Is your farm system developing the next-generation partner with the right stuff?
CPA firms have been thrust into a new and different complex business dynamic that requires them to think out of the box and respond.
Consider the following:
• Lots of predatory pressure on fees and billing rates.
• Baby boomers retiring at a rapid rate.
• Many firms looking at alternative strategies to “going it alone.”
• A talent dearth, particularly in the tax area.
• Quality firms position themselves to get “A” type services but lose out to larger national firms on brand recognition, presence and market permission.
• The merger frenzy with the Top 100 firms gobbling up smaller firms succumbing to their inability to keep pace.
The Next Six firms (RSM, Grant Thornton, BDO, Crowe Horwath, CliftonLarsonAllen and CBIZ) have figured out (or are in the process of figuring out) that the way to respond to this changing environment is by providing consulting and trusted business advisory services to Corporate America as they outsource key business processes and special, non-recurring needs to boutique and larger consulting firms. And Corporate America is willing to pay a premium for the expertise and timely delivery of these services. These high margin lines of business are generating roughly 20 percent of revenues at the Next Six and more than 20 percent to their bottom lines. That isn’t happening by accident; it’s all designed to go where the opportunities lie.
Concurrently, shrinking compliance margins have helped the Next Six to realize it’s time they capitalize on their recurring compliance relationships by delivering on their promises of being trusted business advisors. Up until now, the Next Six have not been able to develop their partners into trusted business advisors who deliver value-added services such as metrics benchmarking, best industry practices, observations about EBITDA and working capital improvements, and ways for owners/operators to create, enhance and preserve their wealth.
To strengthen their advisory capabilities, the Next Six are beginning to move away from the traditional accounting firm model to a new professional services model with different leverage and performance metrics. They also have begun to modify their training curriculums. Most of all, as they look to the future and their next generation of partners, they are placing added emphasis on the importance of advisory and business development skills.
Is your CPA firm responding to this changing environment? Have you noticed these shifts at the Next Six? If you want to “run with the big dogs,” go after greater margins and perpetuate a sustainable brand, you need to take a hard look at your next generation of partner and ask if your firm is developing partners with the “right stuff.”
In addition to the traditional core competencies of client relationships and client service, technical capabilities, personal attributes, staff development and communications, senior management should make sure the next generation of partners possesses the necessary advisory and business development skills. Larger firms have focused on this issue by launching initiatives such as Partner Candidate Development Academies that require active participation by the firm’s senior management and partner candidates.
Here’s a framework of a Partner Candidate Development Academy you might find at some of the Top 100 firms:
To develop high-performing managers into high performing partners within two or three years, the criteria for acceptance into the academy include a recognition that candidates have the basic raw equipment that, more than likely, will translate into strong consulting and trusted business advisory skills. The focus is on the personalized, developmental needs of each participant. Below is a description of the program’s curriculum, which can span three years.
The creation and execution of an individual development plan is the foundation for the academy’s curriculum. Below are the steps for first-year participants:
• Developmental assessment;
• Debrief of assessment results with senior management;
• Creation of a personalized development plan;
• Ongoing program participants update their plan goals for the new year.
The purpose of this process is to help participants leverage their strengths and address development needs based on feedback from their developmental assessment.
Below are the five steps:
|Developmental Assessment ||Month #1 || |
· One-on-one interview
· Follow up feedback session with written report
· Outside consultant
|Debrief ||Month #2 || |
· Meeting to discuss feedback
· Senior management
Creation of Development Plan
|Month #3 || |
· Senior management
|Development Plan Status Report ||Month #4 || |
· Completed and planned actions
· Open Q & A
· Senior management
|Updating of Plan Goals ||Month #5 || |
· Summary of accomplishments
· Goals for following year
· Senior mangement
Ongoing participants repeat steps four and five in years two and three.
Participants meet with senior management to review status of their development plan. The deliverable for each quarterly meeting is an updated plan identifying actions completed since the last meeting and planned actions for the next quarter.
Coaching to support the development plan is provided as follows:
• In review meetings;
• By the participant’s leader and the firm’s senior management;
• Through external coaches and consultants selected based on development needs.
The purpose of the workshops is to provide learning and development of selected criteria for partner skills, as well as an opportunity to collaborate with other academy participants.
Project Team Assignment
The purpose of the project team assignment, which is completed by first-year participants, is to develop strategic thinking and team skills that serve as the foundation for value-added client service. It’s designed to develop recommendations to senior management on a firm’s current strategic, operational or corporate governance issues.
Completion of Annual Cycle
Participants are eligible for consideration for partner at the conclusion of the program year. An assessment, including progress towards the participant’s development goals, is discussed with laser focus. The participant and senior management review the results of this assessment and identify the next steps, including, if appropriate, a recommendation for partner admission.
Today, many small and midsized CPA firms are realizing that the largest CPA firms continue to get bigger and stronger, making it nearly impossible for them to compete for quality clients and quality talent. It’s a reality of business, but not necessarily a forgone conclusion, for those firms who want to “run with the big dogs” and, through strong management, are perpetuating their firms for the next generation. One of their secrets is their ability to develop a “farm system” of quality future partners. It requires active involvement by the firm’s CEO and other senior management. A Partner Candidate Development Academy is a great tool to ensure success. Try it, and we’d be surprised if you don’t see improvements in the quality of your next generation of partners.