In the second part of his two-part series on building a practice, Kevin Reed speaks to senior partners about reward systems, retaining talent and putting in place an infrastructure for growth.
This article touches on themes of growth initiatives, people strategy and management, workflow and client vision – all central to the Accounting Excellence Awards 2019. Entries open: click here for more details.
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Last week, we discovered how firms have put fundamental building blocks in place around equity structure, remuneration and succession planning. This week, the senior partners explain how this foundation has led to resilience and growth.
Mercer & Hole has a “three-pronged” approach to driving growth. Firstly it’s organic; then finding lateral hires where possible; and finally modest and measured acquisitions or mergers.
Mergers and acqusitions
The last significant deal was its merger with Rickmansworth-based Day, Smith & Hunter in 2016 – this brought in three partners and enabled Mercer & Hole to provide a broader range of services to their newly-gained client base.
“We’re proud of the people we’ve got – there are lots of stars here and we try to offer a range of services. Doing that requires joined-up thinking.”
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In a similar vein, successful practice haysmacintyre has stuck with a partnership – although it has just converted to an LLP.
For managing partner Ian Cliffe, this is to “keep up-to-date with general structures and what clients expect and be more transparent with our numbers”.
Does that change how the firm rewards and manages its people?
“No, that’s a separate structure. That resonates from a very strong graduate recruitment programme, through to rapid promotion for directors and partners.
“We pay market rates on salary but have excellent benefits such as pensions, holidays and into CSR programmes and staff bonuses – if the firm does well we all do well.”
No golden pat on the back
While partners don’t have to buy equity unlike those at Mercer & Hole, both sets leave the practice without goodwill.
“You come on board with nothing and leave with nothing,” explains Cliffe. “There’s no massive barrier to coming on board but no golden pat on the back at the end, either.”
Profit shares are paid out in full at the end of the year. The firm does have both equity and fixed-share partners: equity partners are paid out on ‘points’ and a lock-step basis (points are set on an assumption of how much work you’ll bill, and delivering on that sees your points increase). While fixed share partners have a base drawer and percentage incentive to hit budgets and targets.
Cliffe adds: “If you’re really dynamic and drive the business it can be a really substantial profit.
“No rewards system is perfect, but ours encourages and drives new partners to work to full potential and makes all partners work as a team than for themselves, such as holding onto fees and clients. We truly believe we have that right.”
Another strong performer is Holborn-based Wilson Wright. But partner Warren Baker admits that it “can be a struggle” to retain talent and “keep them aligned, on the same trajectory”.
“That’s the biggest problem,” he adds.
But, having just enjoyed its 125th year anniversary, the firm’s “trust-based approach” to its ten partners shows great longevity.
“Unless you trust your partners you’re going to struggle with succession issues. We talk it out and resolve those issues.”
Profits are shared based on ongoing and expected delivery over a period of time. “You need to deliver,” explains Baker, “but it’s not short-term”.
An infrastructure to grow
While such a structure may seem ‘un-corporate’, Wilson Wright’s approach to running the firm is anything but.
Operationally, the firm has brought in non-accountants as “quality middle management”. These team members run HR, the practice itself, IT and marketing.
Baker says that firms will try and outsource such positions and functions, but “at a certain size you need to put in place infrastructure to enable you to grow”.
These people have “transformed” the firm thinks about itself, reveals Baker. The HR manager, for example, set about driving the creation of values, vision and purpose. “She was the catalyst to do that. We’ve gone from the thought processes of an owner-managed business to a corporate”.
The firm is now more “scientific” and “professional” about how it operates. “It’s altered the way we approach things,” says Baker.
“We feel we have custodianship – we need to pass the firm down to the next generation of custodians.”
The entry process for the Accounting Excellence Awards 2019 is now open. The Large Firm of the Year category sets a number of judging criteria: showing the quality of your firm and setting client vision; initiatives to growth and success; and how the firm has addressed people, process, workflow and market challenges. Click here to find out more.
About Kevin Reed
Kevin Reed is one of the UK's most senior accounting and finance journalists. He has written for, edited or managed various business and finance titles for VNU, Incisive Media, and Contentive since 2000 - and is now a freelance journalist and consultant.