Exercising Leadership:

Create Career Paths to Attract & Retain Staff, Boost Efficiency & Morale
Staffing issues—attracting, retaining, and properly utilizing staff—are the leading practice-management concerns for CPA firms. Although this has been true for some time, smart CPA firm owners are making strides in addressing these interrelated matters more definitively.

Your firm may be undertaking or considering staff surveys, informal discussions, enhanced training, and leadership and succession planning. All of these initiatives are good—and they will make a difference. Simply asking staff what they think—and then following up on the feedback you get—can have a major impact as well.

A recent survey of more than 1,400 CPA firm staff across 30 states indicates that these are areas in which your firm’s staff would most appreciate partners’ becoming active and involved. The survey was conducted by CPA firm consultant Steve Erickson who was a partner and managing partner for many years. His goal was to collect information about what it takes to keep staff members at—and keep them contributing to—CPA firms.

The "ideal" firm. Erickson used a series of "ideal outcomes," statements about what is considered most desirable about life in a CPA firm. He asked respondents to rate their level of agreement with those statements, on a scale of one to nine (with one indicating severe disagreement and nine indicating complete agreement).

Highlights of the findings:

• Eighty-five percent of respondents are happy with their relationships with clients and the staff of their CPA firms, choosing a ranking of seven or higher.
• Sixty percent do not want to be CPA firm owners.
• Forty percent don’t intend to stay at their firms for more than three to five years.
• A large percentage of respondents indicate that they are working longer hours than originally anticipated and that work interferes with family and personal time.

Only small numbers said they are learning new skills on most engagements, that they get the feedback needed to be successful, or that they know what they need to do to be promoted to the next level. There were also low agreement rates with the statement, "I know what is required to earn more money."

Why don’t staff members want to stay? "They don’t see how they can be successful in public accounting as it is practiced now," Erickson said. Couple those findings with the positive ones, and he says, "There is a real opportunity here: We need to just figure out how to make people feel they can succeed."

Firms must pay attention both to operations and to how they communicate with staff. "We are losing the confidence of employees," Erickson reports. His study indicated specific times when staff members are most likely to suffer this loss of confidence and leave the firm. Specifically, at the second and fifth years of practice there is a drop in confidence about firm leadership. These are two points at which staff generally take a "step up" in terms of responsibilities. That many in these groups report a loss of confidence is an indicator that staff members are not being prepared for success at the next phase of their careers.

What partners can do. Erickson offered ideas that partners and their firms can consider to address concerns raised in the survey. These are answers that will require the owners to review structure, hierarchy, and accountability—but those are likely to be questions your firm is grappling with these days in any case. Including a staffing component in your plans is not only a wise move for your firm’s current staffing needs, but can also help your leadership and succession strategies.

• Revamp your firm’s career paths. If you say, "we don’t actually have any career paths," this is the time to get them in place. And you aren’t alone; Erickson observed that too few firms offer the kind of career paths—both for those who are interested in becoming partners and, more significantly, for those who are not. He concludes that this is a major problem for firms trying to retain talent.

As Erickson’s survey reports, and as most firms understand now, not everyone wants to be a partner; fully 60% do not want to be. Erickson urges firms to see this not as a bad development, but as an opportunity: Not everyone needs to be a partner to have a long and productive career at your firm. The answer lies in creating career paths for those who are not on a partner track, with training, progressive steps, and opportunities along the way. Your firm must define specifically what the nonowner career path is for it to succeed: What are the steps to be taken? What goals must be achieved? How will progress be rewarded?

This approach will also help firms cope with the increased staffing shortages, especially in the middle-staff years. The strategic focus must move to how to do business with the available workforce.

Erickson notes that one factor that may be delaying the development of the alternative track is that "many firms don’t want to formalize it for fear of offending people." Firms that understand the reality that many just don’t want partnership will be better able to help develop alternatives—and keep the technical talent the firms need to continue to grow. The alternative track may be of particular interest for the growing number of women in the CPA profession.
For those with the interest and aptitude to become an owner, firms must also have a set path and the proper training in leadership and management—and an early start to that training is best.

• Change your leverage. Proper leverage is the key to efficiency and to enhanced financial returns, yet far too many firms still have too much work being hoarded at the partner level, Erickson noted.

The nonowner career track is one way to enhance leverage as well as provide an identified path for staff, he said. Permanent managers and staff can shoulder more work formerly handled by partners, which both frees them up for more client development and support and gives the permanent staff growth goals and opportunities.

Scheduling is a related solution to formalize the goal of "pushing down" more work throughout the firm, Erickson said.

These all tie in to resource management, which Erickson believes will be the next big topic in practice management. "Resources are scarce. We need to look at allocation and innovation." He points to outsourcing as a good example of how resource "triage" is occurring: It forces a review of procedures, and along the way, tasks are identified that less experienced people can handle.

A change in the staffing mix is a way to maximize the use of CPAs as well as to provide alternative career paths. Erickson illustrates this with the example of audit clients who like to see the same faces at annual audits. The problem is that young staff who work on the audits often turn over. Instead, suggests Erickson, consider assigning non-CPAs to work on the audit as part of a permanent, nonpartner track under the supervision of a more senior audit manager. Permanent auditors can give clients that sense of continuity and help solve a staffing problem.

That arrangement can also help alleviate the problem of overloading staff CPAs with work and insisting upon long hours. Proper leverage and a new approach to how firms should staff up can ensure that the work is distributed more evenly.

Even at the partner level, implementing changes is possible—if firms only agree to try. For instance, Erickson put forward the concept of two partners sharing clients. "Why is just one person in charge? Why can’t two handle a book of business, split the commitment, and provide continuous coverage"—and split the pay. There would be more hours billed overall—say, 1,000 each, instead of 1,200 or 1,300 billed by a single partner. Then, hire people to do the
administrative tasks so the partners can concentrate on client service.

• Make technology work harder for your firm. Improvements in applications, such as scanning software so that documentation can be readily incorporated into a digital system, can help. Up-and-coming technologies such as voice recognition are improving and as costs come down, can also help increase efficiencies. Too many partners are fighting technology, he noted, and this will be to the firm’s detriment.

Technology-driven processes offer a way to standardize, which leads to efficiencies. The firms switching to less paper that are doing process overhauls understand this—and are seeing the benefits as well.

"Infrastructure investment is needed in technology and in HR. The problem is many firms are just marginally profitable," Erickson observed, which means that many simply can’t make the needed investments. This is one reason for the steady stream of mergers—firms are bought up by those with good infrastructure, since then "someone else can solve the problems."

• Address partner issues. These can involve some highly sensitive and personal issues, but they can be the ones that hold back a firm’s efforts to change.

"Firms must surmount the fact that partners still drive process in many firms: It’s ‘my client, my work, how I want it staffed.’" Erickson noted that inequities follow this format, since "squeaky wheel" partners tend to get more resources and others may go without what they need.
The move to a corporate form of organization in recent years by many CPA firms has helped some firms minimize this approach. However, for some, corporate organization is not really changing the partner dynamics. "When you try to interject a strong dictator-type MP/CEO with a board on a firm that isn’t ready, there’s a ton of resistance. Truly entrepreneurial partners won’t want it."

For the firms that are succeeding with efforts to have a corporate structure, there is a conscious and conscientious effort to support the management efforts of a board of directors and a CEO "who is empowered to get things done."

• Talk to your employees. Erickson believes that the goal of work/life balance is incorrect, because it makes work seem like the "bad guy." Instead, work/life success should be the goal. "Ask what would make work succeed in your life," he urges CPA firm leaders.
Those who fear answers such as fewer billed hours need to consider the fact that utilization among all staff is at just 55% as an industry average. "We need to be more efficient," he says, explaining that having people work shorter hours and be more efficient during those hours would be an improvement.

Anything your firm can do to better communicate expectations is a worthwhile idea, Erickson said. Give more current and timely feedback and be precise about what exactly will happen if they accomplish A, B, and C. And communicate with your staff in more indirect ways by setting an example and showing that firm leaders follow the stated rules. "Many firms are adopting core values, but if one or two partners ignore them, staff will see. It sends a bad message." Erickson believes firms that truly walk their talk have a much better chance of retention. "Be predictable: Let people know who you are. That will lead to confidence and trust."

Contact information:
Steve Erickson can be contacted at 505-331-9100 or by e-mail at: steve@steveericksonCPA.com.
From the June 2007 issue of Partner’s Report for CPA Firm Owners.

Copyright © 2007 IOMA, Inc. The Institute of Management and Administration.