Prescription for the Profession
AICPA chair Leslie Murphy in her recent address to Council stated "one out of six CPAs left their firms during 2004." The cost to replace these people is estimated at 1.5 times their current salary. Enrollment and graduation are up in accounting programs according to the most recent statistics published by the AICPA. The bad news is that the percentage of graduates going into public accounting has dropped to 29% of the total.
The problem won't go away
When speaking with CPA partners I typically ask the question: do you have or have you recommended public accounting to a son or daughter? 95% generally look at me and either say or demonstrate body language that indicates their children would not think of going into the profession. In fact, they often make comments like "my kids don't want to work the hours or do that kind of work." If that is true, how do they expect to recruit their neighbors' children? Things must change and many partners know it. They simply choose to immerse themselves into solving client problems and focus on charge hours hoping the problem is short term and will go away.
Doing more with fewer people
More bad news is that staffing is not a short-term problem in the United States. Demographics show the workforce will be short on skilled workers and many in the accounting profession are reaching retirement age. In fact, we often hear the question: "who is going to buy me out?" That is a good question and one that many in the profession have waited too long to ask and resolve. The sign of a great leader is they also select and develop their successor. In the accounting profession the tendency in many firms had been to focus on charge hours rather than the development of leaders at all levels in the firm. All progress starts with the truth and it is time for many in the profession to address the fact they will be leaving over the next ten years. Firms are going to have to do more with fewer people. Planning, people and processes will be the keys to success. Technology will be the accelerator. In fact, many firms are starting to reward people for recruiting, developing and managing others and not just for managing a book of business.
How did we get here?
First, let's quickly examine how many firms got into the position they are in today. While it is tough to generalize, the following factors have contributed too many firms' current situation.
- Lack of a shared vision and strong leadership.
- Governance by committee or partners rather than a CEO of MP.
- Lack of a training/learning culture where learning is a two-way street.
- Focus on charge hours for billing and pricing services (effort versus results based economy).
- Lack of the necessary growth to attract and retain top quality people.
- Lack of firm standards, policies and procedures (shared overhead versus shared vision).
- Lack of accountability at the partner level.
- Perception that technology is overhead rather than a strategic asset.
- Commoditization of traditional services.
- Increased regulation and litigation.
This can either be a list that will prompt you into action to transform your practice or you can choose to ignore the warning signs until it is too late to respond. Firms that do act can quickly transform their firm into emerging and growing markets. In order to do so, they must build consensus among their partners or even terminate some partners in order to make the decisions necessary to enable them to attract quality employees and clients. Some of those changes in attitudes are as follows:
| From: | To: |
| Multiple visions | Shared vision |
| Billing by the hour | Billing for value |
| Little value on management | Great value on thinking, planning and growth |
| Mediocrity in personnel | Quality professionals in all positions |
| Effort based economy | Results based economy |
| Managing a book of business | Managing and developing people |
| Commoditization | Unique processes |
| Required CPE | Training/learning culture |
A fair system
While this sounds simple, most people do not change for the sake of changing. They typically change due to fear or the loss of something. Therefore, many firms are changing their partner compensation systems to reward partners for implementing the firm's strategic plan. Since most firms have unique strategic plans, they also have unique compensation systems. The keys to a successful partner compensation system are that the partners perceive the system as being relatively fair and trust those administering the system.
A 90 day plan for change
Changing attitudes requires education, time, thinking and planning. There are five things you can do in the next 90 days that will have a major impact on the firm culture and long-term profitability.
- Develop a strategic plan that is consistently communicated to employees and other stakeholders. Involve managers and future leaders.
- Hold partners accountable in support of the strategic plan.
- Evaluate, and if necessary, change the partner compensation plan.
- Implement or enhance the support for a learning/training culture.
- Evaluate your billing practices (rates, timing and value of services).
While these are not silver bullets, together they will have a positive impact on your firm and the future of its employees.