Golden Practices

CFO Turbulence: More SOX Fallout

Saw this post yesterday at Guerilla Marketing for Consultants and it caught my eye. I'd mentioned The Changing Roles of CFOs back in March of 2006, but when I saw this story again, I couldn't help but think of the startling parallel with defections in public accounting firms, as well.

CFOs Are Restless

CFOs are jumping ship in record numbers. According to a study by Liberium Research, in 2006, more than 2,300 CFOs of public, North American companies bailed out. That's a 23 percent rise from 2005.

The churn at the top is accompanied by a drop in average CFO tenure to roughly 30 months, which is a 50 percent decline from five years ago.

Consultants who can help their clients ease the CFO transition process, whether the CFO is coming or going, will likely find a receptive audience. And keep close tabs on your CFO relationships. Your former client may be facing new challenges in a new position.

This isn't fresh data, having been reported in 2006 and picked up liberally at the time on sites like CFO.com. When I poked around just now, I found this article on TreasuryandRisk.com who further reported that in the first quarter of 2007, defections slowed down, however:

Despite the slowdown, notes Liberum, the overall level of turnover among CFOs remains high.

While the disenchantment in the years following passage of Sarbanes-Oxley and other government regulatory burdens is well known, Liberum also attributes the continuing high numbers in turnover to growing competition, both domestically and internationally, and increasing complexity of business.

“We attribute much of the rise in CFO turnover to the burdensome aspects of Sarbanes-Oxley,” says Richard Jancovitz, senior vice president and director of research at Liberum Research. “The regulatory aspects of the job made it more difficult for them to take a strategic approach and emphasized the bean counter aspect of the role, especially at some of the midsize and smaller companies. But now I believe that the pendulum is swinging back so that CFOs are able once again to take a more strategic approach.”

Still, an entrepreneurial strain among CFOs has been driving some to hedge funds and private equity groups, where there is almost no regulation and lots of opportunities to turn strategies into profits.

Hmmmm, sounds like a big ol' case of boredom to me. Seems a desire for "interesting work" isn't just for Gen X and Gen Y, is it?

It amazes me how some CPA firms hail SOX as the best thing that ever happened to the profession. And others, including my colleagues at VeraSage Institute, are confident it is a death knell. Where do you stand?

Male/Female Partner Ratios

Interesting results in the new Accountancy Age Top 50 firm listing (UK):

On average women make up only 9.7% of partners within a firm and the number of female qualifieds has dropped year on year by two percentage points.

Interesting facts and perhaps the latter is a conseqence of the former? Or, perhaps not, suggests the only female managing partner in the Top 50, Linda Richardson of Morley and Scott:

I think it’s a matter of choice, when it comes down to it. It isn’t necessarily a matter of discrimination against a woman, it’s more of a choice that a woman makes in her life.

While UK average women ownership is roughly 9.7%, Mercer & Hole shows the highest woman-owned ratio at 24%. Kudos, then, to Mercer & Hole for being the sort of place where women WANT to stay on and become partners!

In the US, according to a 2006 study that included some 2600 participants, "Women now account for 19% of all firm partners, up from 12% a decade ago." The study credited quality of life initiatives as being responsible for this increase.

The study is known as 'A Decade of Changes in the Accounting Profession: Workforce Trends and Human Capital Practices' and was conducted under the aegis of the AICPA's Work/Life and Women's Initiatives Executive Committee.

This accounting/women study was referenced in comparison to the legal profession when an article hit the front page of the NY Times in March 2006 that caused a huge stir: "Up The Down Staircase: Why Do So Few Women Reach the Top of Big Law Firms?" 

Phyllis Weiss Haserot, of Practice Development Counsel, wrote "Up the Up Staircase: Follow the Lead of CPA Firms." She notes that the AICPA study shows: "A gender gap in the desire for partnership exists; 65% of male and 41% of female senior managers expressed a desired for partnership." This certainly corroborates the comments of Linda Richardson--but there's still a big gap between 9.7-19% who are partners and the 40% that aspire to be...

Phyllis also cites the study in that "Women are choosing smaller firms where their advancement is more pronounced" which makes sense.

Similarly, the Accountancy Age study comments stated that the smaller firms had significantly bolstered ethic minority partners ratios which the Big 4 dragged down. That the 10 largest firms only show only an 11.8% female partner ratio is definitely disappointing.

Getting to the heart of the matter, back in 2004, my friend Wendy Werner wrote an article "Where Have the Women Attorneys Gone." Wendy, like Phyllis in her article, is much more interested in fixing the disparity than in pointing it out. Both articles are very constructive.

I have to say that the really depressing news was in Wendy's article where she referenced:

The ABA Commission on Women also found that men earn twenty percent higher salaries than women, and are twice as likely to obtain a partnership than women with similar qualifications.

Hmmmm. Well, money isn't everything. Nowadays, time (as in non-working time) is a currency.

I say this is where smaller firms will win out. Smaller firms are simply more flexible. And this is a huge advantage for them that will play out in the next decade or so as we see talent flocking to the most flexible organizations. It's not just a generational thing, or a gender thing. It's what all of us want.

And it's what many people need as we tend to aging parents and raise children in a more dangerous society than the one in which we were raised. And we can do it so easily now with technology.

Recruiting Magnets: Firms of the Future

There's so much more to this story than the recruiting angle. This story is about the future of professional service firms.

But now that I have your attention let me tell you about Brendon Harrex, a senior fellow of VeraSage Institute. He's another innovator turning the professional firm business model upside down!

Brendon, at the age of 31, became the first Chief Value Officer (ever) in his 100-person accounting firm. This means HE was solely in charge of ALL pricing. Read more about this in Ron Baker's post Who's In Charge of Value in Your Firm? where he describes Brendon's role:

If you worked at Ward Wilson, a four-office, ten-partner, one-hundred team member firm in Invercargill, New Zealand, your answer would be Brendon Harrex, who was recently appointed Chief Value Officer, responsible for creating and capturing value across the entire firm. Brendon, at age 31, is the youngest partner in the firm, and is an amazing visionary, bringing leadership not only to his firm, but our entire profession.

Then, at age 33, Brendon was elected chairman of Ward Wilson--the firm had amazing vision. But it also had aging partners who, apparently, were more concerned with their retirement than with the posterity of the profession (my words, not Brendon's!).

Ward Wilson sold to a consolidator. Brendon's window of opportunity opened and he bought out one of WW's offices, the one he led before becoming Chairman. Below is the e-mail he shared with Ron Baker and me about this.

His brilliant ad (pictured, click to enlarge) says:

"If you have get up and go and know you should have got up and left before now, consider the Harrex Group."

Now Brendon has a WAITING LIST of future employees who WANT to come work for him. Read on, the emphasis is mine:

It's Official. Demand Outweighs Supply.

Some call this news story "good" but I call it unfortunate. Well, maybe the publicity is good...

Accounting made #1 on a list (in Am City Bizjournals) of most desired grads. It's official, accounting is hurting more than every other sector when it comes to needing qualified, interested people.

Demand officially outweighs supply. Dare I say the future we've worried about is here.

Bizjournals are reporting:

The number of new college grads hired by the service sector is expected to increase by 19.8 percent this year, based on National Association of Colleges and Employers' [NACE--a human-resources organization] findings.

Hot employment fields for grads

Employers are on the lookout this year for graduates holding the following bachelor's degrees, according to the NACE survey. They are listed in order of anticipated demand:

1. Accounting

2. Business administration and management

3. Computer science

4. Electrical engineering

5. Mechanical engineering

6. Information sciences and systems

7. Marketing and marketing management

8. Computer engineering

9. Civil engineering

10. Economics and finance

So, what can we do to make this profession more attractive? (to those in it as well as those thinking about it...)

We have people fleeing public accounting almost as fast as law (new lawyer defections are approx 85% in the first 5 years)--yet the law school pipelines are generating plenty more--not so with accountants.

And in accounting, we have people with 8, 9, 10 or more years of experience with ZERO desire to ever be owners in their firms.

Is it time to look at and try new ownership models? 
(Some of us think the traditional partnership model is broken.)

Explore a new "practice" equation, perhaps?
(My friend Ron Baker, author of Firm of the Future, explains the New and the Old Practice Equations, in this National Law Journal interview transcript.)

What will it take to open firms' eyes to the fact that it is time to do something other than let this become the next generation's problem. Let's work on improving the posterity of this profession!

3 Positive Ways to Impact Your Firm

In a heavy conversation the other day with a friend who is also in the consulting profession, we reflected on how lawyers and accountants, through their associations, continuing education, and even with their consultants, have belabored much of the same 'stuff' for more than 20 years.

They (you...we...) worry about, ponder, and hear recommendations about, the same 'ol issues and concerns--yet they still go unresolved. These are things like recruiting, retention, cross-selling, profitability, succession, new business development, etc.

Look at the topics of most conferences, seminars, and roundtables and you'll see the same subjects over and over and over. Year after year.

So, we wondered...

• are firms going to session after session on the same topic in hopes of hearing a recommendation that is "easier" or less painful?
• is it that most firm leaders don't want resolution enough to actually take action? (ah, maybe retirement isn't that far away...and it will be the next generation's problem to solve...)
• how much is just plain overwhelm?
• or, maybe, could it be that the problems discussed are symptoms and not the real illness?

We also agreed there are some big problems that don't get talked about much. They are pooh-poohed or  swept under the rug and avoided all together.

My friend asked, "What do you think could most positively impact firms in the next 10-20 years?"

Not an easy question (and my crystal ball is in the shop) but after thinking awhile, I offered these three things:

1. Morale
2. Forethought and Reflection
3. Differentiation

Though they look small, they are not.

MORALE has dramatic impact on customer service and longevity not to mention its benefit for personnel.

Job enjoyment, magnetizing the firm to attract more and better talent, and energy toward learning and excelling--the desire for people to go out of their way to impress each other--are all tremendous results of great morale.

Much of the delegation problem is trust and training based. Great morale creates the behaviors that increase trust. Don't underestimate this as a core goal for your firm and better!

Accountants Round Up

Today is a very special day!

My associate, Sue (over there in the picture), and I are really excited to "unveil" our new blog: Accountants Round Up (pun intended!) that is aggregated accounting industry news. Shortcut URL is accountantsroundup.com.

Here's the powerquote about why we've created this:

"Accountants Round Up is created to introduce more accountants to the blogosphere. Skeptics by nature, they’ve been slower to understand and utilize this technology than many other industries, including law. While this is probably a result of information overload, we aim to show them how much more quickly and easily they can stay abreast of news for their own industry," explains Michelle Golden, president and CEO of Golden Marketing, Inc.

"Our hope is to also demonstrate just how useful RSS technology is for professionals who want to stay attuned to the industry news of the clients whom they are privileged to serve—specialized knowledge being a core element of high level service."

We won't claim originality, though. We were clearly inspired by the wonderful job Nancy Stinson does over at the Stark County Law Library blog providing similar information for the legal profession. If I have no other blog reading time in my day, I am sure to skim Nancy's aggregated news to be sure I'm catching the best posts of the day. The Stark County Law Library blog has been going strong for many years.

Maybe one day, Accountants Round Up will be that same sort of "can't miss it" resource for CPAs and Chartered Accountants, too.

Hope you like the new blog. We're pretty excited about it. Sue manages it and does a really great job. She posts a few items a day. There's about 2 months' worth of content out there now, so please go check it out! And if you like it, it's available by RSS feed or email through FeedBlitz.

Happy reading!

(See our press release on the launch: Download accountants_round_up_launch_pr.pdf )

Seeking US-Based Non-Partner CPAs (or Future CPAs)

My friend and respected fellow consultant, Steve Erickson, is doing some excellent work on the recruiting and retention problems currently plaguing the accounting profession.

He is conducting important research--the results of which he will share with others who care about the future of the profession and want to do something to improve it!

If you are a CPA or a CPA candidate (non-partner) working in a public accounting practice in the US, please take this very quick and anonymous survey. Or, if you know of any, please forward this to them!

Note from Steve Erickson:

This survey has been designed to gain a better understanding of how staff feels about our profession. My intent is to get the broadest possible participation over the next 5 months with the hope that thousands of people will respond so the results will be truly meaningful.

The results should be available in January 2007 and will be posted on my website. Or, if you prefer, I will e-mail them to you. To receive the results by e-mail, please send an email to me with the subject line "Send 2006 Staff Survey Results."

I know many of us are currently working on the development of programs and approaches that will allow us to better recruit and retain quality people. These results will be shared with all that have this intent and interest to include the AICPA, State Societies, Associations, individual firms and consultants.

Please forward this e-mail to anyone you know that may be interested and encourage everyone to participate. It should just take a few minutes to complete. I sincerely appreciate your help with this most important endeavor.

Thank you!

Deadline for participation is December 31, 2006.

Take the Survey

Then spread the word!

And the Winner Is...

Anita C Goetz of Deming, Malone Livesay & Ostroff in Louisville Kentucky has won a free registration to the 2006 National Practice Summit to be held by the Virginia Society of CPAs.

And, Ben Martin tells me the Virginia Society has made this terrific offer:

Anyone registering from the Golden Practices blog is eligible for a 25% discount. If a firm pays for two people at the full price, the firm can send a third person for free. Just call (800) 341-8189 to take advantage of this offer.

So CONGRATULATIONS to Ms. Goetz and thanks to all who participated! Enjoy the conference!

BBD Takes Home an AAM-MAA for Website

We are ecstatic that our client just brought home an Association for Accounting Marketing Marketing Achievement Award (AAM-MAA).  (Please forgive the shameless self-promotion element of this news.)

Briggs Bunting & Dougherty's site won first place in the category of websites for firms under $15 million in revenues.

We love the site for its clean and crisp look and navigation and Erin McClafferty, the firm's marketing and recruiting director, did a fantastic job with the content (we just project managed and designed).

But perhaps the most amazing aspect of this site is that it went from concept to launch in only 60 days. With most firms averaging 9-18 months to complete their site, this is a very impressive timeline. Erin made it possible through her decisiveness and trusting her instincts.

Congratulations BBD, we are proud to be associated with your recognition! There was some pretty tough competition...

See all 2006 AAM-MAA winners.

Advice for Professionals Considering a Blog

A lot of CPAs and lawyers ask me if they should blog. Why do their competitors blog? Is blogging a silly trend they can ignore until it goes away?

Not so oddly (for people familiar with strategic marketers), my advice is seldom the same from one firm, or one person, to the next. But here are some basic considerations...

For professionals who want "off the hook" where blogging is concerned, here's a list of who should NOT blog:

1. Blogging is not for the professional wanting to be "uninvolved" with his or her marketplace.
2. It is not for the person who doesn't stay informed on at least one particular area of practice (be it a specialty or industry)
3. It's not for someone who's uncomfortable stating a distinct opinion or offering analytical perspective
4. It's not for a professional who only writes in "technical-eze"
5. Blogging is not for someone who won't spend an hour or two a week (at minimum) working on posts.

Blogs do accomplish some things that no other current method of marketing or communications can.

1. A blog gives readers insight into the author's personality and demeanor
2. They can demonstrate actual expertise whereas websites usually claim it but fail to substantiate it
3. They help people and show others what is good about your profession and why you add value
4. Good blogs show young professionals that your firm is "with it" (bad ones, just like bad websites, show potential hires that you're NOT with it)
5. Blogs can lead to publicity, interviews and writing/speaking opportunities for you and your firm
6. They open the door for conversations and relationships with other bloggers, colleagues, and prospects who already know you somewhat through your blog and decide they WANT to know more!

If you are still thinking about blogging, there is some great advice on Seth Godin's blog where he shares over 50 tips on building blog traffic. Some of his tips are contradictory demonstrating that different strategies work for different bloggers for different reasons. My favorite tips are:

• Learn enough to become the expert in your field.
• Be among the first with a great blog on your topic, then encourage others to blog on the same topic.
• Share your expertise generously so people recognize it and depend on you.
• Announce news.
• Do email interviews with the well-known.
• Point to useful but little-known resources.
• Don't promote yourself and your business or your books or your projects at the expense of the reader's attention.
• Don't be boring.
• Write stuff that people want to read and share.

My addition to Seth's list: Remember, it's always about what matters to the AUDIENCE!

Under-delegation Hurts Retention, Profitability and Marketing

Professionals understand delegation is beneficial, yet few are compelled to do enough of it. Let's see if some of the thoughts below help create more movement toward delegation behaviors.

In my previous post entitled "The Profitability Problem" I touched on several factors that deserve much deeper discussion. Leverage aka "delegation" is one.

In a comment to that post, David Maister suggested that I skated over the topic of delegation (or leverage)--that I "gave up" and suggested firms just won't get better at this. And he is right, it deserves deeper discussion. I promptly sketched out some thoughts right then and there, but I didn't finish constructing the post until I saw David's post today (which I cite below).

My thoughts fall into 3 major categories:

1. delegation & profitability
2. delegation & marketing, and
3. delegation & personnel retention

How Many Non-Professionals in Your Firm?

An interesting post on the Professional Marketing Blog talks about how, in law firms, there are the lawyers and then there is "everybody else."

I disagree with Larry Bodine, though, who says:

No other profession makes this derogatory distinction. Accounting firms don't have "non-accountants" -- they call them "team members." Same goes for consulting, architectural and engineering firms.

I find that in CPA firms, there is what may be an even more derogatory distinction. Some firms do actually use the term "team members" which was significantly popularized by the good folks of Results Accountants' Systems in their famous Bootcamps.

But many CPA firms refer to their accountants as "professionals" and openly refer to everyone else as "non-professionals."

Pretty unfortunate to that the CPAs are, apparently, the only professionals in those offices...

If your firm is still one of those that uses the "non-professionals" label, please replace it with something (like "non-accountant"?) that appropriately credits everyone in your professional service firm as a "professional" of one sort or another.

Marketing Salaries Reflecting ROI

An eyebrow raising post today on Larry Bodine's blog posits that the salaries of law firm marketers are dwarfing firm administrators' salaries.

Bodine cites two surveys that indicate median administrator salaries are in the $70-80K range and he references numerous legal marketing job ads offering $100K+ (and some in the over $400K range). The median salaries aren't quite that high, but if you visit his other site's job openings you will, indeed, find many jobs for senior marketers and even writers, editors, and knowledge managers in the over $80K range.

Bodine says:

This is GREAT news for the marketers, because it means they've worked their way out of the "overhead" category in law firms.  The marketers are able to say, "If you invest $5 with my plan, you'll get $20 back.  I can prove return on investment." 

About different roles earning different pay, I'm reminded of a wonderful bit of advice shared awhile back by Julie Lindy, editor of INSIDE Public Accounting, on the Assoc. of Accounting Marketing discussion list. She said:

Nobody is paid what they are worth. They are paid what their *jobs* are worth. As human beings, an NFL player is not worth more than a 5th grade teacher, but in our culture, the NFL player's job is valued more, so therefore, he is paid more....You can't take salary personally: It's all about what the job is worth to the person writing the checks.

I agree entirely with Ms. Lindy.

Beside the law firm administrators discussed in Bodine's post, there's another group paying close attention to the legal marketers' escalating salaries...CPA firm marketers.

I cannot help but wonder what most accounting marketers must be thinking when they see the salaries their legal counterparts are earning. The median salaries remain significantly lower (at least $20K behind) in the accounting industry. Actually, I have a pretty good idea of what accounting marketers are thinking.

Something to the effect of: "Can it be that much harder to work with lawyers?"

Uh, well, yes and no. Totally depends on the firm, the culture, and the support marketing, in general, has within the firm. Overall, lawyers aren't that much different from CPAs. In some ways they are more open about what they think and, ultimately, more open-minded about trying new things. In other ways, they are far more trying because they challenge everything (and for fun, I think!).

So...are the disparities in salary reasonable?

It's Not Busy Season, It's "Prime Time"

In accounting firms, the term "busy season" is synonymous with the period of January to mid-April.

These are the months when professionals talk to clients, referral sources, friends, family, and sometimes just about anybody who will listen, about being swamped, exhausted and "really crazy" right now.

Some professionals are good about not complaining, but you may not know because you simply cannot reach them or get them to call or e-mail you back!

That the firm -- or at least the individual -- is at or above maximum capacity** is a dangerous message to send.

There's a difference between healthy-busy and out-of-control busy. I'm talking about the latter. When winter pallor, dark circles under the eyes, and a shortage of cheerfulness accompany the complaints or lack of responsiveness, it's a real marketing problem.

Clients think, "wow, hope they will find time to take care of me..." or, "hope they don't make a mistake due to haste..."  Worse, they may also decide, "I'm not going to refer anyone because then they really won't have time for me."

Another problem with voicing the complaint about the excessive hours for these 3-and-a-half months is that the business owners they are talking to work excessive hours, too, but do so all year around and have little sympathy for their counterparts who enjoy much slower hours through the summer months.

For many years, marketers have worked hard to encourage their CPAs to remember that, while facing their most intense workload in these months, they simultaneously face their peak opportunity to interact with their clients and remind them of the many ways they can assist them.

CPA firm marketers dislike the term "busy season" because it sets the wrong tone--even when it's just used internally. It reinforces anti-marketing mentality at the very worst time.

But Goodman & Co.'s marketer, Dan McComas, says his firm coined the term "Prime Time" to describe these active months. The firm held an internal contest to come up with a less off-putting term than "busy season."

Their winning term is excellent: Prime Time is a simple yet solid reminder that people must perform at their very best to stay accessible, friendly, and helpful.

Prime Time is when you and your firm are most visible of all. Don't use it to tell the world you are over-worked and have no room left to serve clients. As they say, "never let 'em see you sweat."

The smartest firms use Prime Time to demonstrate that their service and attitude is so great, clients & referral sources should want to refer all their associates.

**Most firms ARE seriously above capacity regarding smaller tax return clients and far too many still do returns at prices lower than H&R Block. Firms I talk to know some of these clients should be shed, but are reluctant to do anything about it. Meanwhile, firms wear employees down, weaken morale, and observe "turnover" season just after April 15.

This observer recommends there are important choices to be made about which work is most important and which work firms cannot afford to keep if employee retention problems are to be corrected in firms.

Benchmarking and Lagging Indicators

A lot of people land on my blog searching for information on CPA firm partner salaries and other firm management metrics.

I'm not a big fan of benchmarking one firm against another and spending undue time studying lagging indicators. I believe, instead, that there is significant benefit of benchmarking the firm against itself and it's goals, over time.

That being said, for those seeking metrics by geography, firm size, etc., the AICPA's PCPS section has made its 2003 and 2004 MAP Survey results available to anyone (perhaps for just a limited time).

The reports can be viewed here: http://pcps.aicpa.org/Resources/National+MAP+Survey/PCPS+Complimentary+Results.htm

When viewing these reports, just remember that reviewing lagging indicators won't help you improve. Also remember that the firms you are comparing yourself against are all chasing the same types of improvements you are chasing.

Focus on setting goals and measuring wisely chosen leading indicators if you want to change your firm.  (Hint: chargeable hour goals are NOT leading indicators.)

Measure today against tomorrow. I know it goes against accounting principles, but don't worry about prior years...

Blogging and the Professions, continued

Related to my post yesterday about blogging changing law review publishing and legal information exchange overall, there is an excellent post today from Tax Law Prof. James Maule entitled: In Defense of Law Blogging.

Accountants, too, should be reading this. The same principles hold true in your profession. The changes will come.

By the way, accountants, if you aren't regularly reading Mauled Again (the blog above) you should be!

The Profitability Problem

This is my 100th blog post (Is that all?? Feels like a lot more than that!). As a milestone post, I decided this has to be an extra thoughtful one--I hope you'll forgive the length and find it thought-provoking.

What subject is of greater concern to firms than profitability?

I’ve read reports of high-profile consultants recently predicting record high compensation for partners in 2006 and beyond. I’m not sure on which data the forecasts are based, but I foresee the opposite. Here's why:

Employee costs are rising significantly. Firms are reacting, albeit slowly, to the continuing large numbers of non-partner professionals fleeing public accounting and law firms in search of less pressure, more stimulating work, and feeling valued by more enlightened employers. Promotions (some premature) and raises are used to keep key people when talent is at a premium.

For the past 5+ years, we’ve watched with amazement as law associate starting salaries skyrocket, now running between $100-145K/year and more in some top firms in top and even 2nd tier markets.

In return for those salaries, associates are agreeing to meet the demands of unhealthily high billable hour requirements. Many agree to these conditions because they begin their careers with average law school debt of $75K for top schools, and $45K for public universities. The associates hope they will be able to aggressively reduce this debt and pick up some valuable experience along the way.

The associates are probably unaware they walk into the firm already on the receiving end of some resentment from the senior partners who happen to know a few things:

• It wasn’t very long ago that they were making $150K
• These kids have it “a lot easier than we did” and they’re going to make them work hard for their money
• They’ll have a lot of trouble billing the new associate out at the standard mark-up hourly rate because clients won’t pay that much for the limited experience of a new associate. This means more write-offs, or less desire to use these expensive new associates (hmmm, think there will be even less delegation to these new associates when more experienced people can do the work more "efficiently"? That's a bad enough problem already! And how will they ever learn if they don't do the work -- see the catch 22?)
• There will be a lot less money left over for partners once they have raised the pay of all their other associates to get everybody back in-line, sometimes bringing their 4 or 5 year people up tens of thousands to put them appropriately above the new starting rates.

Smaller law firms – those nowhere near this pay amount – are not exempt from these problems. They face the exact same dilemma, just at lower dollar amounts. Proportionately, the impact to profitability is about the same.

CPA firms are some years behind law firms in dealing with this pay issue because new CPAs are nowhere near these starting salaries. But with the recent change in CPA exam requirements necessitating a fifth year in school, accounting grads are now presenting themselves with Masters Degrees meriting higher pay.

Fewer graduates mean everyone is fighting over those who are at all appealing. Rare, also, are qualified lateral hires since so many people are defecting public accounting, more often hired by clients of the firm than recruited by other firms. Headhunters are more brazen than ever.

As mid-sized law firms have been experiencing for years, CPAs are starting to feel the pinch to their profits of the domino effect that occurs when your new hires come in at the pay of your more experienced people. Raising everyone across the board is costly. Add to that the skyrocketing cost of health insurance and other fringes and incentives needed to compete for talent in the aggressive talent marketplace and, well, we have a big hit to the bottom line.

The business of predictions is a dangerous one. But I'm going on record as saying: the cost of the knowledge worker in CPA firms is going to continue to rise rapidly. I believe it is reasonable to expect salaries for mid- to high-level non-partners to double in the next 5 years. Someone receiving $50-60 now, would be commanding $100+. Say I'm wrong and they don't go up quite this much. They're still going to go up a lot.

Though salaries will never grow as much in smaller firms, firms will have to pay more in order to keep their CPAs. Remember, firms aren’t competing so much with each other for this talent pool as they are competing with private industry and other, more lucrative, professions, such as law, for instance.

That’s just the employee component. Then there is the growing cost of marketing and the new HR/marketing cost component for recruiting.

So, with all these costs going up, where is all this profitability – that these other consultants are projecting to turn into partner compensation – supposed to come from?

I don’t see it coming from significant new business development for two reasons:

Hire a Marketer and Substitute Your Judgement for Theirs. Not.

Chicago attorney Patrick Lamb says in his blog that he has been enjoying these discussions on branding--a multi-blog thread initiated by Dan Hull of What About Clients and added to by Tom Kane and me.

In his post, Pat expresses an observation about attorneys that also holds true for accountants:

As a profession, we are conservative, change resistant, risk averse and incredibly unimaginative.  Sheep-like in terms of how we follow each other....

Here's one way these characteristics manifest themselves.  Hire a gifted marketing director, and then try to substitute the lawyer's [sub: accountant's] judgment for the marketing director's.  Because we lawyers know so much.

In the past 12 years, I have seen so many truly gifted marketers suppressed, overridden, and ultimately rendered ineffective because of the accountants or lawyers they work for. Ask any marketer or consultant to the professions and they can name at least several.

As a lawyer or accountant (or consultant), equate it to a customer who refuses again and again to heed your advice. Then imagine that same customer coming to you repeatedly to justify the value you bring to the relationship demanding ROI and results. Yet they haven't taken most of your advice.

The frustration you experience in that situation is only a taste of what a marketer you've hired feels because you are their ONLY customer. 

That's why marketers leave firms in a matter of a couple of years. And that's why results aren't half as amazing as they'd be if you'd listen to your marketer and act on a lot more of their advice.

Thanks, Pat, for saying what you said publicly. I know you think very highly of your firm's gifted marketer and, for that, both you and she are very fortunate and you are both much better positioned for success!

CPA Firm Marketing Salaries On The Rise (Finally!)

Julie Lindy, Editor of INSIDE Public Accounting, has shared some marketing salary statistics within the accounting profession. With her permission, I'm posting them here:

CPA Firm Marketing Director Average Salary (by region)

Atlantic/SE region (AL, DE, FL, GA, KY, LA, MD, MS, NC, SC, TN, VA, WV): $76,240
Great Lakes region (IL, IN, MI, OH, WI): $72,936
Northeast region (CT, ME, MA, NH, NJ, NY, PA, RI, VT): $96,665
Plains & SW region (AR, IA, MN, MO, NE, ND, OK, SD, TX): $69,986
West region (AK, CA, CO, HI, ID, MT, NV, NM, OR, UT, WA, WY): $83,588

CPA Firm Marketing Director Average Salary (other demographics in IPA's study)
IPA Best of the Best Firms: $97,063
100 Largest Non-National Firms in the U.S.: $93,053
All Firms Participating in IPA's 2005 Annual Analysis of Firms: $83,242

CPA Firm Marketing Coordinator Average Salary (by region)

Atlantic/SE region (AL, DE, FL, GA, KY, LA, MD, MS, NC, SC, TN, VA, WV): $45,939
Great Lakes region (IL, IN, MI, OH, WI): $44,828
Northeast region (CT, ME, MA, NH, NJ, NY, PA, RI, VT): $52,039
Plains & SW region (AR, IA, MN, MO, NE, ND, OK, SD, TX): $42,240
West region (AK, CA, CO, HI, ID, MT, NV, NM, OR, UT, WA, WY): $47,812

CPA Firm Marketing Coordinator Average Salary (other demographics in IPA's study)

Marketing Coordinator salary at IPA's "Best of the Best" firms: $55,431
Avg. Marketing Coordinator salary at the nation's 100 largest non-national firms: $51,349
Avg. Marketing Coordinator salary at all firms participating in IPA's survey: $47,243

I encourage you to obtain IPA's full Benchmarking Report if you are interested on comparing "average" firms with "best of the best" firms (those outstanding in profitability and performance). It is not a coincidence that the most outstanding firms are those also investing more in marketing talent...

Trends in Naming Firms: Deviating From Partner Names

As one in favor of being direct, I appreciate a business name that concisely articulates the purpose of the business. Maybe that's why I liked the name this CPA firm recently chose:

K2S - Knowledge to Solutions

In professional firm circles, discussion arises frequently about what to do with long firm names, especially those consisting of long-retired partners.

According to the press release about their name choice, the former McMahon, O'Polka, Guelcher and Associates said:

"Not only does this new name put the focus on what their business really is, it also has a degree of permanence to it. It will survive regardless of the names of the people who happen to be the owners now or in the future."

Can't Miss BlawgThink!

What major marketing-meets-tech event is going on Nov 11 and 12 in Chicago?

LexThink! is holding it's 2nd [un]conference event where great minds and great bloggers are interacting at the unique Catalyst Ranch. The purpose? Taking great ideas and experiences and bringing them to the next level.

Though it's called "bLAWg" think, it's not all about law. It so happens, though, that lawyers are pretty far ahead of accountants on recognizing the value of blogging on many fronts. Only a handful of accountants have figured this out. If you want a taste of why blogging is becoming an important business development tool demostrating credibility and commitment to a service area or industry (just one of blogging's advantages), you just might want to e-mail Matt Homann for an invitation!

Go here for their Day One Schedule (see marketing track!): http://lexthinkinc.squarespace.com/schedule/

And here's Day Two (the [un]conference part): http://lexthinkinc.squarespace.com/schedule-2/

See you there!!

The IRS Circular 230 Disclosure

You've probably included this or a similar message on all your outbound e-mails:

IRS CIRCULAR 230 NOTICE: To the extent that this message or any attachment concerns tax matters, it is not intended to be used and cannot be used by a taxpayer for the purpose of avoiding penalties that may be imposed by law.

As disclaimers have a tendency to do, this particular disclaimer probably causes more confusion than not among your customers.

A typical customer might think, "I hire you to be my adviser and ensure I comply with the law so that I don't have undue penalties--so why are you disqualifying your own advice??"

So why aren't more firms providing full explanations on their websites to clarify the purpose of Circular 230 and clear up confusion?

You could link from your e-mail disclaimer to a page that starts with "This is an explanation of how our correspondence with you will be affected by new IRS regulations governing tax practitioners."

Heck, in addition to keeping your customers informed and clearing up a growing area of confusion, it might even help bring more traffic to your website.

Marketing Salaries in CPA Firms

To follow on yesterday's post about law marketing salaries compared to accounting marketing salaries, below are the figures from Association for Accounting Marketing's 2004 member survey (released Jan 05). The full survey is a member benefit but can also be purchased from AAM by contacting them via their website.

2003 total annual compensation (U.S. dollars)

3%	Under $30,000
22%	$30,000 to $44,999
31%	$45,000 to $59,999
21%	$60,000 to $74,999
6%	$75,000 to $89,999
8%	$90,000 to $109,999
2%	$110,000 to $129,999
3%	$130,000 to $149,999
4%	$150,000 or more

The largest portion of survey respondents (31%) earned from $45,000 to $59,999 in 2003, followed by twenty-two percent who earned $30,000 to $44,999 and twenty-one percent who earned $60,000 to $74,999. The remaining twenty-six percent of the survey sample is dispersed among the remaining salary levels.

To put these figures into context, here are the survey demographics:

222 respondents.

Their firm size breakdown is:

2%	Big four
10%	National ($200.1 to $2000)
12%	Large Regional ($70.1 to $200)
21%	Midsize Regional ($20.1 to $70)
20%	Small Regional ($10 to $20)
35%	Local (Less than $10 million)

Respondent job title:

25%	Marketing department of one (non-partner)
5%	Marketing staff (no reports)
9%	Marketing mid-level (coordinator/have reports)
29%	Marketing leader/manager (department lead)
3%	Marketing professional with firm ownership
4%	Sales/Business Development professional
23%	Chief Marketing and Business Development Office/Marketing and Business Development Director
2%	Technical partner/owner with marketing/business development oversight

Marketing Salaries in Law Firms--Why is the Accounting Industry So Far Behind??

This just in...according to the new Legal Marketing Association "Roles and Compensation Survey" that will be released July 22,

"Marketers with the word "Chief" in their title earn an average of $225,208 and a median (half are above/blow) of $200,000, according to statistics released today.  The compensation for marketers with "Director" in their title averaged $111,696 in salary and a median of $99,000.

The average annual base salary for 51% of all law firm marketers combined is less than $75,000; however 26% receive $100,000 or more.  At the same time 17% of marketers said they received no annual bonus; 51% received a bonus of only $5,000 or less."

Larry Bodine broke the news on his blog today. He also reports the findings of recruiter Bill Crooks:

Crooks said that in his placement work, he found the following salaries being paid:

• Marketing Assistants (e.g., who do data entry work) at a Top 200 firm are paid $30K to $40K.
• Marketing Coordinators are paid from $40K to $70K in large cities like New York and DC.
• Marketing Managers earn $75K to $110K depending on their duties.
• Practice Group Managers $80K to $180K.
• In the future the higher salaries will be in business development, not marketing.

Some great tips from contributors mentioned in Larry's story:

• New marketers should make certain that there is a mechanism in place for marketers to get sales reports from partners and feedback on sales calls.  Otherwise it's difficult for the marketer to demonstrate ROI to the firm.
• Make sure that the partners know what you are doing for them.  "Provide a report on what kind of activities you're doing on their behalf," she said.
• Marketers must provide competitive intelligence on salaries. 
• Elizabeth Lampert credits the LawMarketing Listserve and the LawMarketing Portal Jobs Page for requiring employers to state the salary in a job posting. 

Maybe accounting marketing should be more up-front about salaries, too. The openness is doing wonders for their legal counterparts.

The spread between law and accounting firm salaries seemed much smaller only five years ago when Association for Accounting Marketing did a comparison between its compensation survey and that of Legal Marketing Association. At that time, law firms led accounting by about $30,000 in the average marketing salary.

Straight From the Horses' Mouths: What A-Level Clients Like and Don't Like About Their CPAs

Last week at Association for Accounting Marketing's Annual Summit in Orlando, Mike Platt moderated a panel of CEOs of companies that most small, medium or large regional CPA firms would be delighted to call clients.

CEO panelists were: Ron Kaplan of Action Products International Inc. in FL, Karen Hough of ImprovEdge in OH, Dorthea Wynn of the Orlando Heart Center, and Tony Wood of The Leadership Coalition of FL & NY. They each provided responses to Platt's questions and to a few questions from the audience. Here is a collection, by general topic, of some of their remarks:

Service Basics

• What I want is a professional team on my side.
• Be there when we need you. A great example is when my accountant was on vacation but was able to be reached and even came in, off the beach in his shorts, to the attorney's office to help us finalize a critical deal.
• Be proactive and help us be proactive--don't wait until the very last minute for things like year-end tax planning.
• I feel like my firm sees me as a "nobody." I just can't get good service. My firm checks in with my CFO who thinks things are fine but I'm going to fire my firm in the next few weeks because they aren't meeting MY needs. I may go back to a sole practitioner.
• I don't really have anything to say when you ask if my firm has ever done anything "above and beyond."
• I don't appreciate when a firm acts like they can be all things to all people.
• It offends me when an accountant tries to come across as a final authority--as the governing body.
• Collaborate WITH us. Talk to us and tell us what you're doing. Our accountant recodes/reclassifies things, redoes budgets, etc, and it seems duplicative. They should be teaching us how to do it better so they don't have to re-do it.
• Ultimately, know my business and me personally.
• Don't answer a question with "it depends." Instead, put yourself in my shoes and answer the question!
• I know I'm under-served because my financial advisor keeps pointing out certain needs and the services I should be getting. I may be small but I'll pay for quality.
• Continuity of staff is pretty important. We don't want different people every year.
• The devil is in the details. Remember that I don't know what you know.

Billing

• Don't nickel and dime us with a bill for $100 or so.
• Even though I know I'm being charged $100-200 for a single phone call, I don't really want to see it broken out on the bill!
• And, yes, it bugs us when our attorneys bill for phone calls, too. But one panelist piped in with: "My attorney doesn't!"
• I'd rather have a "package" price then one based on hours.
• I love to have an idea, say within 10% or so, of what my monthly bills will be.
• Don't dare say to me "our time is our inventory"! All of our time is our inventory, too. It is our only limiting factor. We are just as busy as you and our time is worth as much as yours. Sometimes you don't act like you realize this. (examples under "Consideration" below)

Consideration

• When introduced to someone else in the firm who would be handling a matter, I was handed off in a poor way.
• I know a lot of people work on my account, and that's okay, but if I work with multiple people, you've got to communicate with each other. And I still want a single, primary point-person.
• I end up spending a lot of time tracking down who I'm supposed to talk to for what and people will actually tell me "I can't help you with that...that is someone else...you'll have to call them."
• Stop sending me stuff that doesn't apply to me. Be selective about what you send. Pinpoint the information to my concerns.
• Before I care to know how much my accountant knows, I need to know how much they care.

Adding Value

• The firm has never yet put me in front of another client with whom my business has something in common. I cannot figure out why...
• Make my life easier.
• Offer to be on my board--don't charge for the time...it's an opportunity for you!
• Know our idiosyncrasies.

Cross-selling

• It flabbergasts me that no one has called to offer me another service -- even as my business is changing/growing so rapidly.
• I had no idea of the other services our CPA firm offers. I had to ask my CFO who used to work for the firm so that I could answer questions today about other services I might be interested in. I thought it was neat that they offer to help interview and screen financial people I would hire.
• I saw a full list of services when I interviewed the firm, but I've forgotten what they provide.
• I'd like, on a yearly basis, to be refreshed of the firm's services and which might be applicable.
• I much rather have other services presented to me, personally, rather than by mail. It's best when you talk to me in person. Maybe a yearly meeting where we talk about what's going on for the next year, touch base, share updates and tell me about additional services.

Measuring Satisfaction

• How can you measure my satisfaction? If I'm happy, I refer a LOT of business.
• Another panelist agrees this is the best way to know if you are doing a good job.
• The occasional survey is okay, but I may be too busy to fill it out.
• An in-person survey is good.
• Come see me and ask me.

How Marketers Can Help Solidify Our Relationship With the Firm

• I really liked the packet given to me when I first met with the firm. I looked at it carefully. Hiring my accountant was a big decision for me.
• Don't market to me based on fear.
• I like to feel like I'm getting a competitive deal.
• I care about the value of the service to my business, NOT "Rate x Hours." Show me where you're adding value.
• Market inside your firm, teach younger people, make them more confident and more collaborative.
• There are givers and takers. Be a giver.
• Know your client-base and market to like clients. Tell me how you help businesses that are similar to mine.
• Trust the power of word-of-mouth marketing. I refer if I'm happy--I give good word of mouth.
• Understand the value of communication and personalized relationships. If your people cannot communicate well internally, how can you do it well outside?