Archive for the ‘Partner topics’ Category

Tuesday, October 12th, 2021

The Bonus Dilemma

“Whenever there is a hard job to be done I assign it to a lazy man; he is sure to find an easy way of doing It.” – – Walter Chrysler

You have heard me say it often: I’ve been around a while.

One thing that I have lived through during my 30+ years in CPA firm management is the bonus plan saga. It is like a nightmare that keeps repeating itself (like in the movie Groundhog Day):

  • As a firm grows, it begins to hire more people.
  • At first, there is no bonus plan. People get paid for their over-all performance.
  • Then, a partner has a great idea, “Let’s put in a bonus plan! It will inspire our people to do better.”
  • And then, the ones who don’t get a bonus become jealous.
  • And then, CPA firm leaders feel guilty because they are not being fair to everyone.
  • The ones who do get the bonus usually are the top performers, however, some others may get a bonus because they are creative, intelligent people who can figure out how to “work” any bonus system ever designed for a CPA firm.
  • Eventually, (and it doesn’t take too long) the plan begins to demotivate people.
  • Then, the bright idea becomes: “Let’s do away with our bonus plan and build it back into their salaries.  We’ll reward top performers with larger compensation increases.” Thus, everyone gets an unexpected raise.
  • Several years later, “Let’s put in a bonus plan!” – – – same thing all over again, eventually it is dropped again because it really doesn’t work very well and it creates a huge amount of administrative work in tracking, measuring and analyzing.

I’ve actually been through this saga about 4 times during my career.

I have very mixed emotions about bonus/incentive plans relating to basic job performance.  However, I am very much in favor of incentives for special efforts like bringing in a great new client or recruiting a top-notch, experienced CPA to the firm.

Many partners and managers resort to incentives because they think they’re smart enough to create the perfect carrot. Doesn’t usually work that way in CPA firms.

Here’s what often happens inside the firm.  If you provide incentives for billable time you will get lots of billable time. Also, every client engagement will be over budget. You want them to get billable hours, yet you want them to perform the engagement more efficiently in less time than last year. It sends mixed messages.  We don’t live in a single-variable world – especially inside a CPA firm.

Much of the challenge with developing a highly productive team does not depend on incentives.  It relates back to having skilled, effective managers.  Winning firms have managers (and partners) who continually communicate, coach, and train the younger people in the firm so that everyone understands their role and the importance of quality, timely client service.  That is what will earn them a bigger paycheck.

While some bonus plans can demotivate your people, good managers do not. Good managers motivate.  Embrace the challenging activity of continually interacting and communicating with your team members.

  • You know what Gordie Howe got for a signing bonus? A team jacket!
  • Ed Lauter

Monday, October 4th, 2021

My Copy Arrived

“There are no shortcuts to any place worth going.” – Beverly Sills

As with every Fall, I anticipate the arrival of my copy of the Rosenberg Survey. I learn so much from this valuable resource and it is a very helpful tool as I do my advisory work with local and regional firms.

For example: Why should firms located in cities with over 2 million in population have partner billing rates that range from $474 down to $277?

  • Firms with lower rates are less aggressive than those with higher rates.
  • Firms with higher rates believe they are worth every penny of their rates.
  • Firms with higher rates are often providing more advisory level work and less compliance services.

You can order your copy of The Rosenberg Survey here.

  • Far and away the best prize that life has to offer is the chance to work hard at work worth doing.
  • Theodore Roosevelt

Wednesday, September 29th, 2021

Engagement Letters for CARES Act Consulting

“The woods are lovely, dark, and deep. But I have promises to keep, and miles to go before I sleep.” – Robert Frost

It is always good to be reminded about accurately covering services you provide in engagement letters, especially those advisory services relating to the CARES Act.

Here is a good reminder and a resource from my friend Stephen Vono of McGowanPRO professional liability insurance:

CPAs need to be vigilant in advising clients affected by the pandemic regarding all programs available through the federal, state, and local government agencies. Historical claims data shows that failure to advise clients is a common potential claim against accountants. This engagement letter will assist you in describing the scope of services when performing Cares Act-related consulting and advisory services.

For further eligibility requirements, please refer to the United States Government Health and Human Services website. www.hhs.gov 

Contact: John F. Raspante – Director of Risk Management | p: 732.216.7552  jraspante@mcgowanprofessional.com 
Stephen Vono – Senior VP |  p: 732.216.7552 svono@mcgowanprofessional.com
Download E/L here.

  • It is easy to make promises - it is hard to keep them.
  • Boris Johnson

Thursday, September 23rd, 2021

The Rosenberg Survey

“Great firms continually reinvent themselves.” – Marc Rosenberg


The 2021 Rosenberg Survey is NOW available!

Each year The Rosenberg Survey does an analysis to see which metrics have the strongest correlation to profitability, as measured by income per partner. It never fails, the Top 4 are all related to leverage and rates!  As we work with firms who are struggling with profitability, we start by looking at their various leverage ratios followed by comparing their billing rates to like-sized firms in like-sized markets. 
CLICK HERE to Order the Survey!
The Rosenberg Survey, a comprehensive benchmarking study for CPA firms, is now available! Our Survey is nearly 200 pages, full of dozens of metrics, ratios and analyses of accounting firm financial performance. Order your book today and receive valuable data to help guide your firm. The fee for the Survey is $500. For questions, please contact us at (314) 209-0922 or email chylan@rosenbergsurvey.com
  • Facts are stubborn, but statistics are more pliable.
  • Mark Twain

Wednesday, September 22nd, 2021

Flexible Has Become Our Culture

“I am a man of fixed and unbending principles, the first of which is to be flexible at all times.” – Everett Dirksen

Even before the pandemic, accounting firms were figuring out how to offer employees more flexibility and still maintain the level of production to meet the needs of the firm and the clients. My question is, is there danger in becoming too flexible?

As I have observed, it goes back to my favorite topic – communication. It also involves accountability.

As your people begin to come back to the office, you will be negotiating with each one individually as to what they want their works hours and locations to be like.

Managing people is not an easy task and if you are trying to manage people on-site and people in the virtual world it becomes even murkier. Managing people, for CPAs, has not been a highly-developed skill.

Whether managing people in person or remotely, too much flexibility and independence can set a low-performance bar if not paired with strong accountability.

Expecting people to do what they say they will do, on time, without reminders sets the stage for expectations. If people have proved they cannot do this, then they need more of your supervisory time.

Set clear expectations – This is another area where partners and managers often fail. The new generation of workers wants you to be very clear about what you expect. Most are very willing to do the work required and put in the hours necessary if they clearly understand what you expect.

Accountability – Here’s one recommendation that might work well for your remote and even your in-house workers. Check-in with your direct reports at the beginning of the week, let them work for a week in their own individual style (it might not be 8 to 5 hours), and then regroup the following week.

Closing thought: Too much flexibility and lack of communication can create a culture of poor performance if there is a lack of accountability.

  • The pandemic has definitely forced companies and leaders to look at how we treat people—what are people’s needs? I also think it’s been a real eye-opener.”
  • Nicole Lipkin

Tuesday, September 21st, 2021

Labor & Value

“Until you value yourself, you won’t value your time. Until you value your time, you will not do anything with it.” – M. Scott Peck

Periodically, I repost a blog by Seth Godin. I do this when I think that it has special meaning to the CPA profession. I have observed that many CPAs still bill according to the amount of labor (time) that is involved in a client engagement. You should always consider how much value the client receives. Here’s Godin’s post:

Labor and Value

Adam Smith and David Ricardo argued that all value comes from labor, and the value of something is in the amount of labor it took to produce it.

But Henry George understood that this is backward. The value of something lies in how much labor we’re willing to exchange for it.

Too often, we’re tempted to price things based on what they cost us to make. It’s more useful to price things based on what they’re worth to those that might want to buy them.

  • If you don't know your own value, somebody will tell you your value, and it'll be less than you're worth.
  • Bernard Hopkins

Friday, September 17th, 2021

Flashback Friday – Subscription Pricing

“Price is what you pay. Value is what you get.” – Warren Buffett

This week’s flashback post is a recent one. I think it is definitely worth reading again. It describes Ron Baker’s subscription pricing model.

Now that 9/15 has passed, I hope you have a real weekend – enjoy!

  • Pricing is actually pretty simple...Customers will not pay literally a penny more than the true value of the product.
  • Ron Johnson

Wednesday, September 15th, 2021

A Jerk Free Firm

“In my opinion, we don’t devote nearly enough scientific research to finding a cure for jerks.” – Bill Watterson

Recently, a comment from Allan Koltin caused me to give some thought to what a jerk-free firm might be. Koltin noted that if you had a jerk-free firm, the firm would be more likely to have appeal as a merger candidate.

I have observed that most CPA firms have at least one jerk at the leadership level. It could be a partner, a manager, a male, or a female but their jerkdom is well-known and dreaded. Sometimes they are even ridiculed among the team members. Usually, interns can identify the jerk within a week or so and can often do a great job of doing a comic imitation of that person.

Here is a link to where you can read about jerks in the workplace. But how do you define a jerk personality in an accounting firm?

Someone who:

  • Talks excessively but never listens.
  • Takes credit for other people’s ideas.
  • Is always last minute causing chaos close to due dates.
  • Doesn’t respect other people’s time.
  • Leaves a mess in the lunch room for admin to clean up.
  • Ignores the FIFO method for processing work and puts their jobs first.
  • Seems to have no understanding that you have a personal life.
  • Rarely express appreciation or gives recognition for a job well done.
  • Openly makes fun of other people (staff/clients) and gets involved in the grapevine.
  • Dodges client calls when they know there is a problem and delegates it to someone else.

I could go on but you can add to this list if you want.

I suggest you strive to develop a jerk-free culture by establishing some guidelines and goals. Be sure you have identified the firm’s core values and expect all partners to live by them and set a good example

Here is an example of some values that help make a jerk-free workplace;

  • Client focused – Always striving to provide awesome client service
  • Focused on excellence pertainig to hiring, establishing processes and working environment.
  • Keeping our word – I always think of something Sam Allred said at a retreat many years ago as it applies to partners: “I will do what I say I will do, on time, without reminders.”
  • Team oriented – Everyone at all levels are expected to give and receive feedback to help themselves and the entire team to continually improve.
  • Self-sufficient – I will be a problem solver; not one who creates problems for others to solve.

Be able to say without hesitation, “We are a jerk-free firm!”

  • Of the billionaires I have known, money just brings out the basic traits in them. If they were jerks before they had money, they are simply jerks with a billion dollars.
  • Warren Buffett

Friday, September 10th, 2021

Flashback Friday – Essential Questions

“It is not the answer that enlightens, but the question. – Eugene Ionesco

Many of you are planning a Fall partner retreat. I know you will work diligently to establish a well-thought-out strategic plan.

When you are all finished, answer some important questions posed by David Maister.

Read this Flashback post from 2018.

  • Judge a man by his questions rather than his answers.
  • Voltaire

Tuesday, September 7th, 2021

Subscription Pricing

“You’re going to have to define the kind of customers you want, which is much easier if you’re niched.” – Ron Baker

Ron Baker has been talking about value pricing since 1994. You have read his books and heard him speak many times.

In a recent article, he makes the case for subscription pricing. We are keenly aware of subscription pricing. Many things from Netflix to shaving supplies can be bought via subscription.

Baker says, “It’s what I’m calling Value Pricing 2.0 – the subscription business model.”

Read Baker’s article via Thomson Reuters, titled: “Subscription pricing for tax and accounting services? I know this is a great idea because it scares the hell out of people.

Baker thoroughly explains the pricing model. He also covers how it is better for an accounting firm than traditional pricing models.

As with most things from Baker, I think you will find this very interesting.

  • It always amazes me that some firms have $100,000 clients and yet they have a bunch of $500 clients — that’s insane.
  • Ron Baker