Monthly Archives: April 2012

Speaking an Understandable Language

Posted on by
Reply

Chapter 3 of Randall Bolten’s book “Painting With Numbers” sums it up: Words Matter. This is especially important for people in technical positions who need to “dumb down” information and explanations in a professional, succinct, yet not demeaning way to clients and co-workers. The subtitle of the book is “Presenting Financials and Other Numbers So People Will Understand You.” The Curator recommends this book for anyone in the financial services business.

Bolten’s book is very well done; and despite it feeling a bit like a textbook, it’s not completely dry. Shoot, Chapter 3 starts off with this classic George Carlin quote:

“And now the basketball scores: 110-102, 125-113, 131-127, and in an overtime duel, 95-94. Boy, that was a squeaker! Oh, and here’s a partial score: Pittsburgh, 37.”

*****
iShade’s BulletIN…keep it open on your computer every day.
http://www.ishade.com/bulletin.php

Management Essentials: The Partner Compensation Checklist

Posted on by
Reply

Gary Adamson’s practice management consulting firm is focused on advising partners of multi-partner CPA firms. With over twenty years of experience as the Managing Partner of a top 200 firm, Gary’s goal is to bring practical tools and solutions based on his background, and to provide a fresh, no-nonsense perspective on the issues facing firms today.

Enjoy the following article, provided by Gary Adamson, CPA:

There is a constant topic of conversation both inside firms and at almost every conference. It is the age-old question of partner compensation and “how do you do it”. As our firm grew, we evolved from everyone is equal, to the “slip of paper” approach, to a more goal driven, performance based system. Every firm is a little bit different but the issues surrounding how you split the pie are pretty consistent.

How you choose to solve the partner comp question in your firm depends on a number of things including size, number of partners and where you are on the firm age/evolution spectrum. There is a movement to more performance and goal driven systems even in smaller practices, and moving away from “we’re all the same”. We all know that the reality is that we’re not.

There is also a movement away from formula based systems. It is very difficult if not impossible to find the mathematical equation that will consistently result in a fair outcome. There are just too many variables that don’t fit well in a formula.

Regardless of the details of your plan, several rules or themes will hold true:

*Judgment is always a critical part of the plan. Even in a formula based system, decisions are made on which criteria get measured and the relative weight of each one.
*You are working with tangibles and intangibles. Tangibles are the things that we all measure like production, billings, business development, etc. Intangibles are the human factors and more difficult to measure such as leadership and team development.
*No two partners are alike. You should consider different performance measures and goals based on the individual’s particular contributions to the firm.

The following checklist is intended to provide a framework to get you thinking and to help you review your current process. It is not intended to be all-inclusive or to fit you perfectly. Every firm truly is different.

  • What target percentage of total comp is salary (draw) vs. bonus?
  • How much is at risk to the performance criteria? Is total compensation at risk or just the bonus? Consider how much of a potential roller coaster ride that you want.
  • Interest on capital, if relevant
  • Partner goal setting and results as a part of the process.
  • Tangible criteria vs. intangible. How much of both does your plan incorporate? Remember that a significant dose of judgment is involved in both.
  • Firm goals for the year are integrated with the comp plan? Knowing what the firm goals are and how each partner makes a contribution is key.
  • Is there a discretionary or non-assigned pool of money that can be used by the Managing Partner or partner group to reward exceptional performance or to make adjustments where they are needed? This really gets to the question of how much the tangible vs. the intangible criteria drive your system.

Some of the more common performance criteria are:

  • New business development – new clients.
  • New business development – up sells, cross sells to existing clients.
  • Firm leadership and management.
  • Staff mentoring and development.
  • “Good of the firm” activities.
  • Working capital consumption (WIP and A/R management).
  • Job profitability and realization.
  • Staff utilization.
  • Book of business. Be careful putting too much weight here.
  • Charge hours. Be careful putting too much weight here.
  • Specific personal or firm goals.
  • Successful transition of client responsibilities for a partner nearing retirement.
  • Movement of client responsibilities from one partner to another. The comp plan should encourage and enable this to help keep the firm’s rainmakers free and to assure that the client is served by the best partner and team.

What is your process? This includes who is responsible and the timeline. An abbreviated example of a system in a firm with goal setting and a compensation committee might look like:

  • The firm establishes overall goals for the year.
  • The Managing Partner establishes goals with each partner, integrated with the firm goals and monitors performance with each partner during the year.
  • The MP and each partner meet at year-end to review achievement of goals and summarize performance.
  • The MP makes a recommendation of the year-end bonus allocation to the Compensation Committee based on each partner’s performance and the judgment of the MP.
  • The Compensation Committee reviews and adjusts, if necessary, the MP recommendation.
  • Salaries (draws) are set for the coming year by the MP and Compensation Committee.
  • The Compensation Committee or governing board is responsible for a similar process with the MP.

The ultimate goal is to find a fair allocation of firm profits among the partner group. One size clearly does not fit all firms or partners and, as your firm evolves, your partner compensation process needs to evolve along with it.

Here are links to Gary’s previous four articles:

http://dl.dropbox.com/u/37378359/article%20-%20agreements%20v1.pdf

http://dl.dropbox.com/u/37378359/partner%20goal%20setting%20article1.pdf

http://dl.dropbox.com/u/37378359/Making%20Money%20in%20CPA%20Firms%20in%20These%20Turbulent%20Economic%20Times.pdf

http://dl.dropbox.com/u/37378359/article%20-%20mergers%20%282%29.pdf

Gary Adamson is the President of Adamson Advisory, specializing in practice management consulting for CPA firms. He is an Indiana University graduate and has extensive hands on experience as the recent managing partner of a top 200 CPA firm. He can be reached at (765)488.0691 or gadamson@adamsonadvisory.com. For more about Adamson Advisory, visit http://www.adamsonadvisory.com or follow the company at http://www.adamsonadvisory.com/blog and http://www.twitter.com/adamsonadvisory.

*****
iShade’s BulletIN…keep it open on your computer every day.
http://www.ishade.com/bulletin.php

A Great Time to Leap Into Accounting

Posted on by
Reply

I spoke with a bright young woman yesterday named Sarah Hambley. As president of the Beta Alpha Psi chapter at The Ohio State University, it was easy to hear the enthusiasm in her voice about what the future holds for today’s young accounting professionals. The conversation took me back a bit to my senior year of college, when I weighed less and had hair.

What an exciting time to be embarking upon a career as an accounting professional. I am looking forward to speaking with this group one evening this autumn after the new school year starts.

*****
iShade’s BulletIN…keep it open on your computer every day.
http://www.ishade.com/bulletin.php

Is BlackBerry Rotting On the Vine?

Posted on by
Reply

Several accountants in the past few days have commented to me that they, in their words, “finally upgraded from the BlackBerry to _____.” The accounting profession is historically not an early adopter with gadgets; and, like most business sectors, we see consumers leading the charge with new inexpensive technology first. As much as George Costanza would love to be ensconced in velvet, that’s how much Research In Motion (BlackBerry’s maker) wants to succeed—but they’re not going to do it in the United States. The depth of the challenges facing poor little ole BlackBerry in America are too deep. In my opinion, they were too slow to react to market challenges, somehow falling asleep at the innovation wheel that they once steered. Their new focus on India is probably the better route.

Food for thought, isn’t it? Apply this case study of BlackBerry’s rise and fall to your company, your accounting firm, your clients…it’s a battle out there and no one can be complacent.

*****
Read iShade’s BulletIn every day. Keep it open on your computer or mobile device!
http://www.ishade.com/bulletin.php

The First One Now Will Later Be Last

Posted on by
Reply

Do you have members of your family who do not use the Internet? According to a recent report from the Pew Internet Project, one in five U.S. adults does not use the Internet. That’s hard to imagine these days, especially when we all probably know people in their 80’s using e-mail and ordering from Amazon.com–and low-income families we’ve also seen at Walmart who are clutching expensive smart phones.

Among these one-in-five adults who do not use the Internet, almost half have said that the main reason they don’t go online is because they don’t think the Internet is relevant to them. That’s like saying the world is not relevant.

In 1995, only about one in ten adults in the U.S. was online. I remember getting my first e-mail account in late 1995. My employer signed me up for a CompuServe account; a few months later we had our first web site. Those were exciting times, for sure. Talking with today’s accounting professionals, I hear that same kind of excitement in their voices when on the topics of using tablets on the job and with clients, portal development, more freedom in working remotely and other current changes in the profession.

Exciting times? You betcha.

*****
iShade’s BulletIn. Keep it open on your computer every day.
http://www.ishade.com/bulletin.php

Is Your Firm Out of Alignment?

Posted on by
Reply

Read this great piece by Joe Tarasco, the owner of Accountants Advisory Group, LLC:

In this very competitive marketplace, CPA firms need to effectively align the performance and skills of their partners and staff to the goals and objectives of their firm in order to be a more cohesive organization. This alignment process can be accomplished by setting and closely aligning individual partner and staff goals to the Firm’s overall short and long-term strategy. Also, a primary goal of performance management is monitoring the partners and staff activities to assist the firm in achieving its strategy and vision. Sounds easy, however, performance alignment is extremely challenging but crucial to a Firm’s success and becoming a one-firm firm. Once the partners and staff understand how they can make a direct contribution to the Firm’s success, then they will begin to focus efforts in a more synchronized fashion to work smarter and become more engaged in the process.
Implementing and maintaining an aligned CPA firm requires clarity and proper communications about overall firm strategies and goals. This holds true in all size firms.
The next step in the process is that partners and staff develop personal goals and objectives supporting the goals and objectives of the firm and thus aligning themselves with the firm wide strategies. Those firms where partners appear to have separate practices within one firm or who have partners who are only concerned with annual production statistics very rarely attain strategic alignment and the next levels of success.

Some of the areas that need to be addressed in developing partner and staff goals that are aligned with the goals & objectives of the firm are:
• Technical skills and expertise
• Practice development and marketing
• Niche and/or industry specialization
• Client engagement profitability and management
• Career development of partners and staff
• Client relationships and retention
• Leadership and management
In addition, a performance management structure needs to be implemented that:
• Details and communicates partner and staff performance criteria and expectations.
• Clearly mandates accountability for performance criteria and goals.
• A compensation structure that pays for performance.

Successful firms have clearly defined and communicated values that bind their partners and staff through aligned goals and objectives. In these firms, adherence and achievement of individual goals is firmly rooted and rewarded in their compensation structure thus establishing a true strategically aligned performance based culture.

*****
Read iShade’s BulletIn every day. Keep it open on your computer or mobile device!
http://www.ishade.com/bulletin.php

Are You Running Through Molasses?

Posted on by
Reply

We’ve all worked with people who are extreme perfectionists. Heck, maybe you’re one of them. Amy DuBois Barnett, Editor-in-Chief of Ebony, questioned: “How can we give 100 percent to both our families and our jobs?” Her answer: “What I’m coming to understand is that we can’t.”

She’s speaking in very broad terms of job and family, but we’ve all worked with people who take every little thing to the nth-degree, which frequently results in misspent time. Again, maybe you’re one of them. I certainly am not…and am proud of it. There’s an awful lot to be accomplished during the work day—and in life—and quite often, a “90 percent mark” is good enough for most things. It gets one task off the plate so that the next one can be accomplished. That’s life.

As Barnett stated, “There will simply never be enough time to give everything in life 100 percent.” Perfectionists respond by criticizing those who “settle” for anything less; they also don’t get half as much done either!

I’ve never met a public accounting firm managing partner—of a growing firm—who always had to have that 100 percent out of each and every situation. If you’re trying to grow a business, well, it’s just laughable. Get it done and move on. Perfectionists are constantly taking that walk through molasses while the rest of us are running. No one wants to wait for them.

*****
iShade’s BulletIn. Keep it open on your computer every day.
http://www.ishade.com/bulletin.php

Go First and Lead the Way?

Posted on by
Reply

I heard motivational and leadership speaker Tom Flick recently say some very inspiring lines, which I’ve held to share with you on this fine April 17. I challenge you to give each one careful thought and consideration.

◊ “You’re moving forward or you’re falling behind.”
◊ “Get better today or fall behind tomorrow.”
◊ “Chase the big opportunity.”
◊ “Do what you love and if you help people along the way, you’ll be fine.” (Tom’s father)
◊ “Start meetings and end meetings with your BIG OPPORTUNITY.”
◊ “Get people to change how they work, think and go after life—it’s your job as leaders.”
◊ “Leaders don’t complain, they speak differently, they move forward.”
◊ “Vision creates true urgency.”
◊ “Exercise ethics, live your principles.”
◊ “If you’re not consistent, you’re a joke.”
◊ “Go and inspire your people.”
◊ “Helping other people to win—your job as a leader.”

“Go first and lead the way” was another one I heard him say. Most of us want to be the market leader; what can we all do right now to get closer to being the market leader?

Tom also mentioned this one below, which could really help a lot of accounting firms, in my opinion. I’ve phoned a lot of firms over the years and have seldom been greeted by the receptionist with any type of greeting that stands out.

“Phones answered in your office should be a differentiating factor for your firm.”

*****
iShade’s BulletIn. Keep it open on your computer every day.
http://www.ishade.com/bulletin.php

Friday Morning Fun

Posted on by
Reply

Playing a game of Monopoly the other night, when I had to pay tax on my houses and hotels, my mind naturally drifted to monopolies in the tax world. According to NPD Group, QuickBooks and TurboTax are near monopolies, with a retail market share of more than 90%. Those brands are clearly winning. I lost the Monopoly game.

With the numerous changes in currency taking place in the world, I got to thinking about the workers on the pyramids in ancient Greece who were paid in beer and bread. It’s easy to think, “That was back in another world–couldn’t possibly happen these days.” Think again. When the ruble collapsed in 1998, some factory workers in Russia were paid in pickles. Not even pickles and vodka–merely pickle payments.

An accountant told me this week that Twix bars and Kit Kats are taxed at different rates (one is “candy” and the other is a “grocery item”). Is this true? If so, it certainly does not make any sense. Explain it to me like I’m a four year-old please.

*****
Read iShade’s BulletIn every day. Keep it open on your computer or mobile device!
http://www.ishade.com/bulletin.php

No Laughing All the Way to the Bank

Posted on by
Reply

How many new banks opened in the United States last year? 500? 50? 5? Nope, only two. Yes, two new banks. Last year was the fourth consecutive year of declines in new bank charters—a clear parallel and indicator of the financial crisis and our challenging economic times. Going back to 2007, there were 155 bank charters activated in that year.

These statistics made me think of what I heard motivational and leadership speaker Tom Flick recently say: “You’re moving forward or you’re falling behind.” So true, so true…

*****
iShade’s BulletIn. Keep it open on your computer every day.
http://www.ishade.com/bulletin.php