Partner Roles and Responsibilities – The Key to Firm Growth

Whether you simply desire to improve your firm’s operations, or identify and implement a new long-term strategy, you need to be clear about the role that the owner(s), partners or shareholders should be playing in your firm.  The roles and responsibilities we’ve suggested are based on the best practices we’ve had the opportunity to observe and be involved with in our work with CPA firms throughout North America.  Keep in mind that the roles and responsibilities of a CPA firm owner or owners is something that will vary from firm to firm, based on that firm’s needs and circumstances, and you need to adapt any recommendations to fit your firm’s situation.

The Role of the CPA Firm Owner

Following is a quick summary of the role and responsibilities normally expected of someone in an ownership position at a CPA firm:

• Partners are responsible for client account management. This includes:
  • Maintaining client satisfaction with, and loyalty to, the firm,
  • Continuously updating their understanding of client’s priorities,
  • Meeting with “A” clients at least four times a year, and with “B” clients at least twice a year
  • Identifying additional services that would be beneficial to those clients
  • Providing a high-level oversight of the work performed for those clients
  • Billing and collecting fees
• Passing down the regular contact, together with billing and collection responsibilities of “C” clients and potentially some low level “B” clients to managers
• Maintaining a constant connection with key referral sources by meeting with them periodically similar to your meetings with your key clients
• Leveraging the work being performed for the clients you manage. Partners should be doing client management first, managers should be doing project management first, and staff generally should be doing the detail work
• Focusing on developing all your people and building a right-side up pyramid
• Implementing firm strategy
• Pricing projects above firm established minimum levels of realization
• Moving “D” clients up or out, and stop clogging the firm with bad work
• Actively promoting and complying with firm-wide initiatives

Clearly, in order to live up to this role, partners have to spend time meeting with, listening to and trying to understand what keeps their top clients awake at night (i.e., understanding the concerns and opportunities they are trying to address at this time).  It’s not so much about selling services  (which you will), and it’s not about pushing specific services your firm offers (which will happen).  What it really entails is acting as your clients’ sounding board and helping them uncover issues they should address, regardless of whether or not you are able to resolve them.

The great news here is that simply by understanding the needs of your clients, you can live up to our profession’s mantra of being your clients’ Most Trusted Business Advisor.  You become the first point of contact when your client has a business problem.  Most CPAs are already the first point of contact regarding a financial or tax problem, but that is far different from being your client’s Most Trusted Business Advisor.  By understanding what is keeping your clients awake at night, you position yourself and your firm as having the most potential 1) to help them, 2) to refer other professionals to help them or 3) to just be supportive of them.  All of this builds stronger client loyalty as well as higher satisfaction.

Client Classification Scheme

In order to more fully explain the role and responsibilities outlined above, we need to define for you what we mean when we refer to “A,” “B,” “C” and “D” clients:

A          An A client is often defined as one of the 15 to 20 percent of the clients that make up 70 to 80 percent of the firm’s revenues.  If you sorted your clients by revenues for your most recent fiscal year, you would quickly identify those clients, or client groups, that generated substantial fees for your firm.  An A client is one that you are probably adequately serving, that will continually have new projects for you to do, and that generates sizable revenues for your firm.

B          A B client is one that you are right now most likely underserving, but who has an opportunity to generate sizable revenues for your firm.  For example, you might have a business client for whom you only do tax returns.  However, based on what you know of the business (for example, they might be $5 million in size or have 100 employees), you could easily provide them thousands of dollars more in needed services, help them grow, and create stronger loyalty to, and satisfaction with, your firm.

C         A C client is a client that does not have much additional service opportunity other than what you already do, and the revenues generated by the client normally are relatively small.  However, they are good clients, do not have complex situations, they pay you on time, pay average or better fees, and are pleasant to work with.  The best description of this group of clients is that they are your typical individual tax-return-only clients.  Don’t confuse the C rating with the traditional school performance ratings (where C = 70% and B = 80%, etc.) and assume that they need to become B clients to be good clients.  A firm can have all C clients and do very well.

D         A D client could seemingly fall into any of the classifications above.  However, these clients present at least one of a number of possible problems.  They most likely are unprofitable to the firm as a result of poor rates, realization, and/or utilization.  They might be hard to work with because they are abrasive, late payers, or never timely so they always create scheduling problems.  They may always want special accommodations, require services that are too difficult to provide (e.g., the client that requires the one governmental audit you perform, which is very inefficient work for you), or only pay your last bill as an incentive for you to start their next project.

None of these issues alone automatically classifies someone as a D client.  For example, you might have someone that always pays you late, but you charge premium fees for their work, which makes him/her an acceptable client.  Or, someone may constantly negotiate fees, but nevertheless involves you in big projects that are profitable.  Generally speaking, most firms know quickly who falls into their definition of the D category.  At the end of the day, you do not want any D clients.  This means that your objective is to either find a way to convert them into C clients or better, or introduce them to your fiercest competitor. In the latter instance, these clients can then waste your competitor’s resources instead of yours, freeing you up to spend more time as your key clients’ Most Trusted Business Advisor.

Client Relationship Management and the Marketing Component

Partners, and in some firms, managers, need to take their responsibility for client relationship management seriously.  In most firms, this role is purely an economic assignment.  However, we believe that the role of relationship management is the foundation of the firm’s success and should be formalized with CPAs being held accountable for doing it properly.

For example, consider the tax partner … the walking tax library for the firm.  When this person is the relationship manager for a client, he/she cannot decide to only talk about tax-related issues.  If that tax partner is the partner in charge of a client relationship, then he or she is obligated to understand that client’s top priorities, both strategically and tactically, across all services all of the time.  The partner also is obligated to report that information to the firm in some systematic way.  And he or she is responsible for finding ways to help the client when possible through extending firm services, referring work to other professionals, staying involved as the client’s advocate, etc.   This involves some marketing in the form of functioning as the clients’ Most Trusted Business Advisor, being their sounding board, and helping them find solutions for their issues.

 Marketing—Active or Passive?

Any discussion of partners’ roles and responsibilities, including that of being the Most Trusted Business Advisor, necessarily will include some coverage of marketing.  When discussing CPA firm marketing, we break the term down into two types of marketing—active and passive.  We define “active marketing” as “in-person marketing,” which usually is accomplished using either face-to-face or over-the-phone contact.  It typically includes any conversations that a CPA or CPA firm professional has with a client, referral source or prospect.

On the other hand, “passive marketing” is marketing which is conducted indirectly through mediums such as postcards, newsletters, newspapers, agencies, telemarketing, website presence, e-mail blasts, etc.  We refer to this type of marketing as “passive” because it can be done through the CPA firm’s marketing machine (its administrative support people and systems) and is built around a one-to-many relationship (i.e., one letter or e-mail blast sent to many clients).

Active Marketing for “A” and “B” Clients

The most fundamental role of a partner, and in some firms, of the managers, is centered on client relationship management.  This critical function involves acting as the Most Trusted Business Advisor, specifically including:

• For “A” and “B” clients, a partner or manager should be assigned as each client’s “relationship manager.”
• Quarterly update meetings should be scheduled for all “A” clients and at least semi-annual meetings with all “B” clients.  At some point, these meetings will become billable, but in the beginning, the investigation necessary to fulfill the role of relationship manager can be done through a breakfast or lunch meeting that is off the clock.
• Each relationship manager, through regularly scheduled meetings, should be able to rattle off each of their key clients’ top five priorities for the coming 18 months.  Client relationship managers should know “what’s keeping their clients awake at night” (i.e., the concerns and opportunities they are trying to address at this time).  Think of the relationship manager as the general contractor.  For issues that the firm can address, the contractor brings in his/her own people to complete.  For issues the firm cannot address, subcontractors (or friendly outside professionals) are referred to provide the necessary assistance.
• Referral sources should be rated as well as clients.  “A” and “B” referral sources should have a relationship manager assigned to each with the expectation of regularly scheduled contact similar to what we have suggested for key clients.

The above-described contact and reconnaissance are accomplished through “active” marketing.  The firm is in danger of losing its “A” and “B” clients when a partner or manager in charge of these relationships cannot at least articulate each client’s priorities because the firm is not paying enough attention to these clients and providing those clients with the personal attention and care they need.  Although the firm will not likely incur these losses overnight, you can be sure that unmet critical client needs ultimately will attract attention from competing service providers.  And with each passing day, with CPA firms continuing to broaden their scope of services, the competitors are more likely to be other CPA firms.

When we discuss the need for CPAs to build and maintain strong referral networks, we’re often surprised by how many CPAs expect other professionals to refer business to them, but who do not reciprocate with referrals out to these other professionals.  Providing a referral for a needed service helps the client (they get access to needed skills), helps the firm (referrals out create more referrals in, and helping the client increases loyalty and satisfaction), and underscores why the CPA is the clients’ Most Trusted Business Advisor (because the client can easily access the relationship manager’s professional network).

Marketing for “C” Clients

For “C” clients, passive marketing is the best way to keep that group enlightened about the firm’s service offerings.  For example, e-mail blasts, postal mailings, brochures, etc. listing the variety of services you provide, or covering a featured service, can be good communication means for your “C” clients.  You may be wondering why, if “C” clients typically only need one service, such as tax preparation, why we’d suggest marketing other services to them.  The reason for this is that your “C” clients probably have relatives, friends, former classmates and the like who could take advantage of several of your offerings, even though the “C” clients themselves don’t have a need for them.  Unless the clients have some idea of the breadth of coverage of your service offerings, they won’t be able to refer these other people to your firm.

In addition to passive marketing, you may also want to use active marketing with C clients as a quality referral source.

Dealing with “D” Clients

When it comes to dealing with your “D” clients, marketing is not the issue you should be concerned about.  If a client is classified as a “D,” then the client relationship manager of that client needs to develop a strategy to convert them a “C” or better.  That strategy could be as simple as:

• Billing them at 95 percent of the standard rates this year and see whether they want to remain a client.
• Transitioning this client to one of our senior staff to manage and bill because the client’s needs are better suited to the senior’s experience level and billing rate.

Alternatively, the strategy could be as drastic as the following:

• The partner would need to inform this client that the account must be paid current and kept that way or the client needs to find another accountant.

We are not suggesting out and out firing or termination of clients.  Rather, we believe in holding the client relationship manager and the client accountable to sustaining a profitable and mutually beneficial relationship.  If the client wants the relationship to be one-sided (in other words, profitable and beneficial only to him or her), then adjust the policies and billings to where they should be and let them make their own decision.  Recognize that many of your “D” clients have become “D” clients because you created an operating environment that steered them in that direction.

Different Roles for Different Partners

When you are a client relationship partner, regardless of your technical specialty, you take on the role of being that client’s general contractor for professional services—that is, his or her Most Trusted Business Advisor.  If you are unwilling to fulfill this role, then you shouldn’t be a client relationship manager; you should be a technical partner.  We define these two roles broadly as follows”

Client Relationship Partner:  This is a person in the firm who is assigned the duty of understanding the needs and priorities of specific clients and helping them address those needs through:

• Providing advisory services to assist the client in putting together an action plan or approach to solve those problems,
• Providing additional firm services that can directly resolve the identified issues,
• Referral of other professionals that can provide the necessary assistance, or
• Simply being a concerned, objective third party that listens and has an interest in them and their business.

The Litmus Test for Client Relationship Partners

So how do you know who is living up to their obligation of being a client relationship partner?  Just walk up to any partner, identify one of their “A” clients, and ask him or her to list that clients strategic or tactical priorities for the next 18 months.  We are not just referring to that client’s tax or audit priorities, but rather holistically as an organization or as a person, what are their bigger picture priorities?  If your partners can’t answer this question off the top of their heads or after quickly referring to recent notes, then those partners are not fulfilling the duties of a client relationship partner.

Technical Partner:  This is a person in the firm that is highly technically competent and their professional focus is on:

• Being the firm’s preeminent resource in specific technical areas,
• Providing advice and counsel to other partners (and staff) in those technical areas,
• Taking on the oversight and project management of the firm’s most complex technical work,
• Oversight of quality systems, processes and training to ensure technical standards are maintained regarding the firm’s work product.

How do you know if a partner is a technical-only partner?  Technical-only partners tend to:

• Always default to the work on the floor (in the office) as being a higher priority than meeting with clients
• Focus primarily on cranking out work product,
• Only talk to their clients about the service they specialize in providing (for example, a tax partner might fully service a client’s needs in the tax area, but ignore that same client’s needs in other areas)
• Emphasize the development of their technical skills and have little regard for soft skills development in themselves or others
• Avoid developing others
• May have a tough time delegating lower level work to others (although some client relationship partners suffer from this as well)

Functioning As Both a Technical Partner and a Client Relationship Partner

Can a partner be both a technical partner and a client relationship partner?  We believe that one can indeed be both a technical partner and a client relationship partner.  As a matter of fact, with firms with less than six to eight partners, this combined role should describe every partner.  As firms grow larger, they can begin to afford the overhead of maintaining technical-only partners.  Unfortunately, the reality of most CPA firm partners is that they provide lip service to their role of client relationship partner and bury themselves in their role of technical partner.

When small firms start allowing partners to become technical-only partners, they create a long-term success and profitability problem.  Why?  What we find is it is because technical partners typically just function as managers with more experience.  If the partners are so busy cranking out the work, then who is:

• Taking the time to make sure their clients are satisfied and being adequately serviced? and/or
• Finding new opportunities to help grow the firm, or at a minimum, replace the natural client attrition that will occur due to no fault of the firm (death, sale of the business, etc.)?

It is poor firm strategy to judge satisfaction and service based solely on whether clients call to complain or to ask you to forward their files to some other CPA firm.  Technical partners tend to wait for the phone to ring before help is offered, and even then, usually only offer help when the request for service falls into their specialty area.  How can we look in the mirror and see ourselves as our clients’ Most Trusted Business Advisors when the only time we advise them is when they call us, or the only questions we want to talk about are their tax returns or financial statements?  Client relationship partners proactively seek out what is “keeping their clients awake at night.”  They care enough about their clients as a whole that staying in touch has a higher priority than personally doing their work.

Small firms rarely have the luxury of having technical-only partners.  So that means that small firms have to focus on developing good technical managers (even as a solo practitioner, you should think hard about starting to develop someone into a manager level position over the next few years so you are better positioned to serve your clients adequately).  The managers should be groomed to take on the responsibility of managing the “C” level and some low “B” level clients.  They should also be the project managers for much of the “A” and “B” clients’ work.  This is the type of organization that firms need to build to free up the owners’ time to perform those tasks that only they can do.

Rainmaking and the Referral Process

For most firms, new business comes in through referral.  Therefore, the bigger a partner’s client base, the more likely that partner will bring in new business (which simply means that the more clients a partner knows, the more referrals that partner is likely to receive (not in percentage, but in raw numbers).  Other drivers of referral success are long-standing service (seniority) and position in the firm (such being one of the named or senior partners).  In these cases, there is an extended opportunity for referral simply because:

• These CPAs have been active in the community longer (so they know more people),
• The people they met 20 to 30 years ago are now in high-level management positions or have achieved a great deal of success and can direct opportunities to the firm, and
• These partners are the named or power players in their firms.  Therefore, more blue-birds (new clients that no one knows) call and specifically ask for them.

What we’ve described is the fact that, generally, the bigger the book, the more people you know, the longer you have been involved in the community, the higher your status within the firm, the easier it is for you to bring in new business.  Now this doesn’t mean that these partners necessarily will bring in business.  What we are saying is that these partners don’t have to do too much to make it happen.

The Downside of Typical Rainmaker Models

What ends up occurring is that we constantly reap exactly what we sow.  For example, in smaller firms, one or two partners can easily generate all of the new business needed to maintain constant growth.  Because the issue then shifts from that of “attracting new work” to focusing on “getting it done,” the partners start recruiting future partners who are more technically oriented and most likely are happiest working in the office all day cranking out work rather than meeting with people.  This model works great and the firm continues to grow for a while.  But the problem is that it will grow to a point, and then all of the sudden, revenues slow down and start flattening out.

So what happens to cause that?  Well, the one or two rainmaking partners are still bringing in as much business as they ever did, but the situation has changed.  Consider the impact of attracting $300,000 of new business in a year when the firm has net revenues of $1 million.  That is 30% growth – fantastic!  Now consider the impact of bringing in $300,000 of new business when the firm has net revenues of $5 million – that is only 6% growth.  And the bad news about a number as low as 5% or 6% is that this amount might only be enough to offset the business that was lost that year.  In other words, clients die, projects end, businesses are sold, and through no fault of the firm, work is lost.  At $5 million in revenues, it often takes 5% growth or more just to replace the normal shrinkage that will occur from year to year.

While you absolutely can operate a successful firm with one or two rainmakers and a number of technical partners, please understand that this model has limits.  The limits are simple: once those rainmaking partners have committed all of their available time to either growth of client management activities (the amount of time they are willing to work), the firm is done growing.  In fact, we’ve seen situations where the partners won’t bring in more business because they have a short-sighted view of what it means for the long-term success of the firm and they feel that they are busy enough without the new work.  At this point, rainmaking skills become a scarce and unavailable resource.  This problem is compounded by the fact that a partner’s “book of business” plays such a large part in the power structure of most small to medium sized firms.  In order to free up more time of the rainmakers, they would have to give up some of their book of business.  But they won’t give up part of their book because that is both a source of power and compensation.  Therefore, at a certain size of book, the rainmakers’ time will be completely utilized and the firm’s growth will stagnate.  At this point, firms have to decide whether to expand their current model, or consider using a new one.

Growth by Adding Rainmakers

If you continue with the old model, you will start focusing on finding another rainmaking partner.  In other words, you will look for another superstar to come in and drive the firm (which, by the way, is the most common choice).  The problem with this approach is that every time you add a superstar, it doesn’t take long before they either 1) hold you hostage for money and power (the “I am better than everyone else so I need special accommodations”), or 2) once firmly established in the community, split off and run their own firm.  So, we see firms, typically between $5 and $10 million in revenues grow, then split, then grow, then split, until half or more of the competitors in their community are spin-offs from the original firm.

Growth by Adding Infrastructure and Emphasizing Partners’ Roles and Responsibilities

A model which helps you grow through this threshold size barrier and stay connected as one firm, is to understand that it is not about rainmaking, but about client account management and marketing infrastructure.  If you are a firm under $10 million in size, you don’t likely have room for more than one or two technical partners at most, if any.  Therefore, it is not about one or two partners bringing in $300,000, but about every partner growing his or her book by extending services to their existing clients every year.  It is about every partner staying on top of the needs of their key clients to either find new work, or stay top-of-mind with those clients to leverage referrals.  Simultaneously, it is also about the firm investing in marketing infrastructure and making sure the firm’s name and services are constantly in front of their clients, friends, and professional networks.  The firm has to make a financial investment every year to support “passive marketing,” and the partners have the make the commitment and be held accountable to the “active marketing” or client account management.

This is why in the bigger firms, often, personal rainmaking skills are less important.  Why?  Because marketing becomes process driven, it has significant administrative support and it permeates the job responsibilities that managers and partners are all held accountable to achieve.  While one or two people in a firm being the rainmakers can work well for a time, it rarely works well beyond a certain level of growth.  Marketing, just like technology, just like training, needs to a firm-wide function.  Marketing success is more easily sustained when every partner and manager has some role in it, as well as when the firm culture adopts marketing as a fundamental and necessary support function.  The sooner marketing becomes a core process of the firm, the more quickly your firm will start pushing through its previous revenue barriers.