Track 1: From Charge Hours to Revenue Generated per Employee–Do the Math and Make the Mindset Shift

Transcription:

Mike Maksymiw (00:10):

All right. For those of you that don't know me, I'm Mike Maksymiw. That's how you put all the letters in my name in a row, more commonly known as Mike Max. A little bit about me, this is my wife underneath my picture, been married nearly 20 years this November. We're Disney fanatics. You might've seen me walking around with my Disney Cross body bag. That's a picture after I finished the Dopey Challenge at Walt Disney World in 2020 just before the world shut down and we got our butts kicked into this accelerated new place we're at. If you don't know what that is, you could Google it. I just want to keep moving along. Underneath that are my leadership academy friends. I'm a 2010 A-I-C-P-A leadership alum. Super proud about that. I've met so many fantastic people in the profession and it totally changed the trajectory of not only my career, but the things that I've learned are the most important things about life.



(00:58):

Such a great group of people. That's the whole family on the right. Sophia's on the left in purple. She just finished her freshman year at Merrimack and Massachusetts. Julia is going to be coming here to Southern California University of Redlands in the fall, but we're live in Connecticut, so we're kind of okay with her being 3000 miles away and our family loves traveling and that's a map of all the different states that we've been to. We're at 32 together as a family. Personally, I've been to 40, so that's a little bit about me that has nothing to do with accounting.



(01:30):

I'm going to let you digest this for a minute. This is kind of the crux of everything we're going to talk about for the next 47 minutes for 125 years in the profession. We've used charge hours as our basic metric to evaluate people and bill clients, and what I posit is that we don't actually hire people for charge hours. We hire people to generate revenue and there's better ways to evaluate them on the revenue they generate for the firm. And there's better ways to bill using that same data. Now, what I'm not going to do today is tell you that you shouldn't track hours. I think hours are super important because we have a capacity problem and the only way to know how much capacity you have is to really know how long things take. And part of this is a giant mindset shift of how you approach the data that you've always tracked.



(02:20):

So you don't have to track anything new. We just have to do a little bit of math and then evaluate the results. And we're accountants, we're experts at doing that. Alright, so again, this is a giant mindset shift and it's okay that it's hard. It's okay that it's new and it's okay to fail at it. Just be honest with people about what you're doing and they'll appreciate it that you're giving the effort. And I say this from firsthand experience with various experiments that I've run during my career with and without the knowledge of the people who are signing my paycheck.



(02:59):

All right? So I said before that charge hours is an imperfect metric. I believe that it disin sense creativity, that it disin sense innovation and it harms your most valuable employees by punishing them for being awesome, by giving them more work. When we switch to a revenue model per employee, we actively incent creativity. We actively incent innovation and we actively incent our superstars to be the superstars that they are. Here's the things that you're going to learn today. This is like the CPE slide that we have to have in there, but it's also got really good info for once. This bottom one is the mindset shift. It is the most important and the most difficult one. I've been on this particular soapbox for five to six years now, and every time I have conversations with other brilliant people in the profession, I get better on how to deliver the message that I really believe in. And that's how we landed on today's presentation of how to make the change. Not just that it's a great idea, I wholeheartedly believe in it. This is how you can actually take it home from here in San Diego to your firm and try it.



(04:18):

We heard a lot on the panel this morning about people who set their firms up the way that they wanted to on purpose and with purpose and you got four different stories of what those purposes were. And that's the beauty of the profession right now is that we get to choose what we want to do. We're not all scraping and clawing after the same clients anymore. There's too much work and not enough people to do it, and that's not going to change, probably not until I'm retired. So let's take advantage of it now during this time because what if I'm wrong? What if it does change? Well, if it's six years from now and we've set our firms up the right way, we don't have to change back. We can just be like, this is what it is now. Alright, so we're going to change from, and I know we've all had this conversation at one time or another. We have this much work. How many hours do we have to work to get it all done to I want to work this many hours. What kind of clients do I want to fill those hours with? What kinds of projects? Let me go cherry pick my clientele, let me go create capacity as was said on this morning's panel. Two, it's not hard to fill it up, there's too much to do, but instead of filling it with work that is okay, you can fill it with something that's freaking fantastic. It's fun to do.



(05:36):

So that's what we're going to try to do today is give you some of these tools so you could focus more on the revenue that you're generating and care way less about how many hours it took me to do it so that when you're looking to go fill this newfound capacity that you have from something else that you've learned from one of our fantastic presenters, that the reason why is for the revenue, not because it's going to take me 14 hours that I have left to fill up my time sheet.



(06:04):

So here's a picture example of what I was just saying. The old way of thinking is, wow, I have a lot of things to do and I have to figure out how to do 'em all. There's too many inputs and it's almost like I'm talking really, really fast to get that point across versus I can go enjoy my time because I made enough money doing enough work and I could do it in less time. Technology is awesome. I mean, have you seen the vendors that we got out here, they're taking a lot of the rote, repetitive time sucking work out of our lives. Doesn't change the value to the client though, so let's not change the value to the client.



(06:39):

So this is for the senior executive sitting there. We were this person on the left, we want to be this person on the right and the senior executive is sitting here thinking like, man, I wish, I wish that I could be on a beach. I wish that I didn't have all this work to do. I wish I didn't have 250, 10 40 sitting behind me that I have to go review before a deadline because I didn't tell my clients when they had to get me the stuff. A lot of the same concepts that you've heard already so far, but instead of dreaming that he could be there on the beach, he actually took the picture. He was there. Great Hawaiian, Maui, sunset. Beautiful. This is a great quote from Ariana Huffington, and I have to give my APRIO team a lot of credit for throwing it in because I didn't originally have this in there. They put it in and you've already read it so I don't have to read it too, but it's awesome how long something takes doesn't equate to the value that we provide to the clients.



(07:39):

Terrell said it on the panel this morning too. The things that we have to do to impress our clients aren't as great as the things we have to do to impress our colleagues in this room. And Bob and Doug just said it too in their last presentation, we have to look at our peer group a little bit different when we're trying to compare what we're supposed to do with what we want to do. When you look around this room, you're full of rooms full of brilliant people. You're all awesome. And when we look at this peer group, you're evaluating yourself against a really thin piece of the population that are just all awesome people. But if you look at your client base as your swath of people and the things that you can do that sometimes you're like, well, that was simple, right? That's not extraordinary. Well, the client couldn't do it. The client didn't know that was a thing. And to steal Bob's quote earlier, your 30 years of experience or why you can go do that in half an hour, how are you getting paid for that?



(08:41):

So I know I really haven't gotten into any of the how yet and there's a reason for that. I really wanted to set the stage and warm your minds up to these new concepts for the what could be what is possible because everything that we do in accounting right now, and I really mean everything we've inherited from someone that did it before us, we've been around 125 years, someone else came up with the idea of a charge hour. Someone else came up with the pyramid structure of an accounting firm. We don't have to keep doing it that way. And I wanted to warm your minds up to that process because we're going to get into the how in a moment. So this is our old measurement of success. I can't tell you how disgusted I was the first time I saw an accounting firm's financial statement when it had rate times time minus write-offs equals revenue. And I looked at the partner and I was like, would we ever let our manufacturing client do that? Put gross revenue in as what I thought I could sell my product for and not take scrap out of it and all that other stuff. Would we let them put inventory in at what they think they could sell it at instead of cost?



(09:53):

We're the cobbler's kids with no shoes running around. Our financial books are a mess. They don't make any sense. So I think this old measurement of success is really outdated because back when this was created, we all use green bar and unless you were micro machine talking fast writing down stuff on a green bar paper, no one's faster at writing stuff on green bar than anybody else. So time actually mattered. It took time to do stuff. I think it's been rendered dearly obsolete. I originally had a hundred percent obsolete and then I was really thinking about it and I realized I don't like to talk in absolutes because there's always an exception to every rule, which is probably the only time I'll use always or never.



(10:38):

Here's the new equation, same three metrics that are already sitting in our practice management system, and I keep going back to the panel because it was so good. My good friend Liz Mason was on that panel and I was having this conversation about getting away from charge hours and getting into a different metric that mattered more and she said something really important to me. She goes, the entire ecosystem of practice management software is built on the charge hour. You can't get rid of it because there's nothing to replace it with and everybody has invested bajillions of dollars in it. Your idea is great, but it's not bajillions of dollars to change software. Great. I was like, okay, that's actually really good because I like finding the roadblocks when I have these kinds of ideas because the roadblocks help me find the path to go navigate to get to where, end up where I want to end up.



(11:27):

So I started thinking of, all right, well, I need to use the parameters that we currently have so that one, I'm not asking you to do any different work. Nobody has to change how they fill out a time sheet. You don't have to change which metrics your software's already tracking. We just have to think about 'em differently and apply them differently. So it took a while and a couple runs of thinking and I sat down, I was like, all right, well, we have a charge hour goal at the beginning of the year and you made up a rate for me and when someone did the billing, I have a realization rate, and at the beginning of the year, you probably told me that you want me 75%, maybe 85, 80% chargeable. Well, if you multiply those three things together, you get a revenue number.



(12:09):

That's really what you hired me to do. You didn't hire me to work 1,650 charge hours this year. That's a how not what is delivering projects to clients. FedEx doesn't really care how many miles its trucks drive. He cares how many packages it delivers, and if the driver can find a more efficient route, he doesn't get punished by having to go continue his route and deliver more packages. He's done. So this is how you can get expected revenue per employee, and don't worry, I've got charts and graphs, word accountants, they're built in Excel. I'm going to start speaking your languages.



(12:47):

This is real data. This is from one of our apio offices. These aren't real people's names. We don't have three people names tax associate. I worked with one of our partners in North Carolina office. I had this idea. I brought it up to him and someone in our Nashville office and we started kicking it around and they gave me a lot of good ideas too. I was like, Jeff, do you have real data that I could use because I could make it all up, but one that would be hard, and two, I want it believable. If I'm in a room full of accountants showing 'em data, the first thing they're going to do is called BS if my data isn't any good. So of course the first lineup there is an audit associate with the lowest number of hours for a full-time person. I'm going to get to Y in a moment, but as you look at these hours, they don't seem awful, terrible, too far out of the norm, right close. You can't call BS on me yet.



(13:40):

So here's how it equates out to a whole year, and don't worry, I'm not going to make you look at the whole year all this, but let's look at that audit associate. They don't work in the summer. I don't know exactly why, but you're probably telling yourself a story about what they might have going on. Maybe that's when she's taking summer classes and studying for the CPA exam this year and we gave her the time off so that she can go do that, pass the test, or maybe she's going to finish the last five classes of her master's degree. So she could actually be the CPA because she passed the test last year and we've got our interns working at the right times of the year. So this is kind of how the yearly totals shape up for each trimester. And I personally like breaking into trimesters and not quarters because to be honest, nobody's looking at the first quarter in April because there's a tax deadline and the trimester just kind of fits the ebb and the flow of our work better for most industries that we work in. Somebody probably works where this doesn't, like if you're an EBP auditor and you're really busy in the summer and the fall, it's totally different or a government auditor, I get it. But if you cut your years up in trimester, it generally kind of flows a little bit better. We're going to focus on the first trimester just to have a little bit less data.



(14:54):

So this is how we broke out our team in North Carolina, the hours they're supposed to work the first four months of the year. So then what we did is we took 75% realization rate. I thought that was relatively reasonable and we took the rates that we use for our people, and this is how much revenue each person is supposed to generate each month. Now here's another thing that breaking into trimesters does. It means if somebody misses one of the months, you don't need to have an immediate conversation with them about why? Because we know that work ebbs and flows. Sometimes clients miss delivery dates. Sometimes something happens in the client's lives and our team's lives over a four month span for people. It gives them more room to move around where they need to. It's also a key part of what we're going to talk about later as well, and here's why this really matters to me, and I'm going to tell a story. It's going to be a quick one about why I'm standing on the stage as the leader of the Ario Firm Alliance, and I'm not still a tax line partner somewhere. So after Covid, I had what was arguably the best professional year that I ever had. I billed out 50% more revenue than my budget. So I had a $1.2 million budget and 1200 charge hours that I was supposed to work.



(16:23):

Well, I billed $1.8 million in $900. So if you get rid of the zeros, I had a one-to-one ratio, and I turned it into a two to one ratio. I was twice as efficient as I was supposed to be, and I generated $600,000 more in revenue. So I'm sitting in my partner meeting year end to do my evaluation, and for one, it was only half an hour long, which I thought was sketchy. First thing they say is you miss your charge hour goal by 300 hours. And I was like, I generated $600,000 more in revenue. They're like, but if you work more, we make more. Well, you might, but I don't. And they're like, but it's good for your scorecard. You'll have more revenue. I'm like, I have $600,000 more in revenue. Why would I work more? And they're like, well, we really need you to work 300 more hours. Do I know what I could do with those 300 hours? No, not put 'em there. Give me your 10 best senior managers anywhere in the firm. I said, everybody at the firm knows my name. Now one you saw, it's super weird, but I did some stuff at the firm. Everybody knew who I was too. So they're going to open my email, give me your 10 best senior managers and I'm going to show them how to be twice as efficient as they currently are, how they could generate 50% more revenue in less hours,



(17:45):

And I can keep doing it over and over and over again. We'll create an army of future partners that never want to leave. They could have the work and the life that they want. They can make enough money to buy whatever they might want. Being partners in an accounting firm. What do you think? And they're like, no, we give leadership positions to people who originate work. I was like, that's a different skillset. One has nothing to do with the other. They're like, we need you to make up to 300 hours. So I go, well, actually, I walked downstairs, talked to Jen. She was like, you didn't quit your job, did you? I was like, not yet, but I'm about to write a resignation letter. My business coach Amber is actually sitting right there. She helped me walk through this whole process. She's amazing. My wife loves her too because then my wife didn't have to hear everything I was going through at work. So thank you Amber. Jen also, thanks you and Jen had the diabolical scheme of me putting in my resignation on April 1st, but my non-equity partner clause said I needed to give 90 days notice, and we got paid on the last day of the month and 90 days from June 30th as April 2nd also happened to be a Friday. So put in a letter of resignation on April 2nd as a tax partner and then didn't work the rest of the weekend.



(19:10):

So that's why it matters for all intents and purposes. I'm an example of a superstar that you have. You might even be thinking about her name right now, going like, oh, crap, Sally. Yeah, she's been walking around a little bit dejected lately. We just had our busy season meeting and she missed her charge hour goals, but man, she generated a lot of work. She was great. She helped staff. She did everything she was supposed to, but those dang charge hours, we could change the whole conversation. So if we're talking about revenue, and I just brought the slide up to make that point, what if the conversation was totally different?



(19:51):

What if this is what the scorecard looked like for somebody? Instead, we're evaluating the same first trimester of hours in revenue, so this is what a first trimester scorecard could look like. Now, back in the day, like half an hour ago, you look at her charge hour goal and Melissa missed her charge hour goal by 40 hours is one way we could look at this, but if we look at how she performed, man, that March realization is awesome. Now, maybe she billed her clients the right way, like Bob and Doug were talking about. Maybe she was just super efficient on her jobs and look how it affects her revenue, right? Five hours over her goal in January made the firm an extra $500.



(20:44):

Well, she had an 81% realization in February, but missed the revenue goal because she didn't work enough hours. Maybe there was an ebb and a flow in her life. Maybe a client didn't get her something the last week of February. It came in the first week of March. She killed it in March, took a little bit easier in April, but overall, she hit her revenue goal. She beat it by 1700 bucks, which on $145,000 1% is we can give her that, but back to the first comment of she missed her charge hour goal by 40 hours. What if instead of saying, Melissa, you missed your charge hour goal by 40 hours, we go, wow, you got a work week back in your life during the busiest time of the year. I wonder if, because you're able to refresh and recharge each week, that was why you were able to be so efficient.



(21:36):

I wonder if, because we had a focus on the revenue that you're generating and not how many hours you're sitting at your chair, you were less stressed about I missed my charge hour goal in February because you knew that you were going to be okay on the revenue that you were generating. Now, what's really, really important about this, and this is that third bullet on the learning objectives slide, the hardest part, but the most important, if you're bringing this back to your firm at the end of this week and you're talking with your team about it, I urge you to be extraordinarily vulnerable, uncomfortably vulnerable. Have the conversation with your team honestly and say, look, we're going to try something and it's not going to work, right? And that's okay. We're going to fail, but we're going to fail because we're trying to get better.



(22:26):

We're going to acknowledge this issue that we're driving away the superstars in our profession because we punish them. Meanwhile, the mediocrity that's sitting in the middle that does everything they're supposed to are the ones that end up staying. Now, I'm not saying mediocre compared to the overall population, but the general bell curve of our accounting profession, the folks that are right in the middle of it, they've been around forever, they're good, they're not great, and the great ones are the ones who end up being the leaders. They're the ones that should be the managing partners. They're the ones driving change at the firm, coming to the firm growth forum to hear the new ideas and bring them home and implement them. We want those people in the profession. If we lose a couple on the bottom end of the scale, we should be okay with that the same way that we should be, okay if a couple of clients don't agree with how we're running our business now, we want to keep the best ones.



(23:21):

So when you're really, really vulnerable with your team and you say things like, we're going to try this because we believe in it, part of the reason why we have trimesters so we can adapt and adjust because we're not going to get it right. Something's going to happen with one of our people the first time we try this and you're not going to have thought of it. That's okay. Think about a solution to that one at that point. Heck, ask the person that was impacted. Get their input. You're trying to find these superstars in your firm because right now they're hiding, right? The first time that one of you had a 20 hour project and finished it in six hours, what happened? Did you get to go home? Did you get yelled at for missing a charge hour goal? Some partner come by on a Thursday afternoon and drop a big stack of work on your desk because now you had capacity. How many lessons do we have to learn that way before we're smart enough to figure out that? Well, heck, next time, guess how long that job's going to take me 20 hours? I might be bored while I'm doing it, but I was talking to Liz just before and she goes, well, I could enter this trial balance by hand that it would take me three hours, or I could import it in five minutes, but it's two o'clock on Friday and I need three more hours this week.



(24:48):

We're trained CPAs passing one of the most difficult tests in any profession with a five-year degree at a minimum. We're not data entry specialists. Figure out how to do the easy stuff fast and then we could focus more on this stuff That requires mind work. Like Liz said, we hired people from the neck up so they could use their brains. Let's let them, let's let you, so I'll pause here because we gave you a lot and I want to know any questions on this kind of scorecard versus just that one on the left that says, Melissa, Mr. Charge hour go by 40 hours, and if your name's Melissa and you're in this room, I'm not picking on you. I've got teenagers. I could do uncomfortable silence for a long time. Yes.



Audience Member 1 (25:38):

So the revenue generated amounts are those straight from the billable amounts, filling up clients, and I guess how do you adjust that for lower end staff maybe where time's getting written off?



Mike Maksymiw (25:55):

So I would say the first time that you go through this, don't write off time for individual people. I know our systems allow us to do that. So this is a minor change in how we go through things. So if Jerry is on a job and he stinks instead of writing off his hours, this is part of our experiments, right? We're going to find ways that we're currently failing and how do we adjust to it?



(26:19):

Just do the bill at the top level and everybody gets the same realization on it. Now, sometimes that stinks because if Issa killed it and Jerry stunk and now she looks average, we can look at that part later like phase two. But the first part is having the vulnerability with your team. If someone points it out and saying, you are right, that might happen. Let's figure out how we can address it. Then a similar and related topic is what if you have two lines of business that are wildly different in terms of expected revenue, I don't know, nonprofit auditing versus high net worth income tax? Your realization percentages might be different for those two groups of people, right? Well, what I think the beauty of the math is here is that the person who's working on the nonprofit audits maybe has a 72% realization rate, and the person working on the high net worth income tax has an 87% realization rate that you apply to the revenue you expect for them because you as a business owner made the strategic decision that you're going to do both of those things. So to look at those two people who generate two different amounts of revenue, this kind of puts 'em on par because they're comparing the revenue they're generating with their goal.



(27:35):

So if Melissa's the tax person and she does hit her goal and Jerry's the audit person and he hits his goal, Melissa's not better than Jerry. She's in a different service line and she can't help that because you as the firm owners made the decision to do that, and that's okay. So when you're evaluating people, it's not just my missed charge hour goals or I generated the most revenue because maybe you do nonprofit audits because that's your way of giving back to your community because there's a handful of causes in your community that matter to a lot of people, a lot of your clients, a lot of your employees, and you want to be involved, right? That's the heart part of why you're running your firm. Well, this doesn't punish your employees because you made that decision. In fact, it's probably one of the reasons why they want to work for you at your local firm because you care about your community. It's a really long answer to your question. Anyone else



Audience Member 2 (28:34):

To still give them a charge, still a realization goal? Why not just give them the revenue?



Mike Maksymiw (28:42):

Eventually we'll get there, but I'm trying to make this something that you can bring home and implement without changing a whole lot other than how you think and talk about it. So when we did this at Filmino, the local firm I was at, we used charge hours and realization to tell the story of how you met or exceeded your goal. So in Melissa's case here, she exceeded her goal basically because she was super realizable in March. So then the question to Melissa is, what'd you do? Can we repeat it? Can you teach someone else? To me, that's a way better conversation to have with Melissa in this instance. Now I'm praising her for something that she did awesome that I would like to replicate throughout my firm. What if everybody at all the months was at 87%? We'd have a lot of money in our bonus pool to give away. I think eventually as your firm culture creates this environment and everybody's on board, you'll look way less at charge hours and realizations because you'll be able to price out your projects. You've done 'em all before at the higher premiums that Bob and Doug were talking about. Your team knows what their goal is to go finish the project, which generates the revenue.



(30:03):

Jacob,



Audience Member Jacob (30:05):

How do you move? Adjust for the fact that some clients are just more profitable than others, right? Melissa might be have higher realizations because we marked those bills up, got lucky enough to get put on.



Mike Maksymiw (30:23):

I would say using statistics, how many of those clients do you have and what's the odds that they're concentrated on one person versus spread around, but at the same time, and you're using your specific example, if Melissa's on a lot of those, maybe her realization goal isn't 75 because we have historical data. If Melissa's been employed for 3, 4, 5 years here because she's a manager, we know what jobs she's typically on. We know about what our realization is on that. I use 75% across the board to keep it simple, but as we progress through this, and maybe in year two or trimester two, you're making those adjustments, you could say, yeah, you're on more profitable engagements, so giving you 75%, it's going to be easy for you to hit your revenue goal.



(31:12):

It's not a stretch. You're not going to try to do anything special there. It's not finding the superstars. So hers is 87 and when she goes, why? Well, because, awesome, and because these clients pay us a premium and to make sure that we could evaluate you correctly, we have to adjust for that premium and look, here's how we did the math. We totally transparent about it. All the data sitting in your practice management software, she probably has access to it. If she's a manager for staff, who knows what you're going to assign 'em to? It's haphazard, but the most important thing a staff is going to do is learn. So I'm not super worried about how far away they are in the revenue goal unless they're tanking it, right? And that's going to be plainly obvious. If your revenue goal is 145,000 and you do a hundred in trimester one, we're having a conversation barely covering your cost and to your point in the back, the realization in the charge hours will probably tell the story of how they're missing so bad. And while we're presenting this data to our team members each trimester, we know as accountants, we're going to be looking at it each month to see how somebody's trending. Maybe we do need to take a look at somebody at the end of February. Maybe that's why she was so chargeable in March. Jacob noticed something, went to Melissa and was like, Hey, so just checking in everything. All right. I noticed a couple of discrepancies. They're not big. I'm not worried, but just want to check in on you. Are you okay?



(32:39):

Maybe she wasn't and just being able to have that conversation, she feels somebody cares about her as a human during the busiest time of the year and then she goes and kills it. You filled up all of her energy. Jacob, again, sorry. Don't apologize. This is fun. Yeah,



Audience Member Jacob (32:56):

So if in your partner meeting or partner review meeting, if your firm had taken the position that great, you brought in 600,000 more in revenue and you get a third of it, would you still be a part handle



Mike Maksymiw (33:18):

Likely



Audience Member Jacob (33:19):

And would you have worked the extra 300 hours?



Mike Maksymiw (33:21):

I would not have worked the extra 300 hours. I did my job. I might have, but at the same time, when they told me that the 300 hours mattered more, they also told me without words that my job was to be a line partner and do what I was told and not to think and try to change the game. And I'd been that partner for five or six years. I was ready to go do the next thing, and I told 'em that they shouldn't have been surprised that I quit because I had told them for about a year and a half, I want to leverage this cares act stuff that I'm doing into the next leadership position. Here's what I'm doing, this is why I'm doing it. They were like, go back to being a line partner and work 300 more hours. The 300 hours thing made a lot more sense to put in the presentation. There was a little bit more to the story and I was trying to go through it quick, Yuri,



Audience Member Jacob (34:19):

To reiterate, at one point about missing 40 hours, I actually once had, when I was there, was told I don't qualify for a bonus because I missed 50 hours, 1850 or something.



Mike Maksymiw (34:39):

So you were working an obnoxious amount of hours and it still wasn't good enough. It was



Audience Member Jacob (34:43):

Still 50 hours, short thousand, but I got none of it. So that's the incentivizing.



Mike Maksymiw (34:56):

So you were punished for being awesome and then you were financially punished because not only did they tell you that you stink for being awesome, which is an oxymoron, you got financially punished



Audience Member Jacob (35:10):

Being efficient in public accounting.



Mike Maksymiw (35:16):

No, it's not. However, we don't have a whole bunch of really big accounting firms sitting in this room, but we have sitting in this room are a bunch of leaders who are at a practice management conference because they believe the profession can be better and you are ready to make a change. You're learning about 12 different things here over the next few days. You can't do all 12 at once. You'll take one of them back to your firm and make a difference and after five months you'll try another one, fail a little bit, you'll make a difference. You'll accelerate your change because your team will believe in you because every time that you make a change and it's successful, the next one happens faster because as Liz pointed out, there's a lot of corporate trauma that we're all getting over when we're trying to make these changes. Your team's not going to a hundred percent believe you when you come home with one of these ideas and go, alright, charge hours don't matter as much revenue does. You're going to be like, yeah, right. That just cost me three grand. I don't believe you



(36:16):

2275. But if you reiterate it to them over and over, if you are vulnerable and you say, I'm okay at failing at this, but we're going to drive change, they're going to be cynical and one, they're accountants. We train them to be cynical and when you prove to them that you mean it and you have this conversation instead of the you missed it by 40 hours conversation, they'll believe you. I mean, believe me, I did this the first time my small firm told me we were changing to this. I was like, okay, I've got you. I'm going to tank this on charge hours. I know what my clients are and I could beat my revenue goal and I want to see what you tell me. Mine looked kind of like this. It's accidental, and this wasn't part of what I was going to say, so it's just happenstance, but it looked like this and the managing partner was like, wow, you meet the revenue goal but you missed the charge.



(37:04):

40 few hours in it was actually in a month. He was like, how'd you do that? Can you teach other people how to do that? So I was like, alright, you're for real. I believe you now. So I personally tested this theory out on someone at my firm that brought it home and was like, we're going to try this. It's like, all right, I'll see. And they passed and I felt a lot better about it, and then I was able to go to my teammates and be like, Hey, this is legit. The conversation that I had, they mean we can believe them. Your team talks, it'll travel fast the first time you do this and you do it right and well, and you reward them for being awesome. Yes.



Audience Member 2 (37:44):

I think so many of us have shied away from talking about revenue and I'm a huge advocate of this, but generally in industry, why? Because we don't want our staff to do the math of, oh, they're making this much and I'm getting paid this much. It's been a full, right? So I mean, are we just basically fooling ourselves at this point? Isn't that the paradox that no one wants to stay to become partner because we don't tell them what's possible to their earning potential?



Mike Maksymiw (38:18):

I was going to actually say exactly that. It's like me and my business coach are aligned. She's also a really good friend now too. But to your point, what if we told our seniors, by the way, when you make manager, there's a $35,000 pay bump.



(38:40):

What if when you make senior manager there's a $60,000 pay bump because our people are awesome, they're getting phone calls left and right and they're comparing the offer to go be a controller at a mid-size manufacturing company with COLA increases for the rest of their life at A CFO that's only five years older than them to what they're currently making, not what they could the senior's like, well, I'm making 92 and that offer for one 10, that sounds pretty good. Well, if I told you that in 12 months you're going to be making 115 and three years after that you're making one 60, are you going to take a COLA job for 110? Probably not. And could they reverse engineer how much everybody's making? Probably they're brilliant, but they could just go to big four transparency and figure it out too, because running a website that does that, they could look at the data's already there. We're fooling ourselves to think they don't know. We're just the ones that haven't said it out loud so they don't believe it



Audience Member 4 (39:37):

Shares all that fishbowl.



Mike Maksymiw (39:39):

Yeah, if you hop on fishbowl, you could figure out what everybody's making at every firm everywhere in the country. It just doesn't have a name on it and half of them might be lying, but the kids are taking that back to their manager and they're like, look man, I can get a job for $117,000 if I work remote for a New York firm and the firm in Omaha is like crud. It costs more to live here. Alright, I think, and I think, I don't know this, 80% of you have a superstar that you don't know because they figured out the dumb game that would make them play with their time sheets and they're disengaged and they don't have any motivation at all to change it. Nobody else is changing it. This is the person that will take the phone call to make five grand more at the same size firm as yours down the road because if they're going to play the same dumb game, they might as well get paid more for it. I saw cameras and pictures.



(40:48):

So a story that goes along with this is when I was working at the big firm, a big part of why we merged in was to get access to a lot more resources, and it turns out that I didn't get any of 'em at my office. So I went and found people at other offices and kind of spread my work around seven offices in the country and I told someone on my team that I wanted her to do the project. I'd seen her on a bunch of the reports for scheduling and she was always in demand. I figured out the dumb scheduling game, which was just book 'em two weeks out because nobody looks further than that. So then I got her and I said, all right, look Sharon, we're going to bill $4,000 for this partnership tax return. I don't care how long it takes you, I'm going to check in at 10 hours, make sure you're on the right path. I said, and then next year when you hire a staff in your office, I want her to do it and you to manage it and I'm going to bill $4,000 for it and I'm going to bill 4,400 next year, and I don't care how long it takes you.



(41:49):

She got it done in 12 hours and then she was all worried because there was this dumb eight hour a day time sheet rule thing that we had. I was like, okay, well the budget's 20, put eight hours on Friday. Go take a nap. I wasn't going to punish you for being awesome. I'm going to reward you. She was like, can you do that? I was like, tell me how they find out. They manage the firm off of a spreadsheet. It says 20 hours is the budget. We have 20 hours in the budget. I could bill 4,000. That's $200 an hour. Nobody's mad if you don't tell anybody. Nobody's going to know. Just don't post it on social media what you did on Friday. It's like, we'll be good. So when you challenge your team to do these things, they do them and they do them really well and they surprise you. Up until that point, Sharon in this example was a great worker. She always worked her 55 chargeable hours. What she did was high quality. The reviewers loved working on it, but there was more there that nobody else saw, and then we unlocked it and then she started to thrive managing people and she started shooting up in people's employee rankings



(42:59):

Because before she was just technically adept, but now she had some leadership skills, she had some managerial skills. So I've seen that happen just by having some conversations with people and seeing what the results were. How are we on time? You guys can read that while I look. Three 30. I guess it would be helpful. I knew what time we ended. If we started a quarter of, it's probably 3 35. We probably have five minutes is my guess. Alright, so some of you're probably making faces at some of these things that we're going to ask Sharon to go do when she has the time available now, right? Because she could just go home. Maybe she's got a sick cat and she wants to go spend some time with it. She knows she's going to have to put it down after busy season, baby. She really likes gardening and her pogonia have to get trimmed. But what if it was like me where I said, give me your 10 best people because I want to be a superstar at the next level of being a partner and I want go make other people better. What would be great if they said, that's awesome, that's over and above what we asked you to do using other time for it. We'll pay you extra for it. Here's a spot bonus.



(44:14):

What if Melissa has it right? You can tell she's going to be a future partner at the firm. That intangible thing that you could just after you worked with someone for five years, you're like, yeah, I want to be a partner with you and you're going to be one. This is great. It was probably everybody in this room, right? You all felt that and somebody else told you about it. Now you know how to recognize it. So she does more of what she needs to gain the skills to keep progressing fast so that she could be a partner at the firm within 10 years, which sounds like a really fast timeline, but I personally have friends that have multiple children that went from intern to partner in 10 years at firms across the country and they're all leadership academy alumni too. So I mean they're already special, but that's the kind of person that you might be able to unlock with these things. This is the picture of some of the things that Sharon might be or Melissa might be able to do with her free time or the extra money that you're paying her as a spot bonus or actually this one was one of my favorite. I picked this up from Dustin Verity, one of our lights members.



(45:18):

Every dollar somebody earns over their budgeted revenue, give 'em 20% of it because they're free at that point. They're budgeted. Revenue covers your overhead and all of their costs and the profit margin that you need for the partner comp, everything else that they earn is a hundred percent gravy. Give 'em a big chunk of it because that person that wants to save for something or is financially motivated, you're giving them a huge incentive to make your firm better. You're keeping 80% of those dollars. They're over on unemployment, over on the payroll taxes. This is free work you're getting from someone. Give 'em a big chunk of it and these are the things that they could buy. The dollar sign reminded me of that. I really, really, really like this quote. Doing nothing is a choice and it has consequences. Change is a choice and it has consequences. If you're okay with the consequences, you should be okay with the action. Amber told me that when I was thinking of quitting and she goes, does it really matter what name is on the top of your paycheck? You are extraordinarily employable. You could get a job tomorrow



(46:44):

And so can every one of you and so can everyone at your firm. We've heard it over and over again. There's not enough people and there's too much work. In addition to having great conversations with your team and getting a whole bunch of loyalty out of them, you're making the profession a better place for the next generation. You could be the one sitting on your porch in a rocking chair enjoying your retirement saying, we fixed that. I was the last one that had to get berated and belittled and lose a $3,000 bonus because of idiocy because someone wanted me to regress to the mean and be average because I didn't fit in a box. That's what we're asking the superstars to do is go back to being average because they're disincented to be above average



Audience Member Jacob (47:30):

Or to make up time sheets.



Mike Maksymiw (47:34):

Is that a super engaging type of activity for your Yuri? Is it like a puzzle



Audience Member Jacob (47:39):

Reaction would be about an hour and a half Friday time sheet, stay off the radar?



Mike Maksymiw (47:45):

Did you have a timekeeping code that you put that hour and a half to



Audience Member Jacob (47:50):

Said?



Mike Maksymiw (47:50):

We had one that said timekeeping.



(47:54):

Alright, 60 seconds left. So I got a lot of these ideas from talking to a lot of really smart people and almost all of them are smarter than me. That's the beauty of our profession. People are brilliant and they know stuff you don't. I like talking to 'em and they're like taking all that stuff, smashing it together and trying to come up with a new and novel idea that we can actually do things better. These are some of the books that I've read that helped me with the mindset of Let's change because while the current situation is known, it's also terrible. So why would we stick with terrible when we're smart enough? We're brilliant people that we can make the change to make it better. The big leap, enormously helpful. It talks about this concept of a zone of excellence and a zone of genius, and as a tax partner, I was living a life in a zone of excellence.



(48:48):

I was excellent at it, but it didn't touch my soul. And that's where the zone of genius is, where you're doing something, you're called to, and it turns out Ario likes paying me to do it. It's awesome. I've got the best job I've ever had working at the best place, doing exactly what I should be doing, exactly where I should be doing it. And Brene Brown, Sean ACO does a great thing on positivity and putting happiness in front of your goals and happiness ends becomes a way that you meet your goals. Hugely helpful for me as a super type A overachiever of it allows you to move the goalposts for your goals while being happy each time you meet them, instead of chasing happiness. That's after your goals. Super helpful. It's like a 12 minute YouTube. Find some time in the airport and watch it. It's awesome. It's what I've got. I'm around the rest of today and tomorrow. Would love to chat with you. Thank you for your time and the questions. Really appreciated it.