role as manager of the other partners. Instead, firm leaders should act as mentors with the goal of helping each partner achieve enhanced performance, which benefits the firm as a whole.


Exhibit 1: Submitting to and Supporting Authority

A key attribute of an effective leader is the ability to submit—that is, to be led. To encourage this among partners, firms must establish trust-building behaviors such as ensuring that support structures (role descriptions, goals) are in place and decision authority is defined. The question for partners is this: “Once the process and support structures are defined, will you submit to them?” Submission by the partner group would allow for:

  • Empowerment of the managing partner, service-line leaders, and committees.
  • Increased productivity.
  • Reduced stress at all levels.
  • More shared focus and alignment among the partner group.
  • Decisions that are made more efficiently and effectively.


SET REALISTIC AND MEASURABLE GOALS WITH EACH PARTNER

Partners and their supervisors should emerge from every annual goal-setting meeting with clear expectations for what the partner will produce and how the partner’s productivity will be measured.

Firms can evaluate partner performance in two main areas: financial and nonfinancial measures. Financial expectations are easier to track. For example, if a partner is expected to bring in $150,000 of new business, it is easy to figure out whether the partner is on pace to hit the goal or at risk of missing the target. The same holds true for other financial measures, such as:

  • Profitability of client work (e.g., collections, leverage, realization, margin).
  • Profitability of a department.


It is more difficult to measure partner performance on nonfinancial goals in areas such as recruiting, training and development, delegation, new service offerings, and proper client transition. Some ways to assess nonfinancial goals include:

  • Using a quantitative survey tool to ascertain client satisfaction levels.
  • Recording the number of leads for referral sources and prospects generated as a result of networking events the partner has attended.
  • Tracking task delegation by asking partners to keep a log of all projects that they formerly handled personally but now delegate to someone else. The delegating partners also should record how they monitor and manage the delegated projects. Partners must understand that the logs will be reviewed at quarterly meetings with their supervisors (more on that in the next section).


Remember, goals should be established jointly, with agreement from each partner, and they should be one-size-fits-one, tailored to what the firm most needs and expects from each partner and designed to leverage each partner’s strengths and/or minimize his or her weaknesses. At the same time, be careful not to fall into the trap of assigning higher expectations to top producers than are assigned to average performers in similar positions. Firms should reward performance greater than the expected competency from those in similar positions. Top performers earn their performance pay by exceeding average expectations, not by meeting expectations preadjusted to reflect their exceptional abilities. Each partner’s annual goals should be put in writing. For an example, see Exhibit 2.


Exhibit 2: Sample Partner Goals

When setting partner expectations, establish specific and measurable goals for each area of contribution. Here is a sample list.

Financial Performance

  • Increase my revenue per client by XX% per client by XX/XX/XX.
  • Increase my realized hourly rate from $XXX to $XXX by XX/XX/XX.
  • Improve my on-time billing performance to eliminate reminders from finance as evidenced by our billing manager’s assessment of this improvement by XX/XX/XX.
  • Increase the profit contribution from the service line that I manage to XX% by XX/XX/XX.


Business Development

  • Bring in X new audit clients from contacts generated by me worth $XX,XXX by XX/XX/XX.
  • Refer $XXK in new business for our SERVICE LINE by XX/XX/XX.
  • Conduct an average of four referral source or prospect meetings per month, or 48 meetings in total, by XX/XX/XX; track these meetings and their outcomes/next steps in our CRM or in Excel.
  • Increase revenue per client for my top 10 clients by XX% by XX/XX/XX.


Client Management

  • Hold strategic client account planning meetings for my top 15 clients, completing three specific actions or outcomes determined for each client by XX/XX/XX.
  • Make two additional C-level, board member, or key service-provider contacts for each of my top five clients by XX/XX/XX.
  • Transition 30 smaller corporate or personal tax clients to PERSON’S NAME or OUT OF OUR PRACTICE by XX/XX/XX.
  • Develop the client portion of my succession plan by identifying to whom I will transition each client and by when and reviewing that plan with my department head by XX/XX/XX.


People Development

  • Develop procedures and best practices associated with SPECIALTY TAX SERVICE LINE that are approved by the Tax Department Head and rolled out in web-based training to all Tax staff by XX/XX/XX.
  • Mentor PERSON’S NAME to prepare her to move to the role of manager including taking her to two referral source meetings and two sales meetings and including her in two performance conversations with staff by XX/XX/XX.
  • Recruit a senior audit manager into our group by XX/XX/XX.


Leadership

  • Develop a written plan to develop or increase our penetration in the X market and gain approval from PERSON by XX/XX/XX.
  • Improve my listening skills with my team members as measured by an upstream listening assessment to be conducted by XX/XX/XX and then a check-in survey conducted on YY/YY/YY.


PROVIDE CONTINUAL COMMUNICATION AND FEEDBACK

Once the goals are established and the partner takes ownership of them, firms should set up monitoring systems, processes, and specific checkpoints to ensure the partner stays on track. Unfortunately, most firms implement performance systems that are visited only twice a year—when the goals are set and when the final performance assessment is completed. The lack of regular communication between partners and their supervisors often results in disappointing performance.

We recommend simple, frequent monitoring techniques including, but not limited to, quick meetings to review progress, high-level written status summaries, to-do lists, and reports generated by practice management systems.

Managing partners and other supervisors can drive performance by holding check-in meetings where partners report on the progress they have made toward reaching their goals. When partners know they will have to report on their progress, they are more likely to actually make progress. These meetings should take place at least once a quarter. During the meetings, partners and their supervisors can discuss the status of each goal, looking at both the measure and the “quality” behind the performance. For instance, on the aforementioned delegation goal, the supervisor and partner would review the task-tracking log to verify whether the partner has properly monitored delegated work or “dumped” it in the hopes that everything would work out. The partner also can discuss how the new owner of each delegated task is performing and so on. For other ideas on how to make the most of check-in meetings, see Exhibit 3.

ESTABLISH REWARDS AND CONSEQUENCES

Effective accountability systems reward partners for adhering to processes and procedures, living up to their roles and responsibilities, and implementing the firm’s strategy. Such systems also impose sanctions when partners do not perform up to expectations. Rewards can take the form of public praise, financial stimulus (incentive pay), and promotions (from nonequity to equity partner, being appointed to lead practice areas or serve on leadership committees, etc.). Sanctions may include private reprimands, reductions in pay, greater reductions in pay, and, ultimately, demotion or termination.

Firms can best promote partner accountability by allotting the partners’ supervisors—the managing partner, service-line leaders, or department heads—a pool of money that each supervisor can award, as he or she sees fit, to partners who achieve individual goals. The amount of performance pay varies, but firms should offer sums large enough to motivate partners to meet their goals. The design of financial reward systems can be delegated (see Exhibit 4), but firm boards or leadership groups must have final say on approval.

Firms often resist setting up a performance pay system for partners, because someone in the past held too much control over owner compensation, and that power was perceived to have been abused. Proper design of the reward system should mitigate those concerns.

CONCLUSION

It is neither quick nor easy to devise and implement a partner accountability program, but firms that do so establish an environment in which partners who contribute significantly are rewarded (and happy) and those who contribute less are clear on what they can do better or differently in the future. Such an environment provides fertile ground for the seeds of partner unity and accountability to blossom into a flourishing firm, one where shared goals and a stronger spirit of teamwork reap a harvest of heightened performance, higher job satisfaction, and healthy profits.


Exhibit 3: Ideas for Check-In Meetings

  • Partners should share their status against their goals with their supervisor and in departmental, office, or firmwide partner meetings.
  • Check-in meetings should take place at least once a quarter.
  • In the meetings:
    • Share roadblocks and breakthroughs, and communicate both appreciation and disappointment.
    • Engage in “straight talk” about unmet commitments.
    • Don’t allow for fuzzy language when gaining new commitments related to goals that are off track (e.g., “I’ll try”).
  • Identify any needs or requests the partner has to achieve his or her goals.
  • Have each partner write a brief recap for all monitoring meetings to ensure clarity on decisions made and actions assigned. The recaps should include:
    • Which goals are on track.
    • Which goals are off track and who owns which actions to address these.
    • When those actions will be complete.
    • Any other decisions that were made and, if a decision wasn’t reached, who is taking the lead to make sure a decision is made after the meeting.
    • When the next status reporting meeting will occur.


Exhibit 4: Compensation Committee Considerations

A compensation committee makes sense for some firms. If you are considering one at your firm, remember that a compensation committee, if formed, is a committee of the board of directors (or executive committee), not a committee that has unique dictatorial authority. Compensation committees should be charged with:

  • Developing the firm’s compensation philosophy or framework, subject to approval by the board and/or equity partner group.
  • Recommending base salaries or guaranteed portions of salaries involved, including any year-over-year adjustments, whether up or down.
  • Establishing objective metrics and firmwide incentives that support the accomplishment of the firm’s strategic plan.


EXECUTIVE SUMMARY

A lack of partner accountability and unity ranks as the top concern of accounting firms with 21 or more partners and No. 2 among firms with 11 to 20 partners, but partners who fail to pull their weight or align with organizational priorities can cause big trouble for firms of all sizes.

Accounting firms seeking greater “count-on-ability” from their partners must design a system that establishes expectations for each partner, clearly communicates those expectations, and establishes methods to monitor, measure, and reward or penalize partner performance. The leadership team at each firm is responsible for setting up the system and obtaining partner buy-in.

Firm leadership must employ persuasion and persistence to convince partners to yield to a system that holds them accountable for meeting performance expectations. This is an ongoing process best accomplished with regularly scheduled meetings between partners and their supervisor, either a managing partner or, in larger firms, a service-line or department leader.

Supervisors should hold individual goal-setting meetings with each partner at or near the beginning of the fiscal year. Supervisors should work with each partner to establish realistic and measurable performance expectations. The result should be a set of goals and metrics agreed to by both parties and put into writing.

Firms should implement ways to monitor partner progress, the most important being check-in meetings held at least once each quarter. Because partners must report on their progress at check-in meetings, they are more likely to make progress between meetings, increasing the chances the partner stays on track to meet his or her goals.

Firm leadership should establish strong rewards and consequences for partners who meet, exceed, or fall short of expectations. Supervisors should be allotted money to give as bonuses to partners who perform exceptionally well. Sanctions for poor performance would start at private reprimands and progress through pay reductions and, ultimately, demotion or termination.

Dom Cingoranelli (dom@successioninstitute.com) is an executive vice president with Succession Institute LLC in Castle Rock, Colo. Jennifer Wilson (jen@convergencecoaching.com) is a partner with ConvergenceCoaching LLC in Omaha, Neb. Bill Reeb (bill@successioninstitute.com) is CEO of Succession Institute LLC in Austin, Texas.
 
To comment on this article or to suggest an idea for another article, contact Jeff Drew, senior editor, at
jdrew@aicpa.org or 919-402-4056.



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