Why the Partner Agreement Matters

Illuminated glass pyramid at the Louvre, Paris at nightMany agreements have long outlived a reasonable foundation for the firm’s current success level and size.

By Bill Reeb and Dominic Cingoranelli
CPA Trendlines / Succession Institute

Most of the time when we are called in to work with firms, it is to help them plan for or implement significant change. The dialogue may start out with a general firm retreat, or it might simply be a session devoted to solving a few specific problems.

MORE ON PERFORMANCE MANAGEMENT: Younger Partners See Succession Differently | How to Compensate Your Managing Partner | The Job of Managing Partner: Empowered or Emasculated? | How the Best Managing Partners Turn Ideas into Reality | Make Accountability a Process | Accountability Requires Clear Expectations | Base Retirement on Today’s Operations

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Visionary firms are always looking to make changes long before their operating environment forces them to, from enhancing their ability to compete, making changes to improve profitability, building infrastructure to support succession, upgrading their people development, modifying the compensation process, increasing revenues and more.
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Four Problems That Prompt Mergers

Six businesspeople in meeting around tableAnd three ways you win by tackling them now.

By Bill Reeb and Dominic Cingoranelli
CPA Trendlines / Succession Institute

When firms first start considering the idea to merge into a larger firm, they do it with the intent to solve a problem. Common problems distressing enough to motivate this transaction are:

MORE ON PERFORMANCE MANAGEMENT: Younger Partners See Succession Differently | More Merger Questions Than You Imagined | MPs: How to Elect Them … and Fire Them | Partners as Role Models: The Good, Bad & Ugly | Managing the Managing Partner | Pay Varies When Performance Varies | Accountability Is for Everyone | Who Decides What? | Firms Say What Would Change Retirement Pay | Action Plans for Transitioning Partners | How Retirement Issues Affect Succession Planning

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  • Leadership: Not enough future partners on the ground or in a near-future pipeline to be able to take over and retain the client relationships of the retiring partners while simultaneously continuing to nurture and develop new clients. This concern tends to be expressed frequently by senior partners when they share their discomfort with the level of risk they are accepting regarding their future buyout.

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Younger Partners See Succession Differently

Young woman driving a carAre you acting like an owner or an employee?

By Bill Reeb and Dominic Cingoranelli
CPA Trendlines / Succession Institute

Several of our younger partner readers have posed a couple of questions to us on the topic of mergers, as well as succession in general.

MORE ON PERFORMANCE MANAGEMENT: More Merger Questions Than You Imagined | Merging for the Wrong Reasons | Why Accountability Falls to MPs | How to Implement Strategy, Step by Step | How to Decide Who Decides Pay | Accountability Includes Partners | Succession Plan Requirements | How Retired Partners Are Robbing their Own Firms | 4 Ways to Create More Capacity | Partner Retirement and the War for Clients | Succession: The Questions to Care About | Hazards of Not Reallocating Equity | CPA Firm Performance Assessments: 15 Core Competencies, 21 Questions | 5 Harmful Management Attitudes (and How to Fix Them)

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At the end of the day, remember that just because junior and senior partners may be in different positions, have diverse perspectives and at times, opposite expectations, that doesn’t necessarily mean that you can’t find resolution in the same solutions. So, let's pick up with a question/comment or two.
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More Merger Questions Than You Imagined

Business group of two women and two men shaking handsThere's a lot to consider whether merging up, down or laterally.

By Bill Reeb and Dominic Cingoranelli

Although we find that an internal ownership transition often can be your best bet, a merger makes sense in many cases. So, if this is the direction you are heading, we’ve highlighted some of the issues below that we think you ought to consider, with the first one being to really take a close and hard look at the compatibility of the organizations courting each other.

MORE ON PERFORMANCE MANAGEMENT: How to Compensate Your Managing Partner | The Job of Managing Partner: Empowered or Emasculated? | How the Best Managing Partners Turn Ideas into Reality | Make Accountability a Process | Accountability Requires Clear Expectations | Base Retirement on Today’s Operations

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Who Is a Likely Candidate for a Merger?

If you are going to consider a merger, which firms would seemingly be a good fit for your practice – i.e., your clients and your employees and if, applicable, partners?  The better the fit, the more likely you will be able to retain clients and employees, and the greater the chance for overall success of the merged firms.
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Merging for All the Wrong Reasons

Jigsaw puzzle with pieces missing and word "incomplete" in gapFirst: Get your house in order; don't expect someone else to do it for you.

By Bill Reeb and Dominic Cingoranelli

For at least the past 10 years, the merger market among CPA firms has been pretty active. While the market volume has waxed and waned a little several times during this period, mergers have been a topic in almost every strategic planning retreat we have facilitated.

MORE ON PERFORMANCE MANAGEMENT: How to Compensate Your Managing Partner | MPs: How to Elect Them … and Fire Them | Partners as Role Models: The Good, Bad & Ugly | Managing the Managing Partner | Pay Varies When Performance Varies | Accountability Is for Everyone | Who Decides What?

 

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How to Compensate Your Managing Partner

Businesswoman holding giant dollar symbolHow firms are balancing base salaries against billable hours.

By Bill Reeb and Dominic Cingoranelli

The managing partner should have a compensation plan unique to that position focused on carrying out the strategic and tactical objectives of the firm.

MORE ON PERFORMANCE MANAGEMENT: How to Elect a Managing Partner … and How to Fire Them | Why Accountability Falls to Managing Partners | How to Implement Strategy, Step by Step | How to Decide Who Decides Pay | Accountability Includes Partners | Succession Plan Requirements | How Retired Partners Are Robbing their Own Firms | 4 Ways to Create More Capacity | Partner Retirement and the War for Clients | Succession: The Questions to Care About | Hazards of Not Reallocating Equity

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While there can be some individual performance goals assessed, the bulk of the managing partner’s incentive package and focus should be on overall firm performance. The key here is that you don’t want an incentive system for the managing partner that is overly focused on individual goals because the real value of this position is in driving firmwide change.
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MPs: How to Elect Them … and Fire Them

Midsection of businessman moving out with cardboard box from officeAnd why a five-year term is ideal.

By Bill Reeb and Dominic Cingoranelli

Often, firms elect a managing partner with a majority vote, but to dismiss a managing partner within their elected term requires a higher vote, commonly two-thirds of the equity vote. In some larger firms, the people running for managing partner might not be eligible to vote in this process, but in many others, everyone can vote.

MORE ON PERFORMANCE MANAGEMENT: The Job of Managing Partner: Empowered or Emasculated? | How the Best Managing Partners Turn Ideas into Reality | Make Accountability a Process | Accountability Requires Clear Expectations | Base Retirement on Today’s Operations | How Involved Should Retired Owners Be? | How to Find a Partner’s Replacement

The reason why everyone should be allowed to vote is simply that the smaller the firm, the more likely that removing the candidates being considered for the position puts too much control in the minority ownership of the firm. For example, consider the following six-partner firm scenario:
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