16 items that don’t require formal votes. 7 that do. and 25 best practices.
by marc rosenberg
the role of the managing partner
there is no better way to start this post than with a quote by tony kendall, managing partner of mitchell & titus, a large cpa firm with offices in new york, philadelphia, chicago and other cities. tony said:
“i can’t manage this firm if i have to take a vote every time i want to make a decision.”
for managing partners to be effective, they must have the authority and flexibility to make decisions without first getting approval and without subjecting those decisions to the nitpicking and negativity that may occur when management decisions are open for debate and discussion.
more: exceptional managing partners offer their advice | why management is the #1 key to the firm’s success | herding cats: advice for managing partners
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there are two caveats to this:
- most firms reserve a few major decisions for a full vote of the partners. examples: mergers and making someone a partner. more on this later.
- the decisions that a managing partner can make without a partner vote should be (a) formally cited in the firm’s partner agreement and (b) granted by the firm’s executive committee or board.
in other words, for managing partners to be effective, a wide swath of authority and decision-making power must be given to them, allowing them to operate freely within these parameters.
the managing partner’s authority: standard verbiage
a nice, succinct preamble to the authority and duties section of the partner agreement is this:
the managing partner shall have general and active control of the management and business affairs of the firm on a day-to-day basis. the managing partner shall exercise general supervision and administration over all the firm’s affairs, with the exception of those decisions stipulated elsewhere in the partner agreement (for example, issues that require a vote of the full partner group).
specific authorities granted to managing partners include:
- be responsible for the management duties and powers normally exercised by the ceo of a business
- have the right to delegate authority to others from time to time and recall the authority so delegated. this includes the appointment of department heads, industry team leaders and administrative positions such as the coo and marketing director
- resolve questions and issues relating to ethics and professional standards
- determine the types of services the firm provides
- hire and fire all employees, other than partners
- recommend compensation for employees
- create, adopt, enforce and supervise operating procedures and policies for the firm
- pay all expenses and debts as they become due
- automatically serve on (or even chair) the firm’s compensation and executive committees
- approve all admissions of partners. note: this is in addition to a vote by the full partner group
- manage and administer the firm’s partner retirement system
- initiate preliminary no-obligation discussions with any merger candidates
key decisions managing partners must be able to make without votes
we frequently cite duties, authorities and decision-making powers that managing partners need to have to be effective. this does not mean that just because managing partners are vested with these authorities, they should make these decisions in a vacuum, unilaterally and without appropriate collaboration. it does mean that the decisions should ultimately be made by the managing partner.
for example, assume the managing partner is considering switching tax-preparation software from provider a to provider b. it would be unwise and totally inappropriate for the managing partner to make this decision unilaterally without collaborating with the firm’s it experts and key tax partners.
here is a short, partial list of important decisions that the managing partner should be authorized to make without partner votes:
- name department heads and industry team leaders
- hire admin team members
- create the strategic plan
- hire consultants
- finalize partner goals
- perform partner evaluations
- accompany partners on visits to major prospects and clients
- plan the retreat
- make all technology decisions after recommendations from those with expertise in the areas
- transfer clients between partners
- approve writeoffs
- choose which clients to accept and retain
- decide major vendor contracts
- make banking decisions, including borrowing money, to a limit
- make insurance decisions
- set billing rates
the managing partner’s term of office
electing the managing partner: usually this is determined by majority vote.
removing the managing partner: usually this is determined by supermajority vote.
term of office: usually four to six years, with no limit to consecutive terms. the vast majority of firms are lucky to have even one credible, qualified candidate for the managing partner job. if the managing partner is doing a reasonably good job, it makes little sense to remove the person from office just to rotate the position. at most firms, the managing partner’s term of office doesn’t get much attention from the partners. in practice, managing partners usually keep their job unless there is a compelling reason to change. the most common reasons for the departure of a managing partner are
- retirement,
- a long period of flat growth and low profits or
- the commitment of egregious acts.
common requirements by firms for formal votes
most firms tell me they rarely take formal votes. most decisions are made by consensus. but these decisions are always voted on formally:
- changing the partner agreement
- admitting a new partner; expelling a partner
- declaring a permanent disability
- enacting a merger
- making capital expenditures over a certain limit
- electing and removing the managing partner
- working past mandatory retirement age
meetings with the partners
partner meetings: as firms increase in size and adopt the corporate vs. partnership style, the importance and frequency of partner meetings decline dramatically. the executive committee often increases in stature and importance accordingly. executive committee meetings replace, to a great extent, partner meetings. it will always be important for the managing partner to keep the partners informed of important decisions, announcements and the firm’s direction. partner meetings, perhaps two to four times a year, are one way to accomplish this. my advice to managing partners: keep partner meetings to a minimum.
partner retreats: retreats are a time for contemplation, communication, planning, brainstorming, problem-solving and building a spirit of teamwork. although these objectives can be pursued at the office, they are easier to focus on at a retreat held out of the office, free of distractions. many managing partners i’ve known over the years point to past retreats as events that dramatically improved the firm. my advice: (1) make partner retreats memorable, high-impact events and (2) implement retreat ideas. otherwise, partners will find the retreats a waste of time.
25 best practices for the managing partner to focus on
this post has focused on the managing partner’s job description. below is a list, carefully crafted, honed and vetted, of the 25 best practices that enable cpa firms to become great firms. no firm rates an “a” on all of them, but outstanding firms do well on many of them. it’s the managing partner’s job to make them happen.
- pursue proactive business-getting efforts; lots of team selling
- exploit potential with existing clients
- use the power of niche marketing and develop specialized expertise
- provide world-class service
- be a higher-priced, lower-volume firm
- provide effective management, governance structure and leadership
- franchise procedures
- institutionalize client contacts; sell and service as a team
- partners mess with clients and staff, staying out of administration
- survey clients and staff to find out what they think of you
- maximize staff-partner leverage; partners are delegators, not doers
- have a clear strategic plan. vision. direction. implementation.
- get the right people on the bus and the wrong people off the bus; common focus and culture
- provide a diversity of services
- tenaciously commit to making your firm a great place to work
- make sure partners are good bosses so staff stay and get promoted
- provide proactive leadership development
- offer world-class training
- do succession planning, including client account transition
- maintain good partner relations; address conflicts
- practice partner accountability and good corporate citizenship
- all partners and staff should have goals and targets
- make partner compensation performance-based
- put technology to work for you
- benchmark to improve firm performance
managing partners’ billable hours
the chart below, taken from the 2019 rosenberg practice management survey, gives you data on the number of billable hours worked by managing partners across the country. please understand that these are the hours they did work, not necessarily what they should work.
analysis of this data:
- clearly, the larger the firm, the more time the managing partner needs to spend managing it.
- managing partners of firms over $20 million are working an acceptable number of billable hours, about half as many as all partners in their firms. most likely it’s all high-level, mostly consulting work for sizable clients. the managing partner of a $50 million highly successful firm once told me why his billable hours were 500 instead of zero: “this is the way i preserve my sanity. clients tell me every day how much they appreciate me, but my partners don’t.” many managing partners of large firms have very low billable hours because their focus is solely on managing the firm.
- managing partners in the $10 million to $20 million group work 30 percent less than all partners in their firms. but at an average of 702, their billable hours are still on the high side.
- managing partners of $2 million to $10 million firms are working way too many billable hours, close to what their other partners work. they can’t possibly be focusing as much as they should on firm management. their performance as managing partner would be greatly enhanced if they delegated just 300 billable hours and spent that freed-up time on firm management.
how managing partners should be spending their time:
- managing the firm
- bringing in business (if that’s a skill of the managing partner)
- building and maintaining relationships with the firm’s large clients
… with relatively little time spent on client work.
words for the managing partner to live by
these words apply to all aspects of life, for people of all ages (well, maybe for high schoolers and above).
“perfection is the enemy of good enough, and good enough accomplishes the mission.”
a perfectionist is someone who refuses to accept any standard of performance short of perfection. perfectionism is often harmful:
- it limits one’s time to spend on other pressing issues.
- it often leads to procrastination.
- it imposes unrealistic expectations on others.
don’t misinterpret “good enough” as incomplete, sloppy or short-cutting. it means getting the job done in an excellent manner, but without obsessing about trivia.
managing partners should avoid:
- spending two months creating the firm’s strategic plan instead of two weeks.
- before hiring an experienced person with great credentials who you know has job offers from two other firms, having the person interview with 10 people instead of three and administering two days’ worth of psychological tests instead of an hour’s worth.
- for a three-hour partner meeting, including 15 items on the agenda instead of the five most important.
pareto’s principle, also known as the 80/20 rule: because 80 percent of the benefits or results come from 20 percent of the effort, focus on the 80 percent and skip the rest. in gathering information or data to make a decision, it’s sufficient to review a relatively small amount of data that addresses the bulk of the most important information. example: to identify why the firm’s realization is 5 percent below target, limit your review to the biggest writeoffs.