When CPA Partner Votes Go Wrong

Percentage signs on round hanging tagsThere’s a better way.

By Marc Rosenberg
The Rosenberg Practice Management Library

It may seem intuitive to use ownership percentage to decide important financial and governance issues.

MORE: Why Billing Less May Mean Earning More | What Smaller Firms Must Do to Become Firms of the Future | The 13 Signs You Have a Partner Problem | COVID-19, Adversity and Innovation | How Covid Impacts Partner Retirements |  Three Tough Questions in Partner Buyouts | Reward Partners for Performing Like Partners | 7 Points of a Well-Crafted Partner Buyout Agreement | Smart Tech Tips from Top CPA Firms
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Here are three common reasons why… And one important reason why not.

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The CPA Firm Partner’s Role Is Changing

… like it or not.

By Ty Hendrickson

The role of a partner in an accounting firm is changing. Actually, the role of a partner in an accounting firm has changed and now too many firms and individuals are playing catchup.

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Accounting firms as a whole have changed significantly over the past 10 to 15 years with the influx of new technology that modernizes the work being done within the firm. Compliance work is now being done much more quickly and efficiently because of ever-improving software that automates many accounting tasks.

More of the day-to-day work is being done by software, which has caused the following to happen:

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Why Billing Less May Mean Earning More

Businesspeople discussing chartsHere’s the proof.

By Marc Rosenberg
The Rosenberg Practice Management Library

QUESTION FROM A CLIENT: “As the firm’s MP, I’m trying to encourage our partners to delegate as many billable hours as possible to the staff instead of doing it themselves. What is the benchmarking metric for how much of partners’ billing responsibility should be performed by themselves?”

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ROSENBERG RESPONSE: There is a natural tendency for partners to perform high levels of billable hours, perhaps in the 1,200 to 1,500 range annually.
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When Managing Partners Can’t

Word "fail" written in red markerFour ways to make sure managing partners will fail.

By Marc Rosenberg
The Rosenberg Practice Management Library

There is an intuitive notion that comes to partners that goes something like this: “Let’s all get together and form a firm that will make us all more successful than any of us could be individually. We’ll follow the principles of democracy by dividing up the management duties so that no one is overburdened. The partners will make decisions as a group, thereby avoiding vesting too much power in one person.”

MORE: Don’t Let Exiting Partners Double Dip | The 13 Signs You Have a Partner Problem | COVID-19, Adversity and Innovation | How Covid Impacts Partner Retirements |  Three Tough Questions in Partner Buyouts | Is Mandatory Retirement a Best Practice? | COVID-19: How Your Firm Can Respond
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Management by committee is doomed to fail. This list refutes the excuses partners often give for favoring management by committee.

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Don’t Let Exiting Partners Double Dip

Senior businesswoman in officeWhy pay if the firm doesn’t get the clients?

By Marc Rosenberg
The Rosenberg Practice Management Library

Here’s a question that frequently arises in my consulting engagements: What are your thoughts on partners wanting to work for the firm in a non-partner role after they retire, who continue to control “their” clients while receiving deferred compensation and a salary for their work?

MORE: The 13 Signs You Have a Partner Problem | COVID-19, Adversity and Innovation | Is Mandatory Retirement a Best Practice? | Merging in Sellers: What You Need to Know | Take Yoda’s Advice on Strategic Planning | 15 Amazing Organizational Tactics to Manage a CPA Firm | How to Develop a Truly Progressive NextGen Culture
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The answer is rooted in the maxim: “No transition … no goodwill.” This means that retired partners should not have the inalienable right to deferred comp without actively and effectively transitioning their clients. If they don’t transition, then the remaining partners, at their sole discretion, should be able to reduce the deferred comp payments.
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The 13 Signs You Have a Partner Problem

Businessman holding two papers with happy and angry face each on themAnd seven ways to fix it.

By Marc Rosenberg
The Rosenberg Practice Management Library

In my experience, roughly 60 percent of all CPA firms (below the Top 100) have either major partner conflict or a pronounced lack of effective partner communication and/or relations.

MORE: COVID-19, Adversity and Innovation | How Covid Impacts Partner Retirements |  Three Tough Questions in Partner Buyouts | Is Mandatory Retirement a Best Practice? | COVID-19: How Your Firm Can Respond | Reward Partners for Performing Like Partners
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This is a huge problem because unless the partners of a firm work reasonably well together, it is very difficult for their firm to be truly successful. I’ve always been a believer of the adage “partners who play well together do well together.”
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An Effective Board Begins With an Effective Process

Senior businessman with his team at office

Decide what you need, then look for the right people.

By Steven E. Sacks

In discussing how to select your firm’s board, the issue was that you want to have the proper board composition with the people, right values, philosophies and a shared commitment to the success of the firm.

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As a firm leader, a matter you think needs immediate attention could simply be a symptom of a larger problem. It’s common sense that you would not visit your doctor to treat your broken leg with a Band-Aid, so why look for a fast, ineffective and incorrect solution as a way to fix an operational or cultural problem? This is why those who are on the board are selected for their acumen and belief in the why the firm or company exists and how it can be improved.
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Retired CPA Partners Face Pay Cuts from Covid

Facing the fallout from the Covid crisis, 10 percent of small and midsized firms are already trimming compensation for retired partners.

Firms target annual net profit caps, early retirement provisions, and mandatory retirement ages.

By Domenick Esposito

With profits likely to take a short-term hit, retired partners at many CPA firms are facing cuts to their payouts, according to our straw poll of 30 leading firms.

MORE from DOM ESPOSITO:  Keep Your Firm from Biting the DustThe Six Ingredients for Firm ValueFour Ways to Add $100,000 in New Business Fees Every Year | Eight Steps to Small Firm SurvivalNo Partner Candidates? Whose Fault Is That?Prune Your Firm: ‘Rightsize’ Managers and PartnersHow Partners FailIneffective Management Is Hazardous to Your Firm’s HealthProfitability Requires Discipline |

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Coronavirus crisis updates: Start here for a guide to all our coverage.

With Covid-19 hurting revenues and bottom lines, firms of all sizes are reconfiguring their staff loads and renegotiating their space requirements.

But we haven’t heard much about what firms are doing about their obligations for deferred compensation partner retirement plans. Until now.

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How to Select Your Firm’s Board

Overhead shot of eight businesspeople meeting around a table5 questions that go beyond the eeny meeny miny moe.

By Steven E. Sacks

The old saying that a camel was a horse created by committee has an element of truth to it. If you think that everyone on a board or executive committee shares the same opinions, philosophies and vision, then think again.

MORE: Confronting Leadership: Not Such a Bad Thing | New Opportunities for a ‘New Normal’ | Working Remotely Shouldn’t Mean Feeling Isolated | 4 Ways to Boost Job Satisfaction
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The eeny meeny miny moe may be a little tongue-in-cheek, but the question is how deliberate a CPA firm should be in choosing its board or executive committee members.
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