and two major drivers of that change.
by marc rosenberg
cpa firm staff: managing your #1 asset
“treat people as they are and they will remain as they are. treat people as they can be and should be and they will become as they can and should be.” – goethe
“you see, really and truly, apart from the things anyone can pick up, such as dressing and the proper way of speaking and so on, the difference between a lady and a flower girl is not how she behaves, but how she’s treated. i shall always be a flower girl to professor higgins, because he always treats me as a flower girl. but i know i can be a lady to you, colonel pickering, because you always treat me as a lady and always will.” – eliza doolittle in “my fair lady”
more: thirteen traits of partners you’ll want to keep | six rules for keeping partners happy and productive | why strategic thinking impacts your firm’s future | seven things good firms must do | five ways to separate accounting winners from losers | two factors determine firm profitability | don’t make firm profitability a goal | core values: why your firm needs them | five keys in compensating new managing partners | top 20 tough choices for the partner comp committee | voting on ownership basis? three better methods | what partners do and don’t deserve
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the ancient greek philosopher heraclitus said: “there is nothing permanent except change.” people fly and drive cars instead of using horses and carts. technology has replaced calculators, slide rules and the process for writing books. food is purchased at grocery stores instead of grown on farms.
drastic changes have occurred in the cpa industry as well. one of the biggest areas of change is how staff are managed and treated, as shown by this chart.
how cpa firms treat their staff:
changes from 20th century to today
| issue | yesterday | today |
| supply of staff | like fruit on a tree | terrible
|
| staff treated like | plebes | professionals
|
| when the boss says jump, the staff say | how high? | why do i need to jump? |
| transparency | staff have no rights. partners are secretive about the firm. | firms are much more open about the firm.
staff don’t like secrets. |
| mentoring | not in the cpa firm dictionary. | “invented” in mid-2000s; progress made but there’s still a long way to go. |
| leadership development | not in the cpa firm dictionary. promotions attained through the staff’s own initiative and hard work. | firms realize that if they do not proactively help and train staff to advance and become leaders, people will leave. |
| importance of staff vs. clients to the firm’s success | staff might not have been in the top 5 most important. | most firms say staff are just as important as clients. |
| where the staff work | in the office or at clients. no other options. | many firms regularly practice working remotely. |
| flexibility: when and where work is done | 9 to 5 every day. mandatory ot hours at certain times. | staff want flexible hours and firms are trying to accommodate them. |
| staff retention | awful. awful. | turnover still high. |
if this had been written 30 years ago, it would be totally different from what you are about to read; it’s even different from what we originally wrote several years ago when my staffing book debuted. we have written this from the perspective of firms wishing to adopt progressive policies and techniques to manage, develop and retain their staff.
two major drivers of the change in how firms manage and treat their staff
- the production model for managing cpa firms has changed dramatically. years ago, partners were expected to be highly billable, with 1,400-1,600 hours being common. today, this figure is roughly 1,100. it’s lower for partners who are good delegators. as the trend to manage cpa firms like real businesses has become the norm rather than a radical new concept, firms have come to realize that their staff is more important than ever.
- it’s more important what partners do with their nonbillable hours (firm management, practice development and staff mentoring) than their billable hours.
- because firms value partners’ nonbillable time so highly now, inevitably their billable hours have come down. this means that partners must delegate even more of their work than in the past, resulting in staff-partner ratios increasing significantly in recent decades.
- at a time when the model for operating firms calls for more staff time, the supply of staff has dwindled, crippling some firms’ efforts to get the work out and grow. it’s been this way since the 2000s and shows no signs of abating any time soon. even if students’ interest in accounting as a career spikes unexpectedly, colleges and universities couldn’t handle the demand. there is a shortage of accounting professors worldwide, which is also not expected to ease any time soon.
faced with this dilemma, cpa firms woke up and realized that their whole perspective on managing and developing staff needed to change dramatically.
many years ago, the hr director of a large firm told me:
“there isn’t anything firms can do to affect the supply of staff, but there is a lot firms can do to affect the retention and development of staff.”
that hr director was spot on, and this explains the changes that have occurred in recent decades in the management and treatment of staff. to paraphrase the quotes at the beginning of this post, if cpa firms want to retain and attract staff and develop them into skilled practitioners and eventual leaders and partners, they need to treat them like leaders and partners instead of seeing them merely as employees who can be easily replaced.
the new school of thought recognizes that allowing staff control over their work schedule and where they conduct their work is a major workplace motivator. progressive firms now trust their staff to act like professionals.
the #1 key to cpa firm success: the staff
if you ask cpa firm managing partners to identify the most important key to their firm’s success, the hands-down winner will be “our staff.” ok, some may say it’s a two-way tie between clients and staff. but you get the point. there are many reasons for this:
- having staff who are motivated, engaged, skilled, ambitious, productive and personable is critically important. no one would disagree with this. just ask firms whose staff lack these traits.
- the cpa firm business has traditionally experienced a high turnover rate, generally in the 15-20 percent range. a rule of thumb is that the hard cost of replacing a staff person ranges from 0.5-0.75 times their annual compensation. so the pain of turnover is compounded not only by the nearly impossible task of replacing the departed, but by its high cost as well.
more importantly, retaining good staff enables firms to ultimately provide better service to clients. when firms excel at being great places to work where staff stay and thrive, client service always improves.
- if firms adopt a more leveraged operating model, this means that 70-90 percent of all client work must be performed by staff. this won’t be possible unless firms invest tremendous time and resources into developing staff who are highly proficient at performing the work involved.
- firms need a continuous flow of new leaders to grow and successfully transition work away from retiring partners. this will occur only if the firm excels at developing staff.
proof
if you still aren’t convinced that staff is the biggest issue facing cpa firms today, here is data from the aicpa’s 2022 cpa firm top issues survey, which ranks what firms feel their top practice management issues are.
| # of professionals | |||
| over 21 | 11-20 | ||
| finding qualified staff | 1 | 1 | |
| developing firm leadership | 4 | 2 | |
| staying abreast of law changes | 3 | 3 | |
| staff utilization and management | 5 | 5 | |
| retaining qualified staff | 2 | * | |
* not ranked in the top 5.
advice from todd shapiro, former president/ceo of the illinois cpa society
excerpted from his column in iscpas’ “insight,” spring 2016 issue:
“there are always reasons why firms decide not to devote resources to developing great employees, whether because of the impact on billable hours or ingrained corporate culture. truthfully, there are no excuses. we have to commit to developing the skills needed for our young professionals to succeed. to put it plainly, developing young talent is not a ‘nice to have’ but a ‘must have.’”
advice from jack welch, former chairman/ceo of general electric
during his legendary tenure at the helm of fortune 100 giant general electric from 1981 to 2001, jack welch appeared on everyone’s list of top 10 ceos. the accomplishments of ge during his reign were spectacular.
woven throughout the books he authored and articles written about him is welch’s #1 management philosophy: his fanatical insistence that ge executives consistently demonstrate their commitment and proven success in developing people. indeed, he required that the top executives of each business unit identify and develop future leaders. he made coaching, training and developing people a performance metric that carried equal weight to financial results in determining promotions and compensation.