Save content
Have you found this content useful? Use the button above to save it to your profile.
AIA

Partner recruitment: How to avoid mistakes

by
19th Nov 2012
Save content
Have you found this content useful? Use the button above to save it to your profile.

Mark Lee talks to Stephen Harvard Davis about best practice when accountancy firms recruit new partners and what to do if the appointment goes wrong.

ML: Stephen, you work with restructured teams to make them more profitable faster. How do you define a restructured team?

SHD: I define restructured teams to include senior or essential new hires, downsized teams, new projects and new leaders. In fact it’s any situation where new rules, a new relationship or new methods or working are likely to influence how a business works.  During restructure some change will succeed and some will not. For instance research shows that only 60% of new hires are a success and 42% of all new business teams fail to achieve the results they were set up to deliver.

The main problems for a business with a failed team or project are the lost opportunities. In my experience the financial costs can be calculated between 10 and 20 times the salary of the team. Some of this will be direct costs such as salary and personnel costs and some will be hidden such as unrealised results and lost clients.

ML: How do you see this affecting accountancy firms?

SHD: The same issues face accountancy firms and lateral hires as face any other commercial operation. We know that accountants are expected to be a true business partner to their clients and this means that related abilities, including communication and analytical thinking, are part of the role that accountants are being asked to deliver.

To meet these expectations many firms are recruiting partners with these skills. As typically such recruitment brings with it a ‘change stress’ and a 40% risk of failure. The costs associated with a failed partner recruitment exercise will include management and staff time in addition to the lost opportunities; all of this can be quite crippling for a small firm with just a few partners.

ML: So what actions should such accountancy firms take to reduce the risk of ‘change stress’?

SHD: There’s a tendency when looking for new partners to be attracted by individuals who can bring new clients to the firm. That’s quite proper, but the question needs to be asked, does that person also bring the new skills that are required? If not then will they be a good fit? Other questions should be around management styles, communication skills, networking ability and so on.

To give you an example, on one occasion last year I met with a new partner who had just signed a contract to join an Accountancy firm. He told me that he was excited by the move. Three months later I met him again and my first question was, “Is there something wrong?”  I’m used to observing employee problems through body language. His answer didn’t surprise me, “The firm’s not what I expected…I think I’ve made a big mistake”. Nine months later he had left and taken his client list with him.

The partners who had interviewed the new guy had been blinded by his client portfolio and oversold the benefits of working at the firm. In addition they had not discussed the job issues that he was to encounter at the interviews. The new partner and the firm had different expectations of their relationship. This always needs to be avoided because the expense of sorting such problems can be huge.

ML: I have also heard many similar stories. They often involve aggressive ‘new’ partners who upset the firm’s staff and cause key people to leave. There can also be problems when the ‘new’ partner doesn’t have a huge client following so cannot simply leave when they realise they have made a mistake.   What’s your advise to firms when they are recruiting new partners Stephen?

SHD:  One thing I would always recommend is to plan what happens if the new appointment doesn’t work out.

ML: Isn’t that defeatist?

SHD: Not at all. Accountants are becoming strategic advisers and offering their business clients support on productivity, efficiency and profitability and advice on alternate strategies. It’s perfectly logical that they should be able to address issues that can affect their own firms.

ML: In your experience what are the major events that create ‘change stress’?

SHD: The obvious one is growth. As a team expands to take on more skills there comes stress points when processes have to change in order to maintain efficiency.  In most teams this is when team size reaches two people, nine, fifteen, twenty five and so on.

As a firm grows its partner numbers it will also need to grow the team that supports them. This inevitably creates a need for changes in systems in order to enable the partners to work at their greatest efficiency.  Any expansion in partner numbers or support staff will create ‘change stress’ as will the appointment of a new managing partner or a merger of firms. Under these circumstances it’s likely that some partners will consider their future.

ML: In your experience how should a firm prevent a partner leaving a firm and taking clients with him?

SHD: It’s a question I’m often asked. When a partner announces that they are departing for pastures new they may be required to give six and twelve months notice. However the decision by the partner to leave the firm was probably made six months previously and they’ve had all that time to plan to take business with them. (Some will follow naturally)

The first thing I recommend is to have an up-to-date partnership agreement and employment contracts in place that prevent partners and employees taking IP and other material with them; this would include clients within a set period after departure/termination. A good partnerships and employment lawyer should be able to provide such advice. It may not prevent loss of all clients entirely but it will make people more cautious about poaching.

The next thing is to accept that good talent, particularly in the skills we’ve been talking about, is in short supply and in great demand. Particularly by big firms that are able to offer larger profit shares and salaries that smaller firms can’t afford.  However this is rarely the only driver for partners other than those with specific financial pressures.

It’s worth considering that big firms can sometimes be poor at providing certain benefits that many partners could find attractive in a small firm. So I encourage managing partners regular discussions with their partners with a specific focus on their work and aspirations.  In smaller firms partners should not be afraid to raise such issues among themselves. Such discussions should be designed to clarify whether each partner is unhappy and whether identified actions can be put in place that reduce the risk of them departing. It might be time consuming but prevention is always less inconvenient and cheaper than the time expended sorting out a partner that leaves.

Another tool I recommend is to have a risk assessment on each individual partner leaving or being taken ill. This includes the actions that will result, client re-allocation, communication with clients and how to continue a seamless service. It needs to be included as part of the disaster plan that all good firms have in place.

ML: Thank you Stephen. There’s plenty to think about here. I hope it will generate some comment and discussion.

Stephen Harvard Davis founded Assimilating-Talent in 1999 to work with companies large and small to increase team productivity and profits. He can be contacted via email: Stephen[at]assimilating-talent.com or telephone  01727 838321

Mark Lee is consultant practice editor of AccountingWEB and writes the BookMarkLee blog for accountants who want to overcome the stereotype of the boring accountant – in practice, online and in life. He is also chairman of the Tax Advice Network of independent tax experts.

Replies (5)

Please login or register to join the discussion.

7om
By Tom 7000
20th Nov 2012 12:09

i wonder....

If anyone reading this is a partner in a firm...it seems to me everyone on here is  a sole practitioner, like me...mind you I have got 20 staff, so I am quite a big sole practitioner!

Thanks (0)
Mark Lee headshot 2023
By Mark Lee
20th Nov 2012 12:51

Cheers Ian

I agree most of those who comment seem to be sole practitioners. But I suspect readership goes far wider than that. Indeed the vast majority do not comment at all so it is hard to draw definitive conclusions.

Mark

Thanks (0)
avatar
By SHD
20th Nov 2012 13:21

Ian

It's interesting that you have a team as large as 20 and I guess that a substantial amount of time is thus spent on "People issues".

In my experience any recruitment brings with it a ‘change stress’ and a 40% risk of failure. As mentioned the costs associated with a failed recruitment exercise will include management and staff time in addition to the lost opportunities, all of this can be quite crippling for a small firm particularly a sole trader.

Doubtless you probably don't deal with those people issues all yourself but the costs of having them managed by someone can be high. Tools used to manage the situation for a partner would be equally applicable for non-partner personnel.

Best wishes

Stephen Harvard Davis

Thanks (0)
7om
By Tom 7000
20th Nov 2012 13:59

2nd office

I am on the cusp of buying a second office ( when he finally decides hes retiring) and that would ( according to the top 100 list) make me about no94 and the only sole practitioner in it mwahahahaa

 

Managing peoples easy...Just hire qualified accountants ACA CA or ACCA ...job done right, on time, within budget, with minimum of fuss and hardly any input from me...

What you need is sledgehammers to crack nuts...so they all get nicely cracked.

 

I just get to organise the xmas party in...... Monte Carlo...(and its £149.98/ head...and I think we know what that means)

 

 

 

Thanks (0)
avatar
By blok
20th Nov 2012 19:14

.
Thanks Mark and Stephen.
An interesting read. As someone in my early thirties with partner discussions in progress for 2014 with a mid tier firm, it's a worthwhile read. I used to think I was the one gaining the most from becoming partner but I now understand that it's a two way deal. The firm needs me as much and perhaps more than I it.

Thanks (1)