The Partner Alternative

A CPA can rise to the top even without making partner.

  • TRADITIONALLY, ALL CPAs in public accounting aspired to be partners. The partner title was the key measure of success and firms operated on an up-or-out model.

  • TODAY, HOWEVER, HARD-to-find specialists and a new generation wanting more personal time are unable or unwilling to do what is necessary to make partner. Nevertheless, firms want to retain these valuable employees.

  • CHANGES IN THE structure of firms and positions available within them should make employees reevaluate their career options.

  • HIGHLY COMPETENT STAFF members who have not brought in enough business, who do not want to devote the time necessary to becoming a partner or who want a part-time schedule may be good candidates for an alternative career track at their firms.

  • AN ALTERNATIVE TRACK gives staff members the respect, a unique title and many of the benefits of being a partner. The staff member is more likely to remain in the firm—to everyone's benefit.
STEPHEN WEINSTEIN, CPA, of Branford, Connecticut, is a consultant and adviser to CPA and law firms

    The biggest professional moment for a CPA in public practice traditionally is when the printer delivers the first box of business cards bearing the title "partner" discreetly below the name. It is a sign of arrival, a notice for current or prospective clients that they are working with one of the key people at the firm. CPAs learn in Accounting 101 that "partnership equals success," and their supervisors reinforce this starting the day after graduation. It's a tradition as old as the men whose names formed the Big 6—and it's becoming as outmoded as the huge ledgers they once used.

    Significant changes in the past few years are challenging that one-path-to-success idea. Firm owners struggle every day with the question of how to retain a good employee if they are hesitant—or unwilling—to make that person a partner. Complicating issues range from two-income households grappling with child care to a shrinking labor pool. Firm partners and those they hire should be aware of the problems and consider a solution that just may relieve both partner and staff anxiety.

    I've found a structural change that has proved satisfactory to both staff and partners: the creation of a prestigious alternative career track for the people the firm wants to retain who may or may not fit the typical partner profile. (This is more than just an idea: the rationale for this change and the blueprints for making it happen are based on work I did working closely with the managing partner of one of my clients, Joseph Tarasco, of Yohalem, Gillman & Co., a 90-person New York City firm.)

    Traditionally, public accounting has followed what is known as the up-or-out policy. In the past, it made little sense for either the CPA who is not on the partnership track or the firm to continue the employment relationship, especially since a senior manager not promoted to partner could be replaced by a lower cost supervisor or manager. But today, accounting firms are finding those assumptions no longer work, so they must find ways to respond to the new realities of the work environment, such as

    • The difficulty in attracting midlevel senior staff from the current employment marketplace, leading to a shortage of experienced CPAs at the management level.

    • The reduction of compliance work and increase in consulting (particularly in highly specialized areas), which requires experienced staff.

    • The fact that people are very mobile and less willing to stick it out for the time required to become partner. Because opportunities outside the firm may seem more attractive, firms must find ways to encourage experienced people to stay.

    • The desire of many men and women for more balanced work/family life-styles that preclude spending considerable amounts of time in the office or doing "after hours" business promotion.

    In addition, highly qualified experienced staff often can take the client service burden off the "rainmaker" partners, providing them with more time to devote to business development.

    In the past, nonpartners went on to positions in private companies and enjoyed success. This situation, too, has changed:

    • Management positions no longer are as plentiful because of consolidation and mergers. Consequently, firm employees now may be more willing to consider a "permanent" nonpartner position— if it can be made more attractive.

    • Public accounting did not offer competitive compensation in the past, but today managers enjoy compensation comparable to industry rates, along with other advantages such as challenge and diversity.

    • CPAs who might otherwise push to make partner no longer do so because of the increased demands and greater liability now placed on partners. Many people seek a more balanced life-style, one that allows for more family or personal time.

    • Many people entering public accounting enjoy the knowledge gained, varied work and diverse industry exposure common in today's firm but have little interest in the myriad management tasks partners have to face.

    What if a firm had a path that would make staff feel secure and valued and allow the partners to draw on their experience and skills—an alternative career track that experienced staff could choose at any time? Staff and partners would discuss this option at annual counseling sessions. The ultimate level of success would be the title of director (or principal, a title traditionally given to a non-CPA partner), the close equivalent of the partner title. Following are examples of typical situations where the firm would consider promoting a person to director. In each case, the CPA (or non-CPA specialist) must have significant technical skills or a specialty, plus other attributes required for an executive position, so the firm desires to continue the employment relationship.

    Case A. The staff person expresses the desire for a partnership and the firm believes he or she has the potential to become a future partner but for various reasons promotion will not take place now . (For example, the partners do not think the timing is right or the employee has not yet brought in enough business.)

    Case B. The staff person expresses the desire for a partnership but the partners do not believe he or she should be promoted although they do think the person adds significant value to the firm.

    Case C. The staff person does not want to be a partner but would like an executive position with the firm. He or she adds significant value to the organization.

    Case D. Same as A, B or C, but the individual needs or desires a reduced (not full-time) working schedule.

    A staff person promoted to the director position can be considered for the partner track some time in the future, since the status of that position can change depending on the firm's needs and the individual's changing circumstances. For instance, in case B, the staff person may develop significant expertise in a critical specialty or niche and become recognized in that field. In another situation, a person preferring to remain a career director may change his or her mind and want to reenter the partner career track.

    Becoming a Director

    Earl began his public accounting career in a national firm. After four years, he accepted an outstanding offer from one of the firm's commercial clients. Three years later, he returned to public accounting when he joined his current high-growth firm. Within a couple of years, he was promoted to manager.

    Earl is 34 and married with two young children. For the past year and a half, he has been pushing to become a partner. He presently manages a large client base and has an excellent technical knowledge of accounting. He is an extremely professional, high-quality employee and one of the most dedicated, loyal and hard-working people in the firm. Earl arrives at work early, stays late and is the classic example of the employee who truly believes the client comes first. He is clearly driven to become a partner.

    However, after extensive discussion, the partners determined that he would probably not become a partner for the following reasons:

    • He has not developed any new business (although he has been actively networking), and they do not think he will be able to develop business in the future. Although Earl is very personable, he does not project the type of confidence they believe is necessary to "make a sale."

    • He does not have the business acumen clients and others seek.

    • His business judgment and decisions are often impractical or incorrect.

    • He is not an effective manager of people. He tends not to delegate enough; when he does, his supervision is incomplete.

    • Based on the firm's present and forecasted volume and other financial considerations, there will not be room for another partner during the next three to five years.

    On the other hand, the partners were unanimous in their praise for Earl, his performance, productivity and work ethic. Worried he would leave if he was not promoted to the partner level, they realized it probably would be impossible to replace him. Therefore, they agreed to develop an alternative career track position for him and to counsel him fully and honestly regarding this position and the likelihood of his ever becoming a partner. The firm developed a unique financial package for him and initiated a highly publicized image enhancement promotion of his position.

    Postscript . That was almost two years ago. Earl is still with the firm. He has the title of director, attends most partners' meetings and has a full range of "executive type" benefits. He is happy and highly productive. Since he no longer is pressuring himself to make partner, he seems to be improving in his weak areas. In fact, the firm may, in the future, reconsider making him a partner. In the meantime, it has secured the services of an outstanding employee who maintains a position of respect and responsibility both inside and outside the firm.

    In most firms, partners receive additional benefits, such as equity participation, income sharing, tenure (normally a partner cannot be terminated without a majority vote of the partners) and participation in policy making. The key to the success of the alternative career track is in making the director position prestigious and attractive. A director should therefore receive benefits similar to a partner's. For example, to show its commitment to the director position, the firm may offer the following benefits:

    • A profit-sharing plan (or other incentive-based compensation program). The director may be responsible for managing all or part of a niche profit center, such as director of litigation support, and receive a share of that department's profits.

    • Three months' severance pay if terminated by the firm and 90-day notice before termination.

    • Four weeks' vacation.

    • Personal long-term disability plan.

    • Attendance at certain partners' meetings and at all or part of the annual partners' retreat.

    • Input into the direction and management of the practice.

    • Possible ownership in the firm, using various existing or more creative approaches. (See, for example, "A Piece of the Action," JofA, Aug.96, pages 52-54.)

    • The "trappings" of a partner, such as a larger office, expense allowances, automobile benefits.

    • A "retirement" benefit if the firm merges or is sold and the individual is not retained or if the director retires or leaves and does not compete with the firm. The benefit might accrue at a rate based on each year the employee was a director.

    If the partners treat these CPAs as highly respected and valuable employees, the rest of the firm and the public will get the message. The director title must clearly convey an executive-level position both within and outside the firm.

    The primary resource of a public accounting firm is its people. As firms evolve into high-level consulting and specialty practices, the need to retain the best experts becomes more critical. The profession must change from a "success equals partnership" environment to an exciting and motivational environment for full- or part-time men and women who have the expertise that modern firms will need. The development and promotion of the alternative career track is one very important aspect of the successful firm. Instead of the up-or-out employment mentality, let's create a "top and top" environment—success as a partner or as an executive-level specialist.

    The public accounting profession cannot afford to lose high-quality technical people who do not—or may not want to—fit the conventional role or image of a partner in a CPA firm.


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