When it’s time to make decisions about new partner admissions, senior leadership at many small and midsized CPA firms often hears about how a particular employee might leave the firm unless they’re made partners.
“If Mary doesn’t make audit partner this year, she will leave the firm,” they might say. “We can’t afford to lose her as she gets all the work done at ABC Manufacturing Corporation who pays us over $300,000 a year. Without Mary, this client will leave the firm”
Here’s another example: “We need to make Joe a tax partner this year because he is the only one in the firm who understands ‘C Corps.’ Without him, we will have a big hole in our Tax Department capabilities. It could put a big hurt on the firm.”
In their guts, these leaders know that, while both Mary and Joe are solid professionals, there is little chance that either of them will develop beyond client service partners. They have not exhibited, and probably will never exhibit, strong relationship and business development skills—prerequisites that demonstrate potential for the next generation of senior leadership. Nevertheless, the firm does have client service partner slots to fill because of retiring baby boomers, so senior leadership agrees to make Mary and Joe new partners.
After the meeting, senior leadership looks in the mirror and, once again, acknowledges they are failing to develop homegrown talent who have the potential to be their future CEO, COO or other senior executives.
Unlike larger firms who have long ago figured out that it is smart business for them to make significant investments of both money and time in growing their own future leaders (a long-term strategy that requires a personal commitment of senior leadership), today’s leaders at small and midsized firms instead usually turn to contingent and retained fee search firms to find them lateral hires who hopefully fill their internal players void. Unfortunately, lateral hires are big risks riddled with morale, cultural, quality, ethical and other problems and expensive management lessons.
History shows us that many lateral hires don’t make significant senior leadership impacts on firms. Some last for only short stints and only create disruption to client service. After all, every firm is looking for high-quality talent and no firm is going to let it walk out the door to join the competition. As a result, using search firms to find “free agents” oftentimes is like pouring hard-earned dollars down the proverbial drain.
Arguably this unsuccessful, or, at a minimum, dicey strategy of “buying vs. building” the next generation of senior leadership is the No. 1 shortcoming of many small and midsized CPA firms, and it’s a major reason why many are merging-up into larger, more established brands. While there is nothing wrong with merging-up for the right reasons such as attracting and retaining larger clients, leveraging off a better-known brand, and monetizing your asset, it can, could and should be avoided if the driver is a lack of next generation talent who can become your future “C Suite.”
It’s time for small and midsized CPA firms to start “building” vs. “buying” the next generation of talent. One very effective management technique used by many of the larger firms is offering manager and partner development “academies” to their homegrown all-stars and potential all-stars. It’s smart business that requires firms to make serious commitments of time and money as these academies require active participation by the firm’s senior leadership and the hiring of professional outside coaches. Designed to help high-potential professionals demonstrate a proven track record of steady and increasingly improved performance, these development academies provide real-time training in soft skills such as:
• Long-term client relationship building;
• Peer-to-peer team building;
• Resilience and agility when operating in dynamic environments;
• Selling skills that result in new business originations and cross sales;
• Strategic thinking;
• Strong written and oral communication skills;
• Dressing for success;
• Addressing personal life issues that may be distractions to professional development;
• Impressive presentation skills when meeting with clients and potential clients; and
• Positive influencing of staff.
Developing home grown future leaders pays dividends to firms as the strategy:
• Creates a proud culture in the firm that is admired by both existing and potential clients and employees.
• Develops the necessary “glue” between leaders of today and tomorrow. In many cases, these academies form mentor/mentee relationships that are long lasting.
• Reduces dependence on expensive search firms.
• Demonstrates to younger staff that sticking with the firm of choice can, in fact, be their pathway to financial success as smart and hard work has paid off for home-grown professionals.
• Reduces the need to make “slot shot” client service partners with limited potential for upward growth.
• Promotes a positive morale that has a lasting impact on both client service and firm profitability.
• And last but not least, reduces the dependency on lateral hires or “magic bullets” to perpetuate the firm.
Launching and maintaining development academies is a major undertaking that cannot be taken lightly. Experience tells us these academies do help firms reduce involuntary turnover of all-stars and create better-quality next generation partners—some of them candidates for the future “C Suite.” It’s long overdue at small and midsized CPA firms. Is it time for your firm to shift paradigms?