American Institute of CPAs chair Leslie Murphy, in her recent address to Council, stated, "One out of six CPAs left their firms during 2004." The cost to replace these people is estimated at 1.5 times their current salary. Enrollment and graduation are up in accounting programs, according to the most recent statistics published by the AICPA.The bad news is that the percentage of graduates going into public accounting has dropped to 29 percent of the total. When speaking with CPA partners, I typically ask the question: Do you recommend or have you recommended public accounting to a son or daughter? Ninety-five percent generally look at me and either say or demonstrate by body language that their children would not think of going into the profession.
In fact, they often make comments like, "My kids don't want to work the hours or do that kind of work." If that is true, how do they expect to recruit their neighbors' children? Things must change and many partners know it. They simply choose to immerse themselves in solving client problems and focus on charge hours, hoping that the problem is short-term and will go away.
More bad news is that staffing is not a short-term problem in the United States. Demographics show that the workforce will be short on skilled workers, and many in the accounting profession are reaching retirement age. In fact, we often hear the question: "Who is going to buy me out?" That is a good question, and one that many in the profession waited too long to ask and resolve.
The sign of a great leader is to also select and develop their successor. In the accounting profession, the tendency in many firms has been to focus on charge hours rather than the development of leaders at all firm levels. All progress starts with the truth, and it is time for many in the profession to address the fact that they will be leaving over the next 10 years.
Firms are going to have to do more with fewer people. Planning, people and processes will be the keys to success. Technology will be the accelerator. In fact, many firms are starting to reward people for recruiting, developing and managing others, and not just for managing a book of business.
First, let's quickly examine how many firms got into the position they are in today. While it is tough to generalize, the following factors have contributed to many firms' current situation:
* Lack of a shared vision and strong leadership.
* Governance by committee or partners, rather than a chief executive or managing partner.
* Lack of a training/learning culture where learning is a two-way street.
* Focus on charge hours for billing and pricing services (an effort-based versus a results-based economy).
* Lack of the necessary growth to attract and retain top-quality people.
* Lack of firm standards, policies and procedures (shared overhead versus shared vision).
* Lack of accountability at the partner level.
* A perception that technology is overhead, rather than a strategic asset.
* Commoditization of traditional services.
* Increased regulation and litigation.
This can either be a list that will prompt you into action to transform your practice, or you can choose to ignore the warning signs until it is too late to respond. Firms that do act can quickly transform their firm into emerging and growing markets. In order to do so, they must build consensus among their partners or even terminate some partners in order to make the decisions necessary to enable them to attract quality employees and clients.
Some of those changes in attitudes are as follows:
* From multiple visions, to shared vision.
* From billing by the hour, to billing for value.
* From required CPE, to a training/learning culture.
* From placing little value on management, to placing great value on thinking, planning and growth.
* From mediocrity in personnel, to quality professionals in all positions.
* From an effort-based economy, to a results-based economy.
* From managing a book of business, to managing and developing people.
* From commoditization, to unique processes.
While this sounds simple, most people do not change for the sake of changing. They typically change due to fear or the loss of something.
Therefore, many firms are changing their partner compensation systems to reward partners for implementing the firm's strategic plan. Since most firms have unique strategic plans, they also have unique compensation systems. The keys to a successful partner compensation system are that the partners perceive the system as being relatively fair and trust those administering the system.
Changing attitudes requires education, time, thinking and planning. There are five things you can do in the next 90 days that will have a major impact on the firm culture and long-term profitability.
1. Develop a strategic plan that is consistently communicated to employees and other stakeholders. Involve managers and future leaders.
2. Hold partners accountable in support of the strategic plan.
3. Evaluate and, if necessary, change the partner compensation plan.
4. Implement or enhance the support for a learning/training culture.
5. Evaluate your billing practices (rates, timing and value of services).
While these are not silver bullets, together they will have a positive impact on your firm and the future of its employees.
