w hat h igh p erformance f irms d o t o a chieve a mazing r esults

© UPSTREAM ACADEMY 2012 1

WHAT HIGH PERFORMANCE FIRMS DO TO ACHIEVE AMAZING RESULTS

PRESENTED BY SAM M. ALLRED, CPA FOUNDER & DIRECTOR OF UPSTREAM ACADEMY


It’s relatively easy to become a good public accounting firm. Many firms across North America have already demonstrated that. Becoming a high performance firm, however, is another matter.


So what stands in the way? One of the biggest obstacles is that good is good, and those who are leaders of such firms enjoy a great life.

They’re well-compensated, typically have great clients, are respected in their communities, and reap many other benefits.


So what else keeps firms from becoming high performance? It’s work. Thomas Edison probably said it best: “Opportunity is missed by most people because it is dressed in overalls and looks like work.”


It’s been my privilege to work with hundreds of firms across North America, and I’ve seen elements of high performance in many of them.

Relatively few have become truly high performance. This morning we’ll talk about what high performance looks like and what you need to do to get there.


PRESENTATION ROADMAP

1. Observations regarding firm performance

2. How do we define high performance?

3. What do HPF do to achieve amazing results?

4. Examples of HPF processes5. Questions and answers


OBSERVATIONS REGARDING FIRM PERFORMANCE

© UPSTREAM ACADEMY 2012

The firms in our profession fit a perfect bell curve. There are a few weak firms, a lot of good firms, and a few high performing firms. 8

OBSERVATION #1


The difference between a weak firm and a good firm is as great as the difference between a good firm and a great one (HPF).

OBSERVATION #2

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OBSERVATION #3

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Too many firm leaders are living the Groundhog Day experience. Many feel their greatest challenges remain largely unchanged year after year.

Excuses are common and serve as a barrier to making significant improvements in weak areas.


OBSERVATION #4

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Many firms struggle to achieve the discipline required to develop and execute a written strategic plan. Too many subscribe to a “flavor of the quarter” approach and live the strategy of hope.


OBSERVATION #5

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Firms often convince themselves they are doing just fine by making comparisons to weak competitors. This creates a false sense of security.

Measuring against a mediocre standard seldom helps firms become high performance.


OBSERVATION #6

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Although there is ample benchmarking data available to compare and contrast firm performance, this data does not address the important areas of culture, trust, accountability, unity, vision, discipline, etc.


The differences between high performance firms and other firms transcend benchmarking numbers.


It’s impossible to become a high performance firm by accident. No one “lucks” into it.

OBSERVATION #7


OBSERVATION #8

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High performance firms have a low tolerance for poor results in any area. They understand the connection between great processes and great results.


They also understand and believe that with focus, discipline and endurance, they can improve any area of the firm.

Their track record of doing this has produced a culture of high performance throughout the firm.


OBSERVATION #9

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What Jim Collins said about the flywheel is true. High performance firms are never the result of any one specific action or event.


“No matter how dramatic the end result, the good-to-great transformations never hap-pened in one fell swoop. There was no single defining action, no grand program. Rather, the process resembled relentlessly pushing a giant heavy flywheel in one direction, turn upon turn, building momentum until a point of breakthrough, and beyond.”

Jim Collins


OBSERVATION #10

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Virtually any firm on the planet can become a high performance firm if this is its primary goal and objective.

In large measure, we all get what we deserve in terms of firm performance.


HOW DO WE DEFINE

HIGH PERFORMANCE?


So what does high performance look like? We think of high performance in terms of attributes and areas of discipline. Here are the attributes we’ve observed in high performance firms.


1. Passionate about continuous improvement

2. Shared belief that problems can be solved

3. Absence of artificial harmony4. A compelling, shared vision that

excites every firm member5. Ability to think and act

strategically6. Proven ability to set and reach

stretch goals that align with vision and strategy

HIGH PERFORMANCE FIRM ATTRIBUTES


7. Passionate about exceptional service and ability to deliver it consistently

8. A strong culture of self-accountability

9. Ability to work together as team members in an atmosphere of mutual respect

10.A “leave nothing to chance” approach to achieving anything of significance

11.A strong business development culture

HIGH PERFORMANCE FIRM ATTRIBUTES


High performance firms are excellent in each of these six areas of discipline.

HPF AREAS OF DISCIPLINE

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LEADERSHIP•Vision/Strategy•Non-negotiable Performance/Behavior Standards•Partner Unity/Teamwork•No Tolerance for Known Weaknesses•Effective Firm Governance•Productive Partner Meetings•Succession Planning Process•Strong Culture•Partner Compensation Process 26

KEY COMPONENTS


FINANCIAL PERFORMANCE•Incentive Compensation Plans•Leveraged Staffing Mix•Commitment to Billable Hour Budgets•Bottom 50 Process•Payment Expectation Process•Business Value Agreements

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KEY COMPONENTS


PARTNER EFFECTIVENESS•Partner Evaluations •Partner Goal Setting•Partner Accountability•Optimizing Partner Horsepower•Knowledge Transfer Process•New Partner Training•Partners as Experts

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KEY COMPONENTS


TEAM DEVELOPMENT•Bench Strength Process•Meaningful Evaluations and Career Planning•Rapid Skill Development•Staff Mix•New Partner Selection Process•Connection and Commitment to Vision and Strategy•Recruiting HPF Candidates•Getting the Wrong People off the Firm Bus•Performance-based Comp

KEY COMPONENTS


CLIENT MANAGEMENT•Client Classification•Proactive Client Plans for A/B Clients•Continuous Improvement of Service Offerings•Raving Fans Strategy•Client Upgrading •Payment Expectation Process

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KEY COMPONENTS


BUSINESS DEVELOPMENT•Business Development Results Tracking•Business Development Culture•Rainmaker in Training Process•Optimizing Rainmakers•Client Screening and Acceptance•Niche Development Process•Cross Servicing Plan•RFP Process

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KEY COMPONENTS


There’s a tendency to see high performance firms only through a numbers lens.

There certainly are key measurements and metrics, including income per partner, net fees per partner, net fees per person, realization, utilization, etc.

WHAT IS A HIGH PERFORMANCE FIRM?

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There are likely as many non-tangibles as tangibles that factor into the qualifications of a high performance firm.

A high performance firm consistently functions at its highest level and possesses most (if not all) of the characteristics of a high performance firm.

WHAT IS A HIGH PERFORMANCE FIRM?

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If it’s true that most (perhaps all) firms want to get better, and if most firm leaders know what their firm needs to do to get better, why aren’t there more high performance firms in our profession?

WHY AREN’T MORE FIRMS HPF?


“The primary reason we do not work at areas in which we know we need to improve is that the rewards (and pleasures) are in the future; the disruption, discomfort and discipline needed to get there are immediate.”

David H. Maister

THE JOURNEY TO HPF ISN’T EASY


“The essential questions of strategy are these: Which of our habits are we really prepared to change, permanently and forever? What issues are we really ready to tackle?”

David H. Maister



“Discussing goals is stimulating, inspiring, and energizing. Discussing what disciplines you are prepared to accept to get to a goal feels tough, awkward, annoying, frightening and completely unpleasant.”

David H. Maister



WHAT DO HPF DO TO ACHIEVE AMAZING RESULTS?


1. ABANDON THE STRATEGY OF HOPE

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While hope is a wonderful virtue, it has to be among the worst strategies.

High performance firms recognize they must take a leave nothing to chance approach to all major endeavors.


2. SEE IT AS A JOURNEY

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These firms realize the most important thing is to stay on the path to continuous improvement. They don’t treat the journey like a 100 meter dash.

They fully expect the journey to take four to five years.


3. ACHIEVE LEVEL 8 PROCESSES

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One of the great killers of progress is a checklist mentality.

The best firms understand it’s about learning to do the right processes the right way.


4. FOLLOW THE ADVICE OF JIM

COLLINS

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Every firm that has successfully made the journey has followed the advice of Jim Collins:

1.Get the wrong people off the bus2.Get the right people on the bus3.Get the right people in the right seat on the bus


EXAMPLES OF HPF PROCESSES



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PARTNER EVALUATIONS


A significant focus of the partner evaluation process is to help partners see what they could do to become continually more valuable in and out of the firm.

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PARTNER EVALUATIONS


KEY PRINCIPLES

• The evaluation process needs to be a catalyst for positive change.

• The primary purpose of the evaluation process is to help partners and managers become high performing leaders.

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KEY PRINCIPLES

• The process should provide honest feedback regarding needed improvement.

• To encourage consistency, guidelines on the rating system need to be set and followed.

• Evaluators need to openly interact with each other rather than being allowed to complete the evaluation process while sitting at their desks.

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To be a high performing leader, an individual must excel in four of the following six areas and be good in the remaining two. A high performing leader is never a “one or two trick pony.”

Performance Areas

1. Financial Performance

2. Client Management

3. Business Development

4. Team Development

5. Personal Effectiveness

6. Leadership

HIGH PERFORMANCE DEFINED

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Performance Areas




4. Team Development

5. Partner Effectiveness

6. Leadership

PERFORMANCE AREAS AND SCALE

Measurement Scale Rating

World Class Performance 9 or 10

Excellent Performance 7 or 8

Good Performance 5 or 6

Marginal Performance 3 or 4

Poor Performance 1 or 2


PARTNER/MANAGER EVALUATION

Strengths

Areas for Improvement

Rating

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• Strong personal revenue production – always at or above budget

• Strong department revenue production – always at or above budget

• Strong realization on revenue time

• Timely and effective billing without reminders

• Proactive in collecting outstanding AR

• Good track record of submitting daily timesheets



Strengths


Rating

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• Proven ability to provide consistently great client service

• Proactive in reaching out to clients – a true trusted advisor

• Clients consistently rave about the quality of service they receive

• Proven ability to grow the average revenue per client

• Proven ability to transfer clients to others

• Willingness to remove D-level clients



• Consistently strong personal marketing efforts

• Above average personal marketing results

• Consistent ability to cross-sell firm services

• Commitment to firm (office) marketing efforts

• Consistent ability to generate additional revenue from existing clients

• Continually building strong relationships with the business community


Strengths


Rating

52


4. Team Development

• Effective delegation of work to team members

• Willingness to provide meaningful coaching and mentoring

• Proven ability to develop leaders within the firm

• Consistently high scores on bottom-up evaluations

• Proven ability to recruit and retain key team members

• Proven ability to provide effective career planning for subordinates


Strengths


Rating

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5. Personal Effectiveness

• Willingness to get outside personal comfort zone and use strengths to benefit the firm

• Proven ability to create and build skills each year

• Proven ability to be self-accountable to commitments

• Best effort in becoming continuously more valuable

• Strong technical expertise in a particular area or industry

• Willingness to live performance standards and be a good example to others


Strengths


Rating

54


6. Leadership

• Willingness to put the firm first

• Proven ability to speak up on important firm matters in a constructive way

• Ability to commit to firm/office decisions

• Willingness to set and accomplish stretch goals

• Ability to support fellow partners and discuss issues or concerns directly with them

• Commitment to the strategic direction of the firm


Strengths


Rating

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• Consider a three person evaluation team

• Each team member reviews pertinent data and prepares for the team meeting

• The managing partner’s role is to help ensure consistency in scoring/evaluation

• The team will assign a score to each area and brainstorm strengths and weaknesses

EVALUATION PROCESS

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FORM

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Partner Name: Conrad Simpson Ratings

Performance Category a b c Average Comments:

Financial Performance 8 8 7 7.67

Strengths

Strong office focus. Makes sure the metrics are moving in a positive direction. He's focused on profitability. He led the charge in ensuring the regional concept worked well between Helena and Butte. Sets the example on personal statistics as well - bills on time and has his time entered. Pays close attention to office statistics. On a firm-wide basis, he has developed a report to measure if offices are meeting improvement goals in the area of ABAS engagement results.

Opportunities for

Improvement

Address the top heavy staffing. Get the office in a position to deal with this issue. Are these people functioning at a high level and do we have room for all of them? Realization suffers periodically - usually new ABAS engagement. Should these items always be on his CM/EM list. Need to figure out how to make the slower months profitable.

Client Management 7 7 7 7.00Strengths

Has clients pretty well trained as to due dates. Clients turn things in on time. Perception is that he interacts well with clients. Has large clients, responsive to their needs and manages these very efficiently. He stays in tune with their needs and operates at a high level.

Opportunities for

Improvement

Review client list to see what he can transition to others. Free up time to serve at a higher level. Seems like he may be in a high level holding mold. Delete lower level clients because of his ability to work with larger clients at a much higher level.

Business Development 7 7 7 7.00

Strengths

He has done a good job obtaining new work in the current year. Involves other staff members in the meetings. Successful in obtaining Blacktail Credit Union and keeping a strong presence at Sierra East Bank. One of our best people to meet with a prospective client. Has the whole package to bring in new work. Focusing the office on a marketing culture. It's important and he is consistent in his approach.

Opportunities for

Improvement

Holding people accountable to business development expectations. Does he address the individuals who are not participating? Teach others how to do business development should be a focus since he is naturally good at it. Have we identified the individuals who should be leading the charge and ensuring they are doing this. Are we enforcing the client acceptance standards to ensure we are accepting only the right clients. We are hesitant to go establish ourselves in key market areas such as financial institutions. We let some people be barriers to growing various areas. Seems like we are more reactive to proposals than we are proactive



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PARTNER GOAL SETTING


PARTNER GOAL SETTING

Effective partner goal setting is the primary key to optimizing partner horsepower and creating a high performance firm.

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KEY GOAL SETTING PRINCIPLES

1. Goals should play to individual strengths

2. The meeting should be well-planned

3. The development of partner goals should be a collaborative effort

4. The partner goals should link in some way to the firm’s strategic plan

5. Performance standards are not goals

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6. The number of goals should be limited

7. Partners need to be set up for success by establishing ground level goals

8. There must be an established system of accountability

9. There should be some connection between goals and compensation

KEY GOAL SETTING PRINCIPLES

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GOAL SETTING BEST PRACTICES

1. A well-prepared meeting

2. Set ground-level goals

3. Focus on fewer goals

4. Break goals into trimesters

5. Calendar time for goals

6. Ensure accountability

7. Manage expectations

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One key to setting partners up for success with their goals is that the goal planning meeting is never a “shoot from the hip” meeting.

1. A WELL-PREPARED MEETING

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Annual partner goal setting meeting

1.Begin by reviewing the partner’s success with his/her goals in the year just ending.

2.Review with the partner his/her evaluation.

3.Ask the partner what he/she wants to earn in the coming year.

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4.Work with the partner to set five goals for the coming year – four goals that play to the partner’s strengths and one goal that helps him/her do damage control against a weakness.

5.Allocate 100% over the five goals to give proper weight to the goals. 65

Annual partner goal setting meeting


A successful goal is one that sets the partner up for success, not failure. Take the time to get the goal down from the 10,000-foot level to ground level.

2. SET GROUND-LEVEL GOALS

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In what ways are these goals up at the 10,000-foot level?

• Transfer $300,000 of work by

year-end

• Develop a new strategic

marketing plan

• Act as a mentor to Mark Peters

• Hire a new HR director

QUESTION

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• The goals should be stretch goals that play to a partner’s strengths

• Get each goal down to the task level (spend 50% of the time doing this)

• Identify necessary effort required to reach each goal

• Identify barriers to goal success

VITAL KEYS

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How do you know if a goal is a stretch goal?

What are the risks in setting stretch goals?

How do you make a subjective goal more measurable?

QUESTIONS

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Firms often have partners set too many goals.

Focus on fewer goals (4-6) and on the process needed to accomplish those goals in a timely and quality manner. The goals should tie to the firm’s strategic plan.

3. FOCUS ON FEWER GOALS

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Firm Vision

Strategic Endeavors to Reach the Firm Vision

Partner Goals to Address Strategic Endeavors

VISION STRATEGY GOALS

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Develop Future Leaders

Strategic Endeavors

Partner Goals

Establish Profitable Niches

Serve Only A Clients

Jason Allen – Coach Carol Davis to partner level in three years.

Brent Williams – Coach Darren Stevens to partner level in three years.

Paul Sepp – Transfer $300,000 of billings to free up time for banking niche.

Lori Garretts – Develop plan to take healthcare niche to Level 3.

Karen Scott – Develop a client screening process to identify A prospects.

Glen Case – Develop a process to remove D clients from the firm.

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Many firms routinely use one-year goal periods. While each goal needs a due date, you should consider quarterly or trimester goal periods.

4. BREAK GOALS INTO TRIMESTERS

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Partners need to commit to working on their goals a set number of hours each week/month. They should calendar due dates and time slots to work on specific tasks.

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5. CALENDAR TIME FOR GOALS


Establish a system of accountability that requires partners to record when each task has been completed. They should regularly report their progress to someone else.

6. ENSURE ACCOUNTABILITY

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We need to stop kidding ourselves into thinking that we will accomplish a goal or endeavor without the requisite effort.

“To reach a goal never before attained, you must do things you have never before done.”

Richard G. Scott

7. MANAGE EXPECTATIONS

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BENCH STRENGTH PROCESS

TEAM DEVELOPMENT•Bench Strength Process•Meaningful Evaluations and Career Planning•Rapid Skill Development•Staff Mix•New Partner Selection Process•Connection and Commitment to Vision and Strategy•Recruiting HPF Candidates•Getting the Wrong People off the Firm Bus•Performance-based Comp


“It became real obvious to us a long time ago that we weren’t having the kind of success we needed keeping the best and brightest and moving them into positions where they could be leaders in the firm. We determined we were not going to feed internal growth or grow by merger if we didn’t have a manufacturing plant to produce leaders.”

Bob Bunting

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1. Schedule a partner meeting or retreat

2. Ask the partners to write down the names of those individuals in the firm who they feel could be a partner in the next 5-7 years

3. Using a data projector, display the names for the group to discuss



4. Go through each name and ask the partners to ballpark how many years it should take this individual to become a partner

5. Reorder the names from closest to partner to furthest away

6. Add two columns labeled Strengths and Weaknesses to the right of each name



7. Openly discuss each individual on the list and identify their strengths and weaknesses

8. Identify who is best suited in the partner group to help coach each individual towards firm ownership

9. Establish a system of accountability to monitor and measure progress



POTENTIAL LEADERS

STRENGTHS WEAKNESSES

David T. (1-2)(Randy)

Experienced. Communicates well. Strong sense of client development. Strategic. Has magnetic personality. Unique skill set.

New to firm. Restless and impatient. Job hopper. Struggling to find a place in the firm. Potential for his defined market. Perhaps he is casting too wide a net.

Jenny K. (2-3)(Larry)

Loyalty. Farm girl. Hard worker. Home grown. Great business developer. Excellent interpersonal skills. Assertive. Persistent. Really cares about the firm. One of the best recruiters in the firm. Has a desire to become a partner in the firm.

Talks too loud. A bit caustic. Procrastinates. Needs to do a better job of delegation. Doesn’t see value in what she does. Apologetic about billing.

Jared K. (3)(Susan E.)

Attitude and energy level. Strong enthusiasm. Real team player. Experienced. Home grown. Would fit in well with the group. Has experienced BD success. Has desire to pursue BD. He wants to be a partner. Working for a hall of fame partner. Confidence.

Lack of attention to detail. Gaps in technical background. Not annuity based work. Needs more experience in meetings. Working for hall of fame partner.

Scott A. (3)(Byron)

Hard working. Diligent. Detail orientated. Attitude and energy level. Very creative. Home grown. Strong technical competence. Has experienced BD success.

Health. Has said he wants to pursue a law career. We don’t know what he wants to do. Has a poor sense of urgency on engagements. Part-time person. He may not know what he wants to do.

Jill P. (5)(Linda G.)

Smart. Technical skills. Good people skills. Staff respect him. Works well with all levels of people. Solid person. Clients like her.

Youth. Self confidence. Lack of experience. Hasn’t started a billing sheet. Has not brought in business.

Steven W. (5+)(Tim)

Hungry. Enthusiastic. Affable personality. Hard worker. Clients like him. Willing to take on responsibilities. Will take risks. Team player. Developed some new work.

Technical skills. May not be overly sharp. Needs clear focus. Has difficulty assessing a situation and making good judgments. Can miss the big picture. Has struggle thinking on his feet. He is currently compensated above is skill set.

BENCH STRENGTH WORKSHEET


• Your bench strength ratio is the number of individuals in the firm who can become partners in the next 5-7 years divided by the total number of partners in the firm

• If you currently have 20 partners in the firm and the bench strength exercise yields 15 names, you have a bench strength ratio of 75%.

KEY POINTS REGARDING THIS PROCESS


• Ideally, a firm would have a bench strength ratio between 100 and 200 percent



• When discussing strengths, think of those attributes or talents that help you envision this individual becoming a partner

• When discussing weaknesses, what things stand in the way of you voting this person into the partnership right now?



• A firm’s bench strength isn’t just the sum of those who hold the title of Supervisor, Manager or Senior Manager. The real measure of bench strength is those individuals who the partner group is confident have what it takes to become partners in the firm.



• When discussing possible individuals to add to the list, err on the side of inclusion

• You should openly discuss any existing managers and senior managers who did not make the bench strength list

• Beware of parity. We never treat anyone special when we treat everyone the same.

HIGH PERFORMANCE STRATEGIES


• This exercise helps us to identify any gaps in developing leaders for offices and departments throughout the firm

• This exercise also helps us see if we are falling into the trap of promoting only those individuals who are just like us



• Those on the bench strength list deserve the best coaches we have in the firm

• Coaches should meet with these rising stars regularly, be open and honest with them, and be appropriately demanding to move them out of their comfort zones

• Be cautious about letting individuals pick their own coaches



• Coaches should be willing to help rising stars overcome their weaknesses and help them set goals to play to their individual strengths



• Use one to two partner meetings each year to review progress with your bench strength development program

• All individuals in the bench strength program should receive the same evaluation given to partners

• Coaching should be a partner stretch goal



CLIENT MANAGEMENT•Client Classification•Proactive Client Plans for A/B Clients•Continuous Improvement of Service Offerings•Raving Fans Strategy•Client Upgrading •Payment Expectation Process

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RAVING FANS STRATEGY


• We have categorized all our clients into levels (A – D) based on characteristics and have developed a plan for each of these four client levels

• We have modified our scheduling process to place our very best people with our best opportunities (A-level clients)

EXCEPTIONAL CLIENT SERVICE VISION

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• We have organized client service teams for our best clients, providing more than one contact for each A- and B-level client

• Our clients are one of our best referral sources and a high percentage of new clients each year come from client referrals

• A good part of our growth each year comes from new projects with existing clients


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• We are effective at moving D-level clients out of the firm

• As a firm, we do a great job of cross-selling services and the partners are the firm’s #1 source of referrals

• We have a written service plan for every A-level client and many of our B-level clients


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• We know the top five issues all of our A- and B-level clients are dealing with

• We’re very good at identifying new services for our clients and we train our staff to recognize opportunities

• We introduce at least one new client service offering every 24 months


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• We have a written plan to convert B- and C-level clients to A- and B-level clients

• We only pursue potential clients that fit our A-level criteria

• Our partners have become proactive, forward thinking, trusted advisors (PFTTA)


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QUESTIONS AND ANSWERS

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Thank You!

[email protected]

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w hat h igh p erformance f irms d o t o a chieve a mazing r esults

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