JX AVENIR White Papers 1

Managing an Accounting Firm

The Art of Mastering Business Tension

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It has often been said that managing an accounting firm is like herding cats. Why is it such a challenge? A firm has to have a shepherd to have direction. However, it also has to have partners and other leaders who are entrepreneurial, independent and self-motivated, with egos that match the size of their technical expertise. These professionals have their own ideas about how to move the firm forward and usually do not shy away from letting everyone in on their management theories.

Conflicting forces are an inherent part a firm and of decision-making process. Our intent is to help you both understand and manage them when making decisions in your firm.

The Conflicting Forces of Decision Making Very few decisions in business today are made with unanimous support or appeal. For any program, activity or change in direction, there are both intended and unintended consequences. Here is a simple example. Because partners are not generating enough revenue from their own efforts with clients, the decision makers of a firm change the partner compensation program in order to motivate them. One possible outcome is that partners will take work away from non-partners or hoard work that is below their capabilities. Another result may be that complex work will not be given to the person capable of doing it most effectively and efficiently.

Imagine that every decision managing partners make is placed somewhere along a wire. Opposing forces pull on this wire and, depending on where the decision is placed, cause both intended and unintended consequences. The art of being an effective managing partner is not only understanding that tension but also knowing how to manage it appropriately. Here are some examples of the forces that lie on opposite ends of the spectrum: Long-Term Consequences

Short-Term Consequences Motivation of Individual Performance

Motivation of Team Performance

Partner as Employee Systems That Focus on Equity

Partner as Business Owner

Systems That Motivate Certain Behaviors

Another example of this phenomenon relates to resources. Every day, firms make investments in marketing to grow their business. At one extreme, they can put all of the dollars into the area that is most likely to garner the biggest return. At the other extreme, they can allocate their marketing budget to each partner equally. As the owner of a business, you would want to put your dollars toward what will create the most success for the business. But, as an active participant in the business, you would you want your “fair share� of resources so that you can have the opportunity to be successful in your own right.

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In reality, no firm implements either extreme, but the example points out the opposing forces in decision making that create business tension. This tension is not necessarily bad. Think of it as part of the checks and balances needed for healthy decision making. However, there could be negative consequences if the forces in play are ignored.

Negative Consequences Partner compensation is a case in point. Some firms concentrate on rewarding partners financially for their individual results. Formula-driven firms pay partners based on books of business, billable hours and new business that a partner acquires. Though this approach is not a common one, it does exist and the consequences are evident in the type of behavior it drives. No attention is paid to important firm initiatives. Training staff and putting clients in the hands of the right people is ignored and undervalued. Firms with this system are no more than collections of independent professionals under one roof. They are not addressing long-term goals or improving teamwork. And by not taking advantage of the power that operating as a team provides, they limit their horizons.

Managing Decision Making Recognize the many forces at play when you are making any important decision that affects your personnel. Consider the consequences. You may be solving one problem but creating another. No single decision completely defines a firm. But over time, your firm’s “rules of the road,” which are defined by your programs and policies, create your firm’s culture. The best managers consider the opposing tensions before they act.

Mitch Gorochow Director of Client Relations

About

With over 30 years of accounting, tax and consulting experience, Mitch Gorochow knows what a CPA firm needs to be successful. Along with strategic and tactical guidance, he provides firms with highly effective tools to maximize their business development opportunities and add value for their clients.

After years of serving ”top-five” professional services firms, our partners realized that small to regional professional services firms did not have the resources to hire, develop and manage seasoned marketing and business development professionals—or foster a culture of growth.

AVENIR was born to fill that need. Our proven business model centers on being your partner throughout the marketing and sales process for your firm’s growth and success.

AVENIR Consulting, LLC Greenwood Village, CO (866) 406-4146 www.myavenir.com