A firm's first full-time employee is a major milestone — one that requires more thought and planning that you might expect, according to Rebecca Himango, the founder of illuminHR, who walks firms through building up the infrastructure they need to support a growing workforce.
Transcription (generated by AI; in case of discrepancies, refer to the recording):
Dan Hood (00:03):
Welcome to On the Air with Accounting Today. I'm Editor-in-Chief Dan Hood. We talk a lot about staff shortages and the pipeline problem and other people related issues in accounting and how hard it is to find staff. But for thousands of small firms, the first question isn't where can I find people? Is it time to start hiring? Here to talk about this major milestone for growing firms and other people related issues is Rebecca Himango. She's a CPA and a PHR who founded a consulting firm illuminHR after a couple of decades in HR with top 100 firm EKS&H. Rebecca, thanks for joining us.
Rebecca Himango (00:33):
Absolutely. I'm happy to be here. Thanks for having me.
Dan Hood (00:36):
Excellent. Let me just dive in. How does a firm owner know when it's time to make their first full-time hire?
Rebecca Himango (00:42):
That's a very good question, Dan. I look at this through both lenses. Because I'm a CPA, I understand the economics and the client pressures and leverage and the operating realities of a firm. And I also spent, like you said, about 20 years leading HR inside a CPA firm. So when I work directly with firms that are trying to build that people infrastructure needed for that next stage of growth, and with their first hire, it really depends on if the owner is consistently doing work below their highest value or when client service or responsiveness or quality start to suffer because the owner is stretched too thin, or if they're being limited by capacity. Right now, the market is huge, especially in client accounting services, advisory, that work is really growing. And so if they're limited by their own capacity versus the market opportunity, that's when I feel that it's time to look for the first hire.
Dan Hood (01:39):
And obviously I said full-time hire because we're making distinction right there. You may get part-time help here and there to get you through the busy season or something like that. But we're talking really about the full-on. We're hiring someone, they're on the staff full-time. So is that as big a distinction as I'm sort of suggesting is that between part-time people just helping out where you need when you're busiest and a full-time hire?
Rebecca Himango (02:00):
Yes, that's an excellent distinction because a lot of times it's good for an owner to start with fractional or part-time or outsource work so they can understand who they are as leaders. Sometimes it's good to work out the kinks with someone that comes in on a fractional basis so you understand exactly what you're going to be delegating to them, learning whether you are ready to delegate some owners, just love their clients and hold onto them so tightly. And so they need that practice of letting it go so that when they are ready to hire full-time, they know how to be a leader and they can retain their individuals because they know how to manage them.
Dan Hood (02:41):
Excellent. Yeah, and this is one thing in larger firms, the issue is they'll often promote people to be a leader with the expectation that they'll just magically learn how to be a leader. I mean, this is a big issue for everybody in the world. Being a leader and managing people is completely different from all the rest of your day-to-day work. It's a set of skills that I don't think a lot of people naturally have and that a lot of companies, not just accounting firms, but kind of just assume, well, they'll just pick it up as they go, which is I think in many ways a terrible thing. So getting some practice before you hire someone full-time and you really are fully responsible them as their employer is a great idea.
Rebecca Himango (03:16):
Yeah, and that's a story that's been true in public accounting for as long as I can remember. Being a strong technician does not always equate being a strong manager. So developing a lot of training to support that person from their transition where at staff you're into the detail and seniors, you're starting to manage people and managers, you're working with clients. And so yes, definitely providing the infrastructure so you can help people grow and develop is really important.
Dan Hood (03:47):
Right. And hopefully they get successful enough. I guess maybe we can talk about that, the infrastructure as separate from when do you hire your first full-time employee? All the things you talked about in terms of capacity and are you being taken away from your highest value work and so on. When do you start thinking about building that infrastructure? I mean in theory of infrastructure, that kind of infrastructure at all point in time. But when you're really talking about a formal infrastructure with an HR department, for instance, or someone to work with you to help on HR, even if it's part-time, when does the firm start thinking about that? Is there a rough number of staff or a rough size where they need to start saying, "Hey, you know what? It's not just a firm. I can't be the one going out and posting job ads and hiring people and interviewing people.
(04:31):
I need someone to do that for me on a regular basis."
Rebecca Himango (04:34):
Yes, that's a very good question. And the accounting industry has done a very good job of teaching us all that we don't have to have a full-time person for every single role that we have, and HR is no different. I would say that firms don't need a full-time HR person until they're 30 to 50 individuals, but they do need the infrastructure I would recommend right away. I've worked with owners that I've helped them hire their first person and then create the performance review process so that person knows what success looks like. And then the compensation and bonus structure that's tied to their performance so they feel that they're being seen and understood. And then even into developing the difficult conversations as you're understanding that developmental conversations are to build trust.
(05:33):
Improvement seen as growth, not failure. And so all of that needs to be in place with your very first hire. Now, does everyone do that? Not necessarily. What I'd love is for people to look at HR and this infrastructure when they are first starting out versus when they need it. I normally get the call when there's a lot of turnover occurring or there's a breakdown with performance and management. I recently actually just was at a retreat with a firm that was about 25 people and the employees absolutely love the firm. It's a great culture. Can't speak highly enough about it. And they were just asking for all of these things. They're like, "I don't know how I'm evaluated actually. Sometimes we have performance reviews, sometimes we don't. I get a bonus, but I have no idea what it's tied to." So those kinds of things are helpful as soon as possible and are very affordable when you do a fractional type HR situation versus hiring full-time.
Dan Hood (06:31):
Right. No, that's a spectacular point. When I'm thinking about infrastructure, I'm more thinking about, like I said, like an HR department, but it's more than that. It's all these extra things you've got to think through. It's not just hiring somebody because that's just the first day. Managing them through the rest of their work life with the firm and giving them clear guidance on all the things you mentioned. Bonuses and compensation and evaluation and all that sort of stuff is crucial. As you say, I don't think, I certainly don't, I don't think a lot of leaders would naturally realize that that's part of the whole process.
Rebecca Himango (07:04):
Yeah, and that's a very good point. When you are making your first hire, I feel that's when you become an employer and you want to be ready to be an employer. Like I said, I worked with an individual right when it was an owner, he wanted me to make his first hire. He created employee handbook, he created the performance review system, everything with that first hire. And he is really thriving and his employees are thriving because the foundation was in place. It almost made the whole system more accountable and it gave it credibility. And so the employees are really looking to him as a true leader, not just a five-person CP firm, for example.
Dan Hood (07:46):
Right, right, right. It's weird, I think for a lot of, particularly we started out by talking about small firm making their first hire. A lot of times they're not thinking, they're thinking, "Well, I'm hiring one person and I'll just work all this stuff out with them. I'll just figure it out. We'll talk." And if they're thinking about it at all, they may just think, "I'm just hiring someone to do this work for me. I don't need to go into all those other details." How should they go about that process of hiring? Is the first step really to think through all these issues in advance and say, "Okay, this is what I'm ready to pay. This is how much time I'm willing to spend training them. This is the kind of person I don't need an expert. I can train someone or I absolutely have to have an expert because I don't have time to train them." Is going through all those issues first, is that the way to start?
Rebecca Himango (08:27):
Yes, absolutely. I spend a lot of time with owners working through what they feel like they need in their head and then creating the roles and the responsibilities around it. And it's important too to understand the market and what is more costly or expensive in an employee versus what you really need. So for example, you may need someone that is a bookkeeper level that doesn't have a degree, but has been doing transactional like ARAP for a long time. That is a lot cheaper than wanting to hire. I think a lot of firms are drawn to, "I don't have time to train. I just want to hire someone that walks right in the door and knows everything." So you're paying a lot more for that type of individual. So it's really important to lay out what you really need, which is sometimes why a part-time or a fractional person will help you determine that because you may feel like you would delegate all these really high value tasks when actually you're just delegating something that someone can do repetitively.
Dan Hood (09:30):
Right, right. Well, and I think it's like you're going to have to train them anyways because every firm does things differently. Even if they're a brilliant technical person, they know all the tax or they know all the gap or they know whatever the area is. They don't know your systems and everybody's systems are different enough. So I think anybody approaching it that way may be a little disappointed if they think that, yeah, I'll just hire someone and they'll just come in and take over.You're going to need to train them on some stuff.
Rebecca Himango (09:56):
Brings up another really good point, Dan, is the direction that you want your firm to go. I strongly believe that creating your mission and your values before you make your first hire is really important because how the person aligns with what your business vision is so much more important than the actual technical skills. You can train the technical skills, but you can't train character and integrity and those types of things. I've had firms like EKS&H, for example, that one of the core values was fun and we really lived that out. We had great events and people weren't scared to dress up for Halloween and that's representative of what the culture was. And I think it's one of the reasons why it thrived for so long. Other firms want more suit and tie professionalism and credibility from that way. So knowing exactly what you want your firm to look like.
(10:51):
So I normally start there with owners is encouraging them, helping them develop a mission and some values that we can hire with.
Dan Hood (11:00):
Right. Yeah, no, that makes a ton of sense. When we do our best firms to work for a list every year, and we look at a lot of firms, and one of the things that's clear is when they have that sense of who they are and perpetuate it early. I mean, you're talking about being fun. There are firms that are like, "We're athletic." Literally they're like, "Yeah, we all like the outdoors. We all like to..." So you can use that as part of your hiring criteria. And the earlier you do it, I guess, the more strongly entrenched the culture will be. If everybody you've hired has always been, I'm going to stick with athletic. If there's always been people who you make sure they like to be outdoors or they like to work out or they like to do sports or anything like that, as long as you're continuing to do that, the culture almost, I won't say it builds itself because too many firms think that culture builds itself, but it kind of does.
(11:45):
If you're hiring super intentionally and you have those things in mind. Absolutely. And with that. I'm sorry, go ahead. Yeah. With that in mind, we're talking about you want to have your own culture in mind.
(11:56):
How important would it be? And obviously if you could have it in mind, it would be great, but how important would it be to have your future hiring strategy laid out? I'm talking just your very first employee, should you be also thinking about, well, what's employee number two going to look like and three and four? And if I'm looking at building out a staff in a practice area, how many people do I need for that? How much of that do you need to have in mind? I mean obviously, like I said, if you could have it all in mind, that's fantastic, but how much would you really need to have in mind?
Rebecca Himango (12:26):
Small firms I've found feel every hire more intensely. So culture fit and self-management really do matter. I know it's easy to say, well, it's just one hire or it's just the very first one, but you'll be surprised how strategic we need to be with each hire because a small firm will feel that, whether it's a skill level or a character trait, those things really do matter. I've hired individuals that didn't align with what the owner actually became as he grew with the firm, and they didn't work out because they weren't aligned. There's also differences, for example, in work ethic. Some firms that I work with are built around, we're going to try to make this a 40-hour a week firm, and we don't want you working on your holidays and your vacations. Some people still are very old school. The public accounting, it's like, well, we want you to be available and responsive within 24 hours or even less.
(13:35):
Whether you're on vacation or not, it doesn't take that long to check your email and let us know that you care and that you're there. So simple things like that really do matter. So I recommend having as much in mind as possible.
Dan Hood (13:47):
Gotcha. Makes a ton of sense. We touched on this next question, but I want to dive a little bit more into it. We talked on the transition from maybe working your HR department with part-time people, your advisors or consultants come in and help you on not a full-time basis or on a consulting basis to help you figure out who you're going to hire in your first number of hires. And I think maybe, I don't want to misquote the number here, but it was around 30 to 35, I think you suggested, I may be wrong about that, but where you start to think about, "Hey, maybe I need a full-time department." I think you said 30, but I could be wrong. But are there other, I mean, apart from just a pure number, are there signs like, "Hey, yeah, we really need a full-time HR department, a full-time HR director," even if it's not a full department, at least a person looking after that.
(14:33):
What are some of the hallmarks of a need for that?
Rebecca Himango (14:37):
That's a really good question, Dan. I throw out the numbers somewhere between 30, 50 for a full-time professional, but there are many factors involved. If you are even a smaller firm than that, but you are in 12 different states, your risk is different than a firm that's in one state that has more professionals. So there are different factors that determine that, and also how much you hire and how you retain people. If you have an open door and people are leaving because your culture isn't where it needs to be, then you're going to need more HR support, hiring, onboarding, those kinds of things. So it really depends on the type of firm that you are working.
Dan Hood (15:22):
Right. If you're a terrible, terrible firm, you're going to need HR because you're just awful and people are going to leave you in droves. No. Yeah, but obviously if you do, if you find yourself in a position where a sudden, yeah, wow, why are people always leaving after six months? One, you got to look at your culture, but two, you may need a full-time outside help to help you fix that culture and also to work on your retention. So it makes a ton of sense. Excellent. All right, there is obviously a lot more to talk about it on the subject and we will talk about it, but for now, we're going to take a quick break.
(15:55):
All right, and we're back. We're talking with Rebecca Himango of illuminHR, talking about all the different issues that come along with growing and particularly growing your staff and your HR function within your firm. And I want to go back to a thing we touched on a little bit, which is management skills. Again, this is not purely an accounting issue at all by any imagination. This is across the entirety of the economy. Very few people are good leaders naturally, and almost nobody gets trained to be a leader in any industry in any company. I'm wildly exaggerating. I'm sure there's some people who give some training, but the overwhelming majority is just you're good at the technical stuff. We talked about you're good at performing some tasks, so you are then put in charge of other people doing that task with no training.
(16:47):
I won't say this is particularly a problem at small firms, but at small firms, you often don't have a broader mass of management folks to absorb some of that issues. If someone just really can't do it, there's no one else to help the people underneath them, that's a big problem. How can a firm make sure when it's bringing on people that it has at least some sense of the skills that it needs, if not the actual skills that it needs? How can you, one, assess yourself maybe? We'll start there. If you're an owner hiring your first person, what do you need to know about leadership or how do you make sure you're prepared to do it? Or if you're a relatively small firm and only have a couple of people, how do you make sure that that group of people is ready to hire and ready to lead?
(17:29):
Yeah,
Rebecca Himango (17:30):
Absolutely. That's a good question. So people infrastructure is a really important support system for someone that's learning to manage. So if you have clarity around roles and responsibilities that managers can actually compare performance to, that's helpful. If you have a performance review system that when they're creating it are asking the appropriate questions to identify whether the employee is thriving and what the employee needs to do to develop, that will assist the manager in being able to deliver that feedback. So having those tools in place to support that manager is really important. Also, the training is involved and that can look a few different ways. I mean, it can be a course in doing CPE and those kinds of things. I do a lot of coaching clients to help their individuals learn how to empower people, to recognize people, those things that are so important in developing trust, which is what ties individuals to an organization.
(18:38):
And then there's also recommending others that are in the same position. So if you have a great manager that you're working with at another firm even, putting those two together so that this person can mentor and develop others. So Doug Slabaugh is someone that I really admire. He developed the entire coaching program at EKS&H. And so when I see leaders that need management responsibility, I will always refer them to Doug Slabaugh. He's the CPA coach is what he calls himself, and he does an excellent job of developing leaders. So there's different ways that you can get people the resources they need to grow. And are they going to be perfect right off the bat? No. But people do have that capacity. Now with that being said, some people are just not made to be managers, they're just great technicians. And it's okay if you understand people's strengths to just leverage those strengths and let them do those things and they don't necessarily have to manage.
(19:45):
And you just know your next hire has to be a great manager.
Dan Hood (19:48):
Right. Well, but that also requires that the person making that decision has to have the leadership skills to say, "Aha, wait a minute, this person can't be a leader or you should have less leadership responsibilities because they're really technically expert, but not great with people." So that requires the leadership knowledge at one level above them, right? Absolutely.
Rebecca Himango (20:08):
Absolutely.
Dan Hood (20:10):
And this sort of goes to a question I had been thinking about. We talked about, because we had started this discussion from the point of view of someone who's never hired before or if they've hired somewhere else, this is their first person on staff. And often you talked about a lot of the reasons they do it is that they want to be freed up to do other work. But really the whole thing is the more people you have, and stop me if this is a wild exaggeration, the more people you have, the more of your time you have to spend managing people. And that's not a bad thing. It just means that the bigger your organization is, the more time somebody, if not you, then somebody else you hire has to devote to managing all those people and managing all the people who manage the people below them and manage the people down.
(21:01):
I think for a lot of people, their first hire is to clear their plate. How do you want to make sure that they know that, yeah, you're clearing your plate, but then you're adding something else to your plate, which is managing people?
Rebecca Himango (21:12):
That is a great question and so true. I see in so many instances where you hire a lot of, let's say seniors tends to be, I want someone that knows what they're doing. I don't have to do a lot of training, developing that can work. But once you get three or four seniors, even the effort of delegating the work, reviewing the work becomes overwhelming to an owner and they're right back where they started, where they're not doing the high value work out there in the marketplace and growing the business. And so that's why I say in small firms, every hire is strategic. So I work with the owner to figure out when we are ready. Yes, it's a more expensive hire. You're hiring a supervisor or a manager level person somewhere between probably 130 and 170, depending on the market that you're in. But then if they free up all that time that you've spent delegating workload and reviewing workload and answering questions or having to meet with the client because they're not strong enough to do so, then it's a whole new world.
(22:14):
Now, one million to three million tends to be where I see firms that encounter this issue. And so they have three choices. They can either stay at that level, which a lot of firms do, or it's a risk to hire a more expensive person and then they have that or they can also just stay where they're at and be happy. So that's what a lot of the firms do.
Dan Hood (22:43):
Gotcha. Yeah. I mean, well, this is part, it's not the only part, but this is a big part of what firms need to do if they want to get beyond, like I said, one to three or anywhere up to five million depending on what they're doing. And it is a huge part of the suite of back office functions that firms that want to grow have to develop. Then you get into marketing and you get into technology departments and that sort of stuff. But HR is one of the crucial ones. And I think a lot of firms can't, as you say, decide, you know what? Let's just stay where we are and not put all that work in. But once you do it, those are crucial things to get you to be able to go to the next level. I said we started from a small firm perspective, and I want to go back to that because people talk a lot about snapping and how do you find people?
(23:34):
How do you get them on board? And then particularly, how do you keep them on board? And a lot of the solutions come down to throw money at them in one form or another, or come up with expensive programs that make them say they want to stay in one way or another. Are there other ways that don't involve just big buckets of cash to keep people on board, particularly for smaller firms? What kind of things can they do to make themselves a little sticky?
Rebecca Himango (24:02):
Yeah, no, that's great. When I work with firms on retention, I normally don't start by adding compensation or a benefit. I'll start with listening to the employees and leaders and identifying where the experience is breaking down. Retention is really one thing. People may say they leave for compensation, but their decision is often a cumulative result of unclear expectations, weak management, unsustainable workload, limited growth is a big one if they don't see a future at your organization. But retention doesn't have to be expensive. Small firms really have the strength of flexibility, access to leadership, a variety of work. A lot of larger firms will ask you to focus strictly on one industry after you've been with them for a year or two, where there's a much more variety of work and size of client. And so they're just a great experience. I used to work for the Gallup organization when I was in college and the CFO there recommended that I started with a smaller firm because he said you'll get a well-rounded experience that you won't find if you go straight into the big four, which is what I end up doing.
(25:21):
But nevertheless, from this side of the coin now, I'm seeing that small firms have a lot to offer, especially from a flexibility and owner access. You get training from the best and the brightest.
Dan Hood (25:35):
Yeah. And you can meet them all right there. It's a small firm. It's easy to see what everybody's doing and say, "Hey, that's interesting to me." Or I guess you're also in theory and being on the ground floor for firms that a smaller firm gives you an opportunity if there's a new niche the firm wants to explore, you may be much higher on the list of people involved in it than you might be at a larger firm, right?
Rebecca Himango (25:58):
Yeah. Well, and they can also tailor the employer experience to the staff that work for them. Some of the smaller firms I work for, each year I ask the employees what type of benefits they want. You don't necessarily need to have a health plan from one of the strong health providers. There are things called QSerras or ICRAs in place where you can tailor it to your employee base and they're very affordable. I mean, they're as cheap or expensive as you want them to be. You're the one that sets the limits. So there's a lot of things that you can do to make your employment for someone attractive.
Dan Hood (26:36):
Excellent. And it doesn't have to be expensive. I'm going to say we could talk about this a lot more, but I think if we leave people the message that retention doesn't have to be expensive, they're going to be very happy. And remember the main message there. Well,
Rebecca Himango (26:52):
And the big one now too, Dan, sorry to interrupt you, is remote in hybrid. A lot of the larger firms are asking people to come back into the office. And so if you're a little bit more flexible, remote can go a long way. People will take less salary to work remotely.
Dan Hood (27:08):
Excellent. There you go. Well, it doesn't have to be expensive, but you do need to think about letting them work where they want to work if they have strong feelings about that. Excellent. Very cool. All right. With that, like I said, we can talk a lot more about it, but we're up against the end of our time. So Rebecca Himango of illuminHR, thank you so much.
Rebecca Himango (27:25):
Thank you, Dan.
Dan Hood (27:27):
Thank you all for joining us. This episode of On the Air was produced by Accounting Today with audio production by Adnan Khan. Rate us, review us on your favorite podcast platform and see the rest of our content on accountingtoday.com. Thanks again to our guests and thank you for listening.
