Manage Better for Better Earnings

Source: Accounting Office Management & Administration Report

William Reeb, Winters and Reeb PLLC, Austin TX, says that better management means training staff to be accountable. That means they have to be given the chance to make mistakes. Too often they don’t get the chance because partners won’t let go, and they complain that no one will take a leadership role. It is better to let young people make mistakes early in their careers when the partners can control the outcomes.

Don’t give all the responsibility and attention to the stars. Provide growth opportunities for all staff.

Management skill is not valued highly enough in CPA firms. Managing includes mentoring and coaching, and it is important that every partner approach these in the same way. Managers make other people better. Too many partners think they should do the work themselves because they can do it better. That attitude inhibits staff growth.

Most firms use staff pools from which partners choose the people they want on each job. Staff pools will be more effective in terms of staff growth if staff selection is centralized.

In setting goals, don’t make them unachievable. Set reachable goals and give rewards for surpassing them.

If partners delegate only when they have too much work, here is what happens:

• Staff training is poor.
• Conflict arises among partners.
• There is a lack of leverage.
• The firm becomes a group of individual practices rather than a firm of shared vision.
• Partners with the most business rule the firm
• Client service suffers.

The antidote is to have partners doing what partners are supposed to do:

• Manage client accounts
• Give business advise to clients
• Execute the firm’s strategies
• Develop staff

When realization is very high, say 98 percent, fees should be raised so people are forced to work to increase realization. It may be necessary to fire clients. Don’t discount fees, even in slow periods.

The compensation system is an important element of management. People should be rewarded, not for how long they have been with the firm, but for what they produce. Incentives should be based to some degree on leading, rather than lagging, gauges. For example, consider measuring how many clients were seen rather than how much business was generated. Compensation should be tied to the strategic plan, and people should be paid for managing (based on the performance of those they manage). Establish the same base salary for everyone who does the same work. Use a bonus pool to reward them for exceeding base requirements. Pay for achievement of goals rather than for hours billed.

From Accounting Office Management & Administration Report, August 2005, p. 1. For subscription information contact Institute of Management & Administration, Inc., 3 Park Avenue, 30th Floor, New York, NY 10016-5902. One-year subscription $329. 212-244-0360, [email protected]. For the complete article, click here.