Management and Leadership in a CPA Firm – Part 2

This column picks up where I left off in my last column, covering how attitudes, misconceptions and bad habits get in the way of our learning to be better managers. Here is a recap of some of these attitudes and practices from the last article, together with some other common perceptions we find:

• Nobody helped me, so if you are not good enough to figure it out like I was, maybe you don’t belong here, or
• It will take more of my time to walk them through what I want them to do than the time it takes to just do it myself, or
• It is such a competitive environment and we are a small firm with limited resources, so any money we spend on training our people has a good chance of being wasted because some of our people leave us right about the time the training starts to pay off, or
• The halo effect, which causes us to “dump” more often than delegate simply because the person we are handing the work off to is not capable of flying solo and doing it in the first place, or
• When we do get around to directing people, we often default to a drill sergeant type of style because we assume this is the only leadership style that will motivate our people. Then, after treating them like they are incompetent, we wonder why no one steps up and takes ownership and responsibility for the work.

All of these are examples of poor “internal” leadership (defined in our last article) and we are going to spend the rest of this article reviewing why our attitudes and perspectives are causing us as management to do the wrong things at the wrong times which culminate in our creating a terrible culture for sustaining the business over the long term.

First of all, we want to clarify that it takes NO skill to motivate an overachiever to perform. They are so hungry to please you and be recognized by you that about the only talent needed to focus these people is the equivalent of “throwing steak into the lion’s den.” The overachievers will pounce on the meat and fight with any other contender to prove that they are best, fastest and strongest. However, it does take skill to manage them.

What about the rest of your people? And what about you and your skills as a leader? If you can only make yourself better, faster and stronger, your value to your organization is limited because there is no leverage. Once all of your time is committed, your company’s only solution to get more done is to go out and hire another “you.” The chance of hiring someone already fully capable with the skills and experience needed that will fit into your culture is small. If you just go by resumes, finding such talent seems fairly reasonable. But practical experience says that there is almost always a disconnect between “what people say they can do” and “what they can actually do.”

And even if a person can live up to their exact press release, which is rare, they usually come with other baggage l such as the unpleasant fact that they don’t play well with others, or they are IQ (intellectual quotient) strong and EQ (emotional quotient or intelligence) weak. The point is: whether you hire someone from the outside, or you consider someone from your internal candidate pool, you can’t run or hide from your responsibility as management to develop others. Improving your people is your secret weapon reinforcing your future success. So it is no wonder that a primary role and responsibility of good managerial leadership includes developing talent within an organization. As we often say, “the true value of a leader comes from his/her ability to create leverage through consistently making others better, faster and stronger, not just themselves!”

Now, let’s contrast this approach with some of the comments made at the beginning of this article:

Nobody Helped Me

The “Nobody Helped Me” syndrome is common among some Baby Boomers and in many Eat What You Kill firms. The leaders in these firms typically are strong entrepreneurs, who are self-starters with high levels of initiative and the drive to achieve. This often results in a Darwinian corporate culture where only the strong survive. We’ve seen plenty of examples where partners of a firm will make a call, based on a brief interaction with a new hire, as to whether or not a person will make it after just two weeks on the job! Do you remember the gladiator movies set in ancient Rome where the emperor gave the “thumb up” or “thumb down” sign? That’s what’s going on in this environment. Partners and managers take NO responsibility for their job to develop others within the firm. If someone isn’t deemed to be “fit,” then the assumption is that defective talent was hired, when in actuality, defective management is in power. This culture leads to a lot of folks with high potential being either ignored and therefore marginally developed or forced out of the firm because of the dearth of leadership. These attitudes increase turnover, hiring costs and overhead. What’s more is that over time, as word gets out in the marketplace, the odds of attracting top talent to your organization quickly diminish because those people are not going to be interested in working in your “Coliseum” type of atmosphere.

It Will Take More Time to Delegate It

It should come as no surprise that, in style profiles conducted on members of the accounting profession, there is a greater frequency of highly “risk-avoidant styles” than in the natural population. Being good with details, following “the book” and doing things right are traits of many of those who are drawn to our profession. And these are good traits! But anything good, taken too far, also has negative consequences. When people have trouble delegating details, we often hear the excuse that it is just a fast as (or faster than) trying to show someone else how to do it. The result is that we find owners and managers, who each year, have to work more hours under greater pressure because they just don’t get it. Their need to over-control their environment and lack of attention developing others creates a trap – a trap snaring them. Each year, while the partners’ and managers’ skills improve, the gap in talent between them and their people erodes creating a larger and larger chasm.

As time goes on, these partners and managers personally end up doing more and more work that should be done at a lower level but can’t be done because of a culture that has ignored the critical job of developing others for decades. The staff never has the opportunity to develop as fast or as well-balanced as they should. Profits in this type of firm usually are lower than average because of the high cost of people and bottlenecked throughput from the top. And if low profits, high stress and ridiculous partner and manager hours are not bad enough, over the long term, at some point when these owners want to retire, they will find that they have no viable options for internal ownership transition as result. And it should be of no surprise that outside buyers will not be too impressed with the under-developed group that is left either. Why anyone would choose the option to work more only to build less and make less baffles us. We know we are not painting a pretty picture, but unfortunately, it is a rather common one.

Why Train When Our People Leave Anyway?

In some markets, admittedly it is more difficult to hire and keep good help. That still is no excuse for the notion that it is not worth taking the time to develop someone since it is possible they will leave you several years down the road. No one is guaranteed to stay with you, not even your partners (which is sometimes a good thing). So the idea that people will leave is simply reality. The real question is … “Who do you want to surround yourself and your organization with, day-in-and-day-out?” Do you want your clients to be served by an organization filled with untrained, underdeveloped people who feel like they can’t make a difference, or would you prefer to have a cadre of trained, enthusiastic folks who take their work personally and try to add value to everything they do? The answer is clear … and here is the real value proposition to you: First, if you create a culture around developing people, you will likely find that fewer of them leave you, or at a minimum, your people will, on-average, stay with you longer. But even more importantly, as soon as one of your people has improved their skills, raise his or her rates immediately. You don’t have to wait until the end of the year to start recovering your investment … start making extra money now. And then because you are investing in your people and their skills, they can take on higher level work. This in turn also takes pressure off of your managers and partners. Everyone wins (the firm, your clients, and your people). You win too, because under this arrangement, you have to work less to make more because of better utilization of all of your people rather than over-utilization of just a few.

The Halo Effect

The halo effect is a short-handed term to describe an idea that we sometimes, if a person is good at one thing, assume they are good at everything. We put a halo on their head, so to speak, as if they can do no wrong (like an angel). As managers and leaders, we often have to make quick decisions and come to conclusions with very little information, so this is a natural outcropping of instincts we are required to develop. The problem is that, whether it is sooner or later, most people that are the recipients of the halo eventually become victims of it. Why? Because this instinct is based on flawed logic. Just because you have the skill or ability to accomplish one specific task and activity has no bearing on whether you are equally, more or less competent to handle another. In many ways, it has just become a sloppy management technique as it supports the idea that we can shirk our management obligation to understand each of our people’s capabilities and competencies and

then train to strengthen our people in the areas of importance. At the end of the day, a project will eventually be handed to our haloed employee that is way above their ability. He or she will then, naturally, fail. Two bad things commonly happen at this point. The first, and very common, is that the haloed employee becomes the “goat” employee overnight as management looses faith in him/her. The second is that the employee, who did everything he/she could to do the project properly given their current abilities, instead of being rewarded for making a heroic effort, is criticized for poor performance. However, that poor performance is the sole responsibility of the manager who delegated the work without reasonable oversight in the first place. This situation can result in good employees bailing out, while marginal managers hide behind yet one more performance issue that was someone else’s fault. So, the moral of this particular story is:

Don’t ever put a halo on anyone because it is not only unfair to them, but because they will always eventually let you down. And even more important, you should attribute competency based on specific task performance, not to a person.

Each of us has strengths and weaknesses and while we will be good and some things, we will also be bad at others. So, do your job and take time to understand what each of your people can do and cannot do, and then put together an appropriate development plan to close the required competency gaps.

The Drill Sergeant Style

Decades ago, the notion of “Theory X and Theory Y” was created to help explain different management styles based on different perspectives of the manager. Some managers felt that all people need a lot of direction, monitoring and follow-up, and that if you gave your employees an inch, they’d take a mile (Theory X). Others believed that all people generally want to do a good job, and with appropriate support and a positive environment, they would do a great job for the manager because of personal pride. To this day, over half of all managers still lean heavily on Theory X, with many of those working in the CPA profession. Many owners and managers, in delegating to their people, default to a drill sergeant type of style because they assume that this is the only leadership approach that will motivate their people to perform.

In addition to those choosing to be a drill sergeant, other CPAs are so rushed and have so much to do, that they feel that they can’t take the time for longer responses to questions, more two-way discussion and more supportive behaviors. While these accidental “drill sergeants” come across harsher than they intend, they are still harsh nonetheless. The outcome is the creation of a group of people who are under-developed, but even worse, won’t respond until the next set of orders is given. This style also results in loss of high-impact employees who refuse to be managed that way. Eventually, because of this management approach, we end up proving the validity of our Theory X style – people have to be told what to do, how to do it and watched like hawks or they will not perform. (It’s a self-fulfilling prophecy.) However, please understand that the only reason this is true, if it is true for you, is because you have run off your self-motivated people, and you have created a negative work environment for the rest. You have trained your remaining employees that

it is safer to be criticized for being incompetent than to take action in unfamiliar areas and fail inasmuch as the punishment for self-improvement is too high.

CONCLUSION

Simply put, if most of your people are under-performers, there is only one explanation --- you don’t know what you are doing as their manager. Management is hard work. Management takes time … it is not something you squeeze in at the end of the week, but something that you start doing every day. Developing others is a real talent and one that can be exceptionally rewarding to both you and your firm. But you have to put in the time. People don’t get better because you tell them to get better. Your people get better because you help them, you make them feel comfortable pushing their personal development envelopes, and because they know you have their backs when they fail.

Discussing the concept of “having your employee’s backs” and what that means opens up a lot of dialogue. So now is a good time to stop as we will pick up here in our next column.