| EXECUTIVE
SUMMARY |
 MORE THAN 50% OF PARTNERS
AT CPA FIRMS are over 50 years
old, and a significant number of firms now
are run by baby boomers who will seek
retirement during the next five to 10
years. There is a shortage of partnership
candidates to take the reins.
GROWING A FIRM AND
RETAINING CLIENTS requires
drive and rainmaking skills in addition
to attributes such as loyalty,
dependability, technical competency and
devotion to quality. Potential
partnership candidates should be able to
inspire and manage people, bring in new
clients, serve a vital role on client
advisory teams and be motivated to be
highly successful.
SMALL AND MIDSIZE CPA
FIRMS (the ones that most
need new partners) have not provided a
floodgate of opportunities. Instead of
investing in creating a successor
generation, many haven’t hired the
entry-level people they would have in
the past.
OWNERS OFTEN SEEK AND
HIRE people who are
productive in delivering high chargeable
hours but don’t give them comprehensive
leadership training or career
counseling. As a result the best people
don’t get the opportunity to develop
their potential.
FIRMS MUST TAKE THE
INITIATIVE TO FIND, attract
and nurture the best people from a
relatively small pool of possible
candidates. A firm should designate one
of the local colleges or universities as
a “farm club” for new recruits.
THE KEY TO A SUCCESSFUL
RECRUITING effort is to make
it a top priority and invest the money
to do it thoroughly. Firms should
designate one or two partners to focus
on it and reward them for achieving the
desired results. | | STEPHEN WEINSTEIN, CPA, is a
Branford, Connecticut, consultant who
helps CPA firms and other professional
companies deal with critical practice
matters including the development and
resolution of buy-in and buyout/retirement
issues. His e-mail address is
swadvisor@comcast.net .
|
 he dreaded alert “We’ve got a
problem” applies in more realms than NASA command
control. For the CPA profession it pertains to a
looming predicament: finding and developing strong
entrepreneurial young partners so established
firms can continue to thrive after their founders
bow out. Many owners say the successor drought has
been growing over the past several years and
likely will worsen in the future. Forward-thinking
firms are taking steps today to address the
challenge with a mixture of short- and long-term
programs designed to keep the leadership pipelines
flowing. This article will describe some causes of
the future-partner scarcity and offer CPAs
specific approaches to use to get the best people
as well as motivate current staff.
WHY DO WE HAVE THIS PROBLEM?
The reason for the shortage of
successors in public accounting firms is a complex
matter that no one explanation covers, but
understanding the contributing factors may point
owners toward a solution. This is what partners
say:
 Over the past 10 to 15 years, fields
such as finance, technology and law have captured
the imagination of many of the brightest and best
business-oriented students. Meanwhile, although
the nature of public accounting has evolved, many
young people in our society remain unaware of
those changes and the possibilities an accounting
career offers.
Small and midsize CPA firms (those
most in need of new partners) have not provided a
floodgate of opportunities. Instead of investing
in developing a successor generation, many firms
haven’t hired the entry-level people they would
have in the past, largely because technology has
increased productivity and let them use fewer
people to perform the work. That means fewer CPAs
enter the firm’s college-graduate-to-partner
pipeline—which the five-year program in accounting
schools has further slowed.
The number of women entering the
accounting profession has jumped to 56% in 2002
from 45% in 1982. Once rare, women CPAs now
represent more than 50% of the workforce of local
and regional firms, but a mere 14% hold the
position of firm partner, shareholder or owner.
Many “old guard” male partners who have seen the
workplace change say women’s aptitude is
undeniable, but the vote’s not in on whether they
will strive in greater numbers to become owners.
Partners focus so exclusively on
client matters, new business development and
“churning out the product” that they don’t nurture
the talented people who enter their firms. While
owners often seek and hire people who can deliver
high chargeable hours with low write-downs, they
don’t give those same employees comprehensive
leadership training or career counseling. As a
result their best people don’t get the opportunity
to develop their full potential. After a while
many leave (see “ Case Study:
Career Counseling Vs. the Annual Review ”).
LONG-TERM SURVIVAL
The shortage of young people who are partner
material has become a crisis. Upwards of 50% of
partners are more than 50 years old, and a
significant number of firms now are run by baby
boomers who will seek retirement during the next
five to 10 years, sources say. Many senior owners
aren’t confident their staff CPAs are strong
enough to guarantee the viability of their firms
and the solid retirement buyout packages they want
future partners to deliver. Growing a firm
and retaining clients require more than the
conspicuous virtues of loyalty, dependability,
reliability, technical competency, devotion to
quality, moral character, a productive nature, a
strong work ethic and an agreeable personality,
firms say. Owners who don’t want to lose people
with just those qualities sometimes promote them
even when they’re not truly partner material. So
what’s the missing ingredient to make a successful
principal? An individual must be able to “grow the
pie” through a unique combination of
characteristics including
Leadership skills.
Partners must have the ability to
inspire and manage people. That requires the
vision, skills and personality to motivate
employees and obtain strong support from every
member of the firm.
Rainmaking potential.
Partners should be able to bring in
clients from existing-client referrals and from
contacts and organizational activities. Strong
candidates will have shown interest in doing this
early in their careers; they are people with
engaging personalities, who are “out and about”
with others and already starting to build a track
record of bringing in new business.
Entrepreneurial skills. A
true business adviser is someone clients look to
when they are going to make a major financial
decision. CPAs with genuine business acumen
generate client loyalty not just because they work
on the account (and do the accounting, audit or
tax work) but because the client experiences them
as a vital part of his or her team.
Ambition and drive. A
strong desire to become an owner is essential.
This usually is combined with a willingness to do
whatever it takes to “make it.” Such people drive
themselves, and often those around them, in their
quest for partnership status. Many people work
hard, but few really are motivated to be highly
successful, owners say.
Other key attributes.
Occasionally, a person without the
above characteristics may have a specific talent
that can add significant business in the future.
For example, he or she may have become a “known
expert” in a technical specialty the firm can
market to achieve substantial financial benefits.
CASE
STUDY
Career Counseling Vs. the Annual
Review
J ohn, one of ABC
& Co.’s better staff members, had just
completed his fifth year with the firm. He
had joined ABC on graduation from college.
Each June he had had counseling sessions
with a partner. These meetings were fairly
routine; the partner would review John’s
performance for the past 12 months and
commend him on his high chargeable hours,
his staying within budget and his positive
client and staff relationships. The
partner then would tell him his salary
increase for the coming year. In their
most recent meeting, the partner said John
was doing well at the firm and was pleased
with his assignments and salary increase.
Three months later, John submitted
his resignation. He said he had always
loved technology, and since ABC &
Co. did not have a technology department
or niche, he had decided to join another
firm that was building that specialty.
The partner who had counseled John had
had no idea he wanted to pursue this
career track. The partners were quite
upset because John was one of the few
staff members who had “partnership
potential.” Furthermore, they would have
been interested in building a technology
niche and were upset to lose a talented
individual to a competitor. This
is a classic example of what firms do
wrong. Accountants generally are not
well-trained in staff development,
either in college or through subsequent
CPE or training, and their expertise and
level of comfort in dealing with these
matters may be limited. Too often, they
focus on performance reviews and salary
adjustments instead of on what employees
want to achieve in their own careers
(see “ Career
Counseling Guide ”).
|
FIND, ATTRACT AND NURTURE
The situation is unlikely to change rapidly,
so for the next few years CPA firms must take the
initiative to find, attract and nurture the best
possible candidates. Taking long-term actions
today to develop quality contenders over the next
several years, and short-term actions to solve
your immediate needs, can keep the pipeline of
potential leaders full. Recognizing the crisis,
the AICPA is investing $25 million in an ambitious
student recruitment campaign, now in its fourth
year. The Web site
www.StartHereGoPlaces.com is the “hub” of
the campaign. On a long-term basis,
consider one of the local colleges or universities
as a “farm club” for new recruits. This is
especially useful for local or regional firms that
are large enough to project the image of being an
alternative to the Big Four. Start an internship
program (see “
Road to the Future ,” JofA ,
Jul.04, page 41). Institute a program that
combines campus activity such as speaking in
accounting classrooms a few times a semester;
create a working relationship with one or two key
professors; get involved in other activities to
make the firm’s name familiar to the business
school’s students and faculty. Encourage partners
and managers to raise the firm’s visibility
through writing, public speaking, advertising,
public relations and volunteer work, all of which
contribute to strong image development.
Small firms can attract ambitious college
graduates by
Putting up an eye-catching job
opportunity notice in a local school’s career
counseling/placement office.
Becoming active with the state
society committee on colleges.
Speaking at a college career night
for accounting graduates. On a short-term
basis, to get the word out to the most promising
candidates, initiate a series of basic steps such
as running advertisements, using placement
agencies and executive search firms and networking
aggressively. The key is to be willing to invest
the money to find and attract the best talent.
Many local and regional firms consider advertising
ineffective and shy away from paying potentially
expensive fees to agencies, but that attitude may
be counterproductive. Spend the money to develop
really unique ads, place them in a wide variety of
print media and on Web sites and offer attractive
compensation packages. Bringing in a talented
prospective principal in the current tight
recruiting environment may require significant
compensation and incentives. If you need to pay
partner-track people a lot more than existing
staff, do it. Another, more radical
approach is to widen the search outside the realm
of accounting. Dynamic people who weren’t
accounting majors in college but who have been
working in specialized (niche-oriented) fields
such as finance, technology, law, real estate or
law enforcement may be good candidates, especially
for firms with industry or service-niche
practices. The key to a successful search
and recruiting effort is to make it a top
priority. Designate one or two partners to focus
on it and reward them for achieving the desired
results. A recruiting partner’s responsibilities
should include developing and placing ads (and/or
establishing an arrangement with headhunters),
quickly responding to all leads, overseeing the
interview schedule and process and promptly
answering candidate inquiries. Firms can measure
their success by evaluating the quality of the
people they hire.
|
RESOURCES
CPA Career Center,
www.cpa2biz.com/Career/default.htm
AICPA members can
search job postings, locate candidates
for open positions, assess personal
strengths and development needs and
access other career-related resources.
Competency Self-Assessment Tool
(CAT),
www.cpa2biz.com/CAT
CAT provides guidance
for staffing, training-needs analysis
and job redesign. The tool is free to
individuals who are AICPA members.
For more information see
www.aicpa.org or www.cpa2biz.com
or call the Institute at
888-777-7077.
|
DEVELOP EXISTING STAFF
Because firms push employees to be
production-oriented (that is, to deliver high
billable hours and get work done on time and
within budget), they do not typically devote
adequate time and resources to bringing out staff
members’ leadership, human resources or marketing
skills. Most firms merely pay lip service to those
areas by talking up certain practice-development
activities. Instead, use a step-by-step,
long-term approach to developing the future
partners in your firm:
Write out a list of personality
characteristics and other attributes that you and
your partners see as necessary for future owners.
Start with the attributes listed on above and add
qualities important to your organization. This is
your qualifications wish list, against which your
firm will gauge potential candidates.
Perform an in-depth review/assessment
of each member of your staff. Your goal is to
recognize who in the organization may have the
potential to become a principal.
Initiate career counseling with each
staff member who shows any promise. Many partners
do not understand how to perform an effective
career counseling session. Partners can ask
questions such as those found in the “Career
Counseling Guide.” The counselor’s primary
objective is to really understand the interviewee,
to learn his or her long-range goals and plans and
then to develop specific short-term (one-year) and
long-term (three- to 10-year) goals.
Monitor, at least quarterly, the
goals and progress of all future partners. To
expand their capabilities, partners need to be
willing to send these potential successors to a
wide range of educational and training courses in
marketing, human behavior, leadership and
management. Some of the best programs may be
offered outside of the accounting world and can be
quite expensive. Recognize that money spent on
partner development is an investment.
Establish a mentor program. An
existing owner responsible for the development and
nurturing of specific prospects should hold
monthly, one-on-one breakfasts or lunches with
them. The partner’s role is to “get inside the
candidates’ heads” to know about (and care about)
their personal and business lives.
Regularly take staff to client,
practice-development and proposal meetings. It’s
also important to acclimate younger workers to
handling significant client issues. Ask for their
opinions on how to deal with challenging
situations. For example, if a client is exploring
an opportunity to acquire another company and is
faced with a difficult financial feasibility
analysis, ask a candidate to draft this analysis
prior to the meeting, present it to the partner,
be involved in its conversion into a final
document and attend the meeting with the partner
and client.
Provide information to candidates
regarding the financial and other benefits of
being an owner. Very often, prospects are unaware
of the virtues of becoming an owner in a CPA firm.
This can be covered effectively during the career
counseling sessions. How much information a firm
is willing to share is totally discretionary; it
can be quite detailed or very general. In
addition, communicate with staff about the firm’s
goals and planned activities. Have certain
candidates attend part of the partners’ retreat or
hold semiannual “state of the firm” staff
meetings.
Be a great role model. Show a
positive and enthusiastic attitude; avoid negative
comments about other partners or staff; be a team
player. It is not uncommon for the unhappy,
negative behavior of existing partners to destroy
staff interest in firm ownership. Being a
cheerleader for the firm goes a long way toward
increasing candidates’ desire to become partners.
 |
PRACTICAL TIPS TO
REMEMBER
| |
|
 Develop a
relationship with a local
college or university. Have
existing partners speak in
accounting classrooms a few
times a semester, create a
working relationship with one
key professor and pursue
activities to make the firm’s
name familiar to the business
school’s students and faculty.
Raise the firm’s
visibility through a program
of writing, public speaking,
advertising, public relations
and volunteer work.
Spend the money
to find and attract the best
talent. Develop unique ads and
place them in a wide variety
of print media and on Internet
sites.
Offer attractive
compensation packages. If you
need to pay partner-track
people significantly more than
existing staff, do it.
|
Make partner
recruiting a top priority.
Designate at least one partner
to focus on it.
Perform an
in-depth assessment of each
member of your staff. Your
goal is to recognize and
develop existing staff who may
have the potential to become
an owner.
Establish a
mentor program. Acclimate
younger workers to handling
significant client issues.
Provide more
information to candidates
regarding the financial and
other benefits of being an
owner. Be a cheerleader for
the firm to increase
candidates’ desire to become
partner.
| |
INCOME VS. EQUITY OWNERS
Many owners still have no idea how to admit
people into the upper levels of their firms. There
generally are three levels of promotion to
consider for existing managers: principal or
director (a nonowner title), income partner and
equity partner. Offering people a promotion to a
high-level nonowner position such as principal or
director is the first option to consider. Firms
usually reserve that position for people they want
very much to retain but who don’t possess the four
key criteria listed earlier. Make the position
very attractive by implementing a significant
benefit package and conferring prestige similar to
that associated with becoming an owner.
Another position, often described as the income
or nonequity partner, is the next level to
consider. Generally, income partners share in the
firm’s income, although not necessarily as part of
the equity owners’ compensation system. They are
recognized as partners in the eyes of staff,
clients and the public (providing the status that
many people want). They generally have no stake in
the firm (although in some states they might own a
fraction of 1% of stock to satisfy legal
requirements for shareholder status). Such
partners may not participate in the same ways as
equity owners, for example, in the management of
the firm, the owners’ compensation system, voting
or having full access to all firm information.
Being a nonequity partner provides an opportunity
for all parties to operate together at the partner
level without making the more complex commitment
of an equity interest. There’s no
definitive system for bringing in someone as an
equity owner. Many firms require a buy-in, while
others give people credit for their years of
service or the new business they have generated
over the years (see “
Add a New Owner to Your Firm, ” JofA
, Aug.03, page 43, for more details about how
to add equity owners).
PEOPLE, PEOPLE, PEOPLE!
Finding, developing and retaining the
best—especially those who can lead and grow the
firm in the future—is the most important issue
many firms face. Stepping up the search for
potential successors and developing those
presently on a firm’s existing staff are critical
steps. There are no overnight solutions,
but the future success of many firms will depend
on whether their owners take immediate and
comprehensive action. Those firms that commit the
time and money now will be in the best position to
outlast competitors and go on to have a thriving
future. |
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