insight magazine

Partner Perspectives | Fall 2017

The Risks of Alternative Facts

Many CPA firm partners are stretching the truth to their own detriment.
Marc Rosenberg, CPA President, The Rosenberg Associates

When asked to defend a clear distortion of fact, a straight-faced presidential advisor now infamously known by all said the distortions were “alternative facts,” inventing what’s become a ubiquitous term.

Oddly enough, I’ve witnessed many partners and their CPA firms creating their own alternative facts that, left unchecked, create substantial risks for the sustainability of their practices.

Here are some examples—and the hard truths:

Q: Are you active in practice development?

Alternative fact: “I’m constantly talking to clients and referral sources about new business opportunities.”

Truth: This is often a defensive response at best. Every partner knows that practice development is important, but many simply aren’t comfortable doing it. At the same time, they’re just as uncomfortable admitting that they don’t like “selling.” Like most things, if the attitude isn’t there, the results won’t be there either. My research shows that 80 percent of all partners at firms with revenues below $10 million do very little to bring in new business, but cite the alternative fact above to anyone who will ask or listen.

Q: How important is your staff?

Alternative fact: “They’re just as important as our clients; we couldn’t service our clients without them. Our partners are able to manage large client bases because the staff excels at doing a great job.”

Truth: Today, it’s trendy to say staff members are just as important as clients, but it’s probably the best example of firms failing to walk the talk. Most partners spend insufficient time helping staff learn and grow because they’re too busy with client production, lack the skills to mentor staff, and participate in partner comp systems with little or no reward for developing staff.

Q: Why are your billable hours so high?

Alternative fact(s): “If I do the work myself, it gets done quicker and better.” “When the work is done at my billing rate, we make more money.” “The firm does a lousy job of hiring good people and training them. So they’re of limited use to me.”

Truth(s): Many partners perform staff-level work because they like it; they don’t trust their staff; they’re not comfortable or skilled as delegators; or, the firm’s comp formula pays them handsomely for billable hours. In my experience, perhaps the worst transgression of any partner is taking a pass on the training and development of staff, which hinders their development and abilities to perform the work that should be delegated to them, preventing the firm’s successful execution of its succession plan.

Q: Does your firm have a succession plan?

Alternative fact: “Sure we do. It’s very simple: We want to stay independent and pass on the firm to new partners.”

Truth: That’s not a plan; that’s a dream. A succession plan is one of those things that firms can’t “say” they have unless they actually have it. Succession plans must be detailed in writing and include proactive systems and processes for developing future leaders, provide for effective mentoring of up-and-coming staff, and addresses the transition of roles. And most important, there must be accountability for implementing the plan’s action steps.

Q: Does your firm have a strategic plan?

Alternative fact: “Of course we do. We talk about it all the time.”

Truth: Talk is cheap. If you ask the partners and staff at most firms to cite the firm’s mission or vision, they couldn’t come close. To “have” a strategic plan, a firm needs to have a written plan document with SMART goals that support achievement of the firm’s vision, partner accountability, and rewards for those who achieve their goals. Without these, strategic planning is an alternative fact, not the truth.

The good news is that partners can be cured of their tendencies to cite alternative facts. Why are partners at many firms even allowed to cite alternative facts? The answer, unfortunately, is that they can— there are few consequences for partners performing and behaving in a manner that runs counter to the firm’s vision, policies, and practices. So the cure lies in two interrelated management practices: First, hold partners accountable for their performance and behavior. Second, the managing partner, perhaps with other members of the firm’s leadership, must coach and mentor the partners to live and breathe the firm’s core values and practices instead of abusing them.

Perennially cited by Inside Public Accounting as one of the 10 most recommended consultants in the country, Marc Rosenberg, CPA is a nationally renowned consultant, author, and speaker on CPA firm management, strategy, and partner issues. His 14 practice management books are available online, and Marc can be reached at 847-251-7100.

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