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Using Competency Models for Higher Levels of Performance
Accountants Advisory Groupwww.AccountantsAdvisory.comSlide2
Accountants Advisory Groupwww.AccountantsAdvisory.com
Strategic consulting to CPA firmsLeadership, management and strategic directionAdvisory services pertaining to partnerships agreements, partner compensation & retirement agreements, etc.Marketing, new business development and public relations strategiesMerger and acquisition consultingHuman capital and recruiting programsPartner retreat facilitationRecruiting partners and managersObjective and independent advicePractical experience from industry specialistsSlide3
The “Perfect Storm”
Gender Unfunded Retirement Increased Competition Leadership
Consolidation/Franchises Retiring CPAs Quality CPAs
Slide4
CPA Firm Life Cycle
Initial Stages of Development
Running the practice in a more formal fashion
Mergers with smaller practices
New partners
Attracting experienced staff
Establishing niches and specialties
Economy and market conditions cause decline in revenues and profits
More competition for clients and talent
Founding and “rainmaker” partners retiring
Succession planning problems
Establishing a client and referral base
New partners
Start up
Growth - Established
Mature-Expanding
Challenged
Declining
Seek exit options
Merger
Sale
DissolveSlide5
2012 PCPS Succession Planning Survey
79% of firm owners say succession planning will be a significant issue for them in the next 10 years.44% of multi-owner firms either are discussing a merger, acquisition, or sale, or are planning to do so in the next 2 yearsSlide6
Future Classification of Firms
Consolidation / mergers will take place at a rapid pace and as a result, the future classification of firms will change and will look like:Slide7
Top 10 Attraction Factors:2011 vs. 2006
RANKTOP ATTRACTION FACTORS2011
2006
PERCENT-POINT CHANGE
1
Career growth
opportunities
91%
80%
112Salary88%78%
103Paid personal / vacation time86%79%7
4
Open-door / accessible
management
83%
68%
15
5
Comfortable office atmosphere
81%
69%
12
6
Interesting, challenging client projects*
81%
71%
N/A
7
Medical benefits
73%
70%
3
8Firm’s reputation or prestige73%
59%149
Retirement savings plan72%67%
510CPE credit reimbursement
65%
50%
15
Source:
PCPS 2011 Top Talent Survey. * The 2011 survey asked separately about client and internal projects. The 2006 survey asked about client and internal projects combined.Slide8
Driving Value
LeadershipState of the Art TechnologyMarketing, Public Relations and Practice DevelopmentRecruiting the best talent possible at all levels either directly or through M&A
Training, Career Development, Succession Planning, Partner & Staff Performance Management
Leading edge services, industry specialization
&
niches
Efficient &
timely delivery
of serviceHuman Resource Management
Practice & Engagement ManagementValuesProfitsSlide9
STOP making Excuses—The Time to Change is NOW
“It is not the strongest of the species that survive, not the most intelligent, but the ones most responsive to change.” —Charles DarwinSlide10
Top 10 Accountant's Excuses For Not
Implementing A Performance Management PlanDeadlines
Too many client demands
Going on vacation
Taking
CPE
Unqualified staffSlide11
Top 10 Accountant's Excuses For Not
Implementing A Performance Management PlanReturning from vacation
Engaging
new client
Writing newsletter article
Staff person quit
Client
crisisSlide12
Build a Quality Staff Pyramid …the Clients Will ComeSlide13
Managers
Staff
Managing Partners / Senior Partners
Junior Partners
Work
Flowing
Down
Work
Flowing
Up
Inverted Pyramid StructureSlide14
Leverage
Is the firm over-partnered for the current state of the “new economy”?Is the firm “carrying too many underachieving partners and mangers? Is the firm too “top heavy”?Does the leadership of the practice need to make some tough business decisions regarding the “Over-Partnered Syndrome” for the benefit of the firm?Are high billing rate partners doing too much low level work?Is the current partner compensation program demotivating partners to delegate to junior partners or managers?Slide15
Managers
Staff
Partners
Supervisors
Historical Pyramid Structure
Work
Flowing
Down
Work
Flowing
UpSlide16
Partner & Staff StructureDo we have enough “quality” staff in the appropriate positions to have a successful delegation process?
Are we properly developing our staff?Is the firm’s scheduling process taking into account the proper matching of work and talent and career development?There is a direct connection between the “partner-to-staff ratio” and the ability of firms to be successful in the long-term and develop succession planning.Need at least a 1:5 partner to staff ratio.Slide17
Winners, Comfort Zoners, Journeymen
Winners—20%Passionate about their careers.Have a personal strategic planContinuously upgrading their skills and knowledge.Upgrade their client baseContinuous career development and self-improvementAble to increase billing rates and collectSlide18
Winners, Comfort Zoners, Journeymen
Comfort Zoners—60%Shy away from challenges that will truly test them and require them to learn new skills.Fairly competent accountants who work hard, and provide good client service.Not progressive—status quoThey have a jobTake no risksNo future game planSatisfiedVolume/factory generatorsSlide19
Comfort Zone
.Slide20
Winners, Comfort Zoners, Journeymen
Journeymen—20%Don’t careShort-term playersJourneymen-move to different firm every few yearsSlide21
Performance ManagementSlide22
Performance Management
Provide clear objectivesRating and ranking against competency standardsMeasuring achievementsProviding honest and unbiased feedbackLinking compensation and rewards to performanceSlide23
Expectation GapSlide24
Performance Expectations
Performance expectations serve as a foundation for communicating about performance throughout the year. They also serve as the basis for assessing performance. When you set clear expectations about the results that must be achieved and the methods or approaches needed to achieve them, you establish a path for success.Slide25
Performance Expectations—A 2 W
ay StreetPerformance objectives express mutually understood agreements for results that an employee is expected to produce during the performance assessment period. Performance objectives are not separate from an employee’s job, but part of the job. Performance objectives are “ends” towards which you and your employee direct effort and focus resources. Slide26
Characteristics of Professionals inSuccessful Firms
EnergyDriveEnthusiasmMotivationMoraleDeterminationDedicationCommitmentSlide27
Performance Management
Implementation Using Competency Models
Competency
Model
Traditional
Training
Reward &
Compensation
Performance
ManagementPartnerDevelopmentNon-TraditionalTrainingSlide28
Work Product and Work Quality Technical and Accounting Knowledge
ProfessionalismAnalytical Skills Team Building and Team WorkClient Focus/Client Service CommunicationSlide29
Business AcumenProject Management
Relationship Building Risk Management Supervisory SkillsManaging a Profitable Business Business Development Slide30
Performance Management
Accountability for Implementing the Firm’s Short-Term and Long-Term PlansAnnual goals and competency standards that are linked to the Firm’s strategic plansCompensation program that rewards each partner fairly based upon the firm’s profitability and achieving goalsCounseling and guidanceSlide31
Work Product and Quality—Manager & Above
Develops and manages project milestones; ensures they are achievedInvolves Partners at appropriate time throughout the projectDetermines deliverable content and format to meet project objectives/client expectationsPartners with the client to align work product with client’s business strategyDesigns and produces solutions aligned with project objectives and client expectations (business strategy)Assigns responsibilities for tasks and decisions; coordinates the team’s activitiesSets clear goals, objectives and measures for the projectReviews work of others—ensures quality of deliverable(s)Utilizes project results to continuously improve work/future projectsSlide32
Analytical Skills—Senior
Effectively gathers, organizes and summarizes dataUnderstands rationale behind tasks and ultimate objectivesInterprets data and arrives at conclusionsQuestions procedures in achieving objectivesQuestions data integrityIdentifies obstacles to collecting and analyzing dataApplies information, logic and experiences to suggest solutions and alternate processesConducts research to formulate and support recommendationsSlide33
Analytical Skills—Supervisor
Identifies opportunities for creative problem solvingResolves obstacles to collecting and analyzing dataEvaluates the quality of information considering its source, relevancy and timelinessPerforms complex data analysis Recognizes when additional expertise is needed to address client issues and communicates with client service teamSlide34
Analytical Skills—Supervisor
Recognizes the broader impact of proposed solutionsChallenges logic used to assess problemsIdentifies related problems and issues when solving problemsMakes timely and sound decisionsAccurately defines a problem based on an understanding of technical requirements and/or client needsApplies learning from prior experiences to interpret current situationsSlide35
Analytical Skills—Manager & Above
Identifies the most critical issues of a client's situationDevelops solutions to resolve technical or business issuesIdentifies Firm and external resources to solve client problemsDevelops innovative approaches for similar client situationsSolicits creative ideas from the teamChallenges ideas and conclusions of the team and the clientProbes beneath the surface of problems to determine root causesRecognizes risks associated with innovative ideas and problem-solving approachesAnalyzes data based on reasonable assumptions, factual information and vision Slide36
Technical Skills—Auditing & Accounting Staff
Is learning to read and interpret financial statementsPerforms specific accounting tasks as delegatedIs learning and progressing in the knowledge and application of accounting principlesIs learning and progressing in the knowledge of auditing and accounting standardsIs gaining a general knowledge and awareness regarding tax issuesIs learning to prepare financial statementsIs learning and progressing in the area of computer applications in facilitating the auditing proceduresSlide37
Work Product and Quality—Senior
Completes deliverables in a timely mannerProduces deliverables that are clear, concise, thorough and of professional qualityEnsures job execution, documentation, consultation and completion in accordance with required policies and proceduresExecutes self-review of all workGenerates solutions aligned with project objectives and client expectationsDemonstrates an understanding of how work product links to client’s business strategySlide38
Technical Skills—Auditing & Accounting Senior
Reads and interprets financial statementsPerforms specific accounting tasks as delegatedProgressing in the knowledge and application of accounting principlesProgressing in the knowledge of auditing and accounting standardsGeneral knowledge and awareness regarding tax issuesPreparation of financial statementsProgressing in the area of computer applications in facilitating the auditing proceduresSlide39
Technical Skills—Auditing & Accounting Supervisor
Demonstrates solid judgment when interpreting dataHelps staff to develop Accounting knowledgeAcquired the knowledge and application of accounting principles and is sharing knowledge with othersAcquired knowledge of auditing and accounting standards and is sharing knowledge with othersGeneral knowledge and awareness regarding tax issuesPreparation and review of financial statements including disclosuresUses computer applications to facilitate the auditing process Slide40
Competency Models—Defined Roles & AccountabilitySlide41
Come Ready to Play Every DaySlide42
Technical SkillsA high level of comprehensive technical skills that is respected by clients, staff, and referral sources.
Continuously upgrades technical skills to become more valuable in the marketplace.Strong expertise in a niche or industry.Takes pride in their work and shows a personal commitment to quality.Slide43
Leadership & Team PlayerRespects partners
and employees of the firm. Is a mentor and counselor, who is fair and objective. The firm comes first before personal gain. Is both client and staff centric.Is entrepreneurial and takes calculated risks to grow and improve the firm. Willing to invest personal capital into the firm.Recognized by partners and staff as a trusted professional and manager of the firm. Is a role model to younger staff. Is a team player. Prioritizes the needs of the firm and takes the initiative to complete tasks and projects on a timely basis.Is willing to be held accountable for performance. Makes no excuses for underachieving.Slide44
Not a Great Role Model
.Slide45
Leadership & Team Player
Has enthusiasm and a positive attitude for the profession, the firm, and clients.Communication skills are clear, concise, and confident whether dealing with clients, staff, or prospects.Is willing to assist in resolving conflict and by acting as a liaison between people in the firm.Contributes to firm management by committee involvement and taking on special projectsSlide46
Leadership and Team Player
Follows the One-Firm Firm concept and puts the firm first.Provides constructive feedback on a continuous basis and is a good coach.Is a team player and good role model. Works hard at relationship building.Concerned about long-term issues, not just short-term profits.Is a source of creative ideas about the firm.Slide47
Client Service & Relationships
Meets with clients throughout the year and provides solutions to their business and personal financial problems.Clients seek out advice and counsel and is truly considered a trusted advisor in all aspects of their major business and personal financial decisionsExcels at client retentionProvides a greater level of client service with each yearReceives referrals from clientsGenerates additional revenue from clientsSlide48
Client Service & Relationships
Generates additional revenue from clientsTransfers clients to others when appropriateCulls out C & D clients when appropriateHas strong client relations and is considered a “Trusted Advisor”.Clients are not just satisfied, they are “delighted clients”.Has a strong history of client retention.Clients refer friends and colleagues.Slide49
Practice Development
Has a strong network of relationships with professionals outside the firm, such as attorneys, bankers, high-net-worth individuals and corporate executivesCommitment to firm/niche marketingAbility to generate new revenueAbility to generate additional revenue from existing clientsAbility to cross-sell firm servicesAbility to increase personal billing rate and collect itSlide50
Practice Development
Continuously demonstrates the ability to engage new business.Markets for quality clients, not quantity and continuously upgrades his client base.Strong relationships with referral sources and the business community.Generates additional work from existing clients. Slide51
Engagement Profitability & Management
Manages engagement profitability and quality on a frequent basis.Clients generate high realization rates.Consistently upgrades client base with high profitability clients. Disengages “C” clients.Demonstrates timely and effective billing and collectionsSlide52
Combining Competency Modelsand SMART GoalsSlide53
Goals
Develop “SMART” GoalsSpecificMeasurableAttainableRealisticTime-FramedAlign individual goals with firm objectivesInclude a self-evaluation in the processUtilize weightings and ratings to evaluate actual performanceSlide54
The Elements that Make a Goal SMART
SpecificSpecifically define what you expect the employee/partner to do/deliver.Avoid generalitiesThe level of detail you need to provide depends on the employee’s personality and their experience level. For example, a highly autonomous or experienced employee will need less detail than a less confident or seasoned one.MeasurableIdentify how you will measure success—usually stated in terms of quantity, quality, timeliness or cost (e.g. increase by 25%).Slide55
The Elements that Make a Goal SMART
Actionable/AchievableMake sure that accomplishing the goal is within the employee/partner’s realm of authority and capabilities.Can the employee successfully complete this goal with the skills, resources and time available to them?Are there factors beyond their control that need to be considered?While considering whether a goal is actionable/achievable, you also need to consider the partner’s/employee’s total set of goals. While each individual goal may be achievable, overall, you may be assigning the employee more goals than they could reasonably be expected to successfully complete.Slide56
The Elements that Make a Goal SMART
Agreed upon:Sufficient space to provide a detailed descriptionA field to list the higher level organizational goal that this goal is linked toAn area to list any important milestonesA separate field to capture the way success will be measuredA separate field for the due dateA limited number of fields to enter goals, to limit the overall number of goals assigned to each employeeSlide57
Using Weightings to Prioritize Competencies & Goals
Communicates the relative importanceAssists in prioritizing work on a day to day basisDecisions when faced with competing demandsOften used when compensation in tied to performance ratingsReflects the firm’s values and prioritiesSlide58
3-year Goals
1-year Goals
Long-Term Vision and Goals
Setting and Achieving Goals
90 Days
Daily
To
Do’s
1-Year Goals
Long-Term Vision and Goals
3-year Goals
6-Month GoalsSlide59
Partner Accountability, Goals, and WeightingsSlide60
Partner Compensation Criteria
Criteria WeightFinancial Goals 50%Collections: $1,600,000Realization Rate: 90%Average Days A/R: 45Average Days W/P: 45Billable Hours: 1,200Marketing Goals 15%Net New Business: $200,000New Website by 9/30/13Branding Program by 10/31/13Establish Wealth Management Niche by 12/31/13Slide61
Partner Compensation Criteria
Criteria WeightMiscellaneous 15%Assigning clients to other partners: $400,000Adhering to firm policiesAssisting younger partners and staff to advanceContribution to staff CPE trainingManagement of the Firm 20%Leadership and daily managementAchieving action items assigned from the last retreatRecruiting of high-level talentImplement an amended partnership agreementManage the implementation of a new Career Development ProgramSlide62
Partner Self-Evaluation
Each partner should prepare a self-evaluation of total performance, including accomplishment of goals and objectives.Optional criteria to be considered for incorporation into the evaluation:Number of years as a partnerBillable hours workedNon-billable hours worked, including hours spent on:Practice development Staff recruiting and training New niche developmentGeneral firm marketingTraining in firm CPE sessionsSpecial management and administration projects and responsibilitiesSlide63
Partner Self-Evaluation (continued)
Optional criteria to be considered for incorporation into the evaluation:Client relationshipsClient fees managedRealization rate for client fees managedBilling rate compared to other partnersContribution to developing, mentoring and retaining staffNew business engaged this yearAdditional fees earned from current clientsClients lost this yearQuality of technical workCooperation with other partners and staffContribution to firm managementSlide64
Partner Self-Evaluation
The advantages of having each partner submit a self-evaluation form prior to the annual counseling and compensation meetings are:It opens up the lines of communication between you and your partners. Your partners will be forced to think about their performance, both objectively and subjectively prior to the meeting.It will allow you to attain knowledge about your partners’ accomplishments, some of which you may not be aware.Both parties will be better prepared for the discussions.It will assist you in evaluating how well each partner achieved their goals and objectives.Slide65
Sample Partner Self-Evaluation
Form QuestionsSome sample points to be included in a partner self-evaluation:Review the partner statistical and other information that was forwarded to you. Evaluate the information and provide me with your opinion of your performance in these areas.Provide any pertinent information that was not included in the statistical and other information that would assist me in evaluating your performance.Slide66
Sample Partner Self-Evaluation Form Questions
(continued)Review results of your past year’s goals and objectives. For those goals and objectives that were not achieved, explain why and what you will do differently in the future to accomplish them. Indicate your goals and objectives for the new year taking into account the firm’s stated goals and objectives.Indicate any other discussion items you would like to address in your upcoming annual performance review.Slide67
Aligning Performance Management with the Firm’s Objective and VisionSlide68
Alignment Process
A firm strategy and vision is developedGoals and objectives are agreed upon to achieve the strategy and visionAn action plan is developedPartner and Manager goals and objectives within a competency model framework are developed in conjunction with the action plan.Slide69
Performance ManagementSlide70
The One-Firm Culture
Not individual practices under one roofEstablishing and communicating the Firm’s organizational goals that all partners can contribute to.Each partner focuses on how their work contributes to higher levels of Firm success.Partners (including the managing partner) and staff are held accountable for performance and results.The practice is run more like a business with entrepreneurial ownersSlide71
Talent & Alignment—Factors That Make a CPA Firm Successful
Must create an environment where partners and staff are constantly motivated and can effectively balance their commitment to the firm, the clients, and themselves.Creating strong links between partners/managers and the kinds of things that motivate them, the firm’s strategy, and the way the firm is organized to deliver the strategy.The success of a CPA Firm is directly aligned to the partners and staff putting the interests of the firm ahead of their own needs.