Using Competency Models for Higher Levels of Performance

1. Using Competency Models for Higher Levels of Performance Accountants Advisory Groupwww.AccountantsAdvisory.com

2. Accountants Advisory Groupwww.AccountantsAdvisory.com • Strategic consulting to CPA firms • Leadership, management and strategic direction • Advisory services pertaining to partnerships agreements, partner compensation & retirement agreements, etc. • Marketing, new business development and public relations strategies • Merger and acquisition consulting • Human capital and recruiting programs • Partner retreat facilitation • Recruiting partners and managers • Objective and independent advice • Practical experience from industry specialists

3. The “Perfect Storm” Consolidation/Franchises Retiring CPAs Quality CPAs Gender Unfunded Retirement Increased Competition Leadership

4. CPA Firm Life Cycle Start up Growth - Established Mature-Expanding Challenged Declining • Founding and “rainmaker” partners retiring • Succession planning problems • Establishing a client and referral base • New partners • Running the practice in a more formal fashion • Mergers with smaller practices • New partners • Attracting experienced staff • Establishing niches and specialties • Economy and market conditions cause decline in revenues and profits • More competition for clients and talent • Seek exit options • Merger • Sale • Dissolve • Initial Stages of Development

5. 2012 PCPS Succession Planning Survey • 79% of firm owners say succession planning will be a significant issue for them in the next 10 years. • 44% of multi-owner firms either are discussing a merger, acquisition, or sale, or are planning to do so in the next 2 years

6. Future Classification of Firms • Consolidation / mergers will take place at a rapid pace and as a result, the future classification of firms will change and will look like:

7. Top 10 Attraction Factors:2011 vs. 2006 Source: PCPS 2011 Top Talent Survey. * The 2011 survey asked separately about client and internal projects. The 2006 survey asked about client and internal projects combined.

8. Driving Value Leadership Human Resource Management Values State of the Art Technology Marketing, Public Relations and Practice Development Recruiting the best talent possible at all levels either directly or through M&A Practice & Engagement Management Training, Career Development, Succession Planning, Partner & Staff Performance Management Efficient & timely delivery of service Leading edge services, industry specialization & niches Profits

9. STOP making Excuses—The Time to Change is NOW “It is not the strongest of the species that survive, not the most intelligent, but the ones most responsive to change.” —Charles Darwin

10. Top 10 Accountant's Excuses For Not Implementing A Performance Management Plan • Too many client demands • Going on vacation • TakingCPE • Unqualified staff • Deadlines

11. Top 10 Accountant's Excuses For Not Implementing A Performance Management Plan • Writing newsletter article • Returning from vacation • Staff person quit • Clientcrisis • Engagingnew client

12. Build a Quality Staff Pyramid …the Clients Will Come

13. Inverted Pyramid Structure Managing Partners / Senior Partners Junior Partners WorkFlowingDown WorkFlowingUp Managers Staff

14. Leverage • Is the firm over-partnered for the current state of the “new economy”? • Is the firm “carrying too many underachieving partners and mangers? Is the firm too “top heavy”? • Does the leadership of the practice need to make some tough business decisions regarding the “Over-Partnered Syndrome” for the benefit of the firm? • Are high billing rate partners doing too much low level work? • Is the current partner compensation program demotivating partners to delegate to junior partners or managers?

15. Historical Pyramid Structure Partners WorkFlowingDown WorkFlowingUp Managers Supervisors Staff

16. Partner & Staff Structure • Do we have enough “quality” staff in the appropriate positions to have a successful delegation process? • Are we properly developing our staff? • Is the firm’s scheduling process taking into account the proper matching of work and talent and career development? • There is a direct connection between the “partner-to-staff ratio” and the ability of firms to be successful in the long-term and develop succession planning. • Need at least a 1:5 partner to staff ratio.

17. Winners, Comfort Zoners, Journeymen • Winners—20% • Passionate about their careers. • Have a personal strategic plan • Continuously upgrading their skills and knowledge. • Upgrade their client base • Continuous career development and self-improvement • Able to increase billing rates and collect

18. Winners, Comfort Zoners, Journeymen • Comfort Zoners—60% • Shy away from challenges that will truly test them and require them to learn new skills. • Fairly competent accountants who work hard, and provide good client service. • Not progressive—status quo • They have a job • Take no risks • No future game plan • Satisfied • Volume/factory generators

19. Comfort Zone .

20. Winners, Comfort Zoners, Journeymen • Journeymen—20% • Don’t care • Short-term players • Journeymen-move to different firm every few years

21. Performance Management

22. Performance Management Provide clear objectives Rating and ranking against competency standards Measuring achievements Providing honest and unbiased feedback Linking compensation and rewards to performance

23. Expectation Gap

24. Performance Expectations • Performance expectations serve as a foundation for communicating about performance throughout the year. • They also serve as the basis for assessing performance. • When you set clear expectations about the results that must be achieved and the methods or approaches needed to achieve them, you establish a path for success.

25. Performance Expectations—A 2 Way Street • Performance objectives express mutually understood agreements for results that an employee is expected to produce during the performance assessment period. • Performance objectives are not separate from an employee’s job, but part of the job. • Performance objectives are “ends” towards which you and your employee direct effort and focus resources.

26. Characteristics of Professionals inSuccessful Firms • Energy • Drive • Enthusiasm • Motivation • Morale • Determination • Dedication • Commitment

27. Performance Management Implementation Using Competency Models Non- Traditional Training Traditional Training Partner Development Competency Model Reward & Compensation Performance Management

28. Work Product and Work Quality • Technical and Accounting Knowledge • Professionalism • Analytical Skills • Team Building and Team Work • Client Focus/Client Service • Communication

29. Business Acumen • Project Management • Relationship Building • Risk Management • Supervisory Skills • Managing a Profitable Business • Business Development

30. Performance Management Accountability for Implementing the Firm’s Short-Term and Long-Term Plans Annual goals and competency standards that are linked to the Firm’s strategic plans Compensation program that rewards each partner fairly based upon the firm’s profitability and achieving goals Counseling and guidance

31. Work Product and Quality—Manager & Above • Develops and manages project milestones; ensures they are achieved • Involves Partners at appropriate time throughout the project • Determines deliverable content and format to meet project objectives/client expectations • Partners with the client to align work product with client’s business strategy • Designs and produces solutions aligned with project objectives and client expectations (business strategy) • Assigns responsibilities for tasks and decisions; coordinates the team’s activities • Sets clear goals, objectives and measures for the project • Reviews work of others—ensures quality of deliverable(s) • Utilizes project results to continuously improve work/future projects

32. Analytical Skills—Senior • Effectively gathers, organizes and summarizes data • Understands rationale behind tasks and ultimate objectives • Interprets data and arrives at conclusions • Questions procedures in achieving objectives • Questions data integrity • Identifies obstacles to collecting and analyzing data • Applies information, logic and experiences to suggest solutions and alternate processes • Conducts research to formulate and support recommendations

33. Analytical Skills—Supervisor • Identifies opportunities for creative problem solving • Resolves obstacles to collecting and analyzing data • Evaluates the quality of information considering its source, relevancy and timeliness • Performs complex data analysis • Recognizes when additional expertise is needed to address client issues and communicates with client service team

34. Analytical Skills—Supervisor • Recognizes the broader impact of proposed solutions • Challenges logic used to assess problems • Identifies related problems and issues when solving problems • Makes timely and sound decisions • Accurately defines a problem based on an understanding of technical requirements and/or client needs • Applies learning from prior experiences to interpret current situations

35. Analytical Skills—Manager & Above • Identifies the most critical issues of a client's situation • Develops solutions to resolve technical or business issues • Identifies Firm and external resources to solve client problems • Develops innovative approaches for similar client situations • Solicits creative ideas from the team • Challenges ideas and conclusions of the team and the client • Probes beneath the surface of problems to determine root causes • Recognizes risks associated with innovative ideas and problem-solving approaches • Analyzes data based on reasonable assumptions, factual information and vision

36. Technical Skills—Auditing & Accounting Staff • Is learning to read and interpret financial statements • Performs specific accounting tasks as delegated • Is learning and progressing in the knowledge and application of accounting principles • Is learning and progressing in the knowledge of auditing and accounting standards • Is gaining a general knowledge and awareness regarding tax issues • Is learning to prepare financial statements • Is learning and progressing in the area of computer applications in facilitating the auditing procedures

37. Work Product and Quality—Senior • Completes deliverables in a timely manner • Produces deliverables that are clear, concise, thorough and of professional quality • Ensures job execution, documentation, consultation and completion in accordance with required policies and procedures • Executes self-review of all work • Generates solutions aligned with project objectives and client expectations • Demonstrates an understanding of how work product links to client’s business strategy

38. Technical Skills—Auditing & Accounting Senior • Reads and interprets financial statements • Performs specific accounting tasks as delegated • Progressing in the knowledge and application of accounting principles • Progressing in the knowledge of auditing and accounting standards • General knowledge and awareness regarding tax issues • Preparation of financial statements • Progressing in the area of computer applications in facilitating the auditing procedures

39. Technical Skills—Auditing & Accounting Supervisor • Demonstrates solid judgment when interpreting data • Helps staff to develop Accounting knowledge • Acquired the knowledge and application of accounting principles and is sharing knowledge with others • Acquired knowledge of auditing and accounting standards and is sharing knowledge with others • General knowledge and awareness regarding tax issues • Preparation and review of financial statements including disclosures • Uses computer applications to facilitate the auditing process

40. Competency Models—Defined Roles & Accountability

41. Come Ready to Play Every Day

42. Technical Skills • A high level of comprehensive technical skills that is respected by clients, staff, and referral sources. • Continuously upgrades technical skills to become more valuable in the marketplace. • Strong expertise in a niche or industry. • Takes pride in their work and shows a personal commitment to quality.

43. Leadership & Team Player • Respects partners and employees of the firm. Is a mentor and counselor, who is fair and objective. The firm comes first before personal gain. Is both client and staff centric. • Is entrepreneurial and takes calculated risks to grow and improve the firm. Willing to invest personal capital into the firm. • Recognized by partners and staff as a trusted professionaland manager of the firm. Is a role model to younger staff. • Is a team player. Prioritizes the needs of the firm and takes the initiative to complete tasks and projects on a timely basis. • Is willing to be held accountable for performance. Makes no excuses for underachieving.

44. Not a Great Role Model .

45. Leadership & Team Player • Has enthusiasm and a positive attitude for the profession, the firm, and clients. • Communication skills are clear, concise, and confident whether dealing with clients, staff, or prospects. • Is willing to assist in resolving conflict and by acting as a liaison between people in the firm. • Contributes to firm management by committee involvement and taking on special projects

46. Leadership and Team Player • Follows the One-Firm Firm concept and puts the firm first. • Provides constructive feedback on a continuous basis and is a good coach. • Is a team player and good role model. Works hard at relationship building. • Concerned about long-term issues, not just short-term profits. • Is a source of creative ideas about the firm.

47. Client Service & Relationships • Meets with clients throughout the year and provides solutions to their business and personal financial problems. • Clients seek out advice and counsel and is truly considered a trusted advisor in all aspects of their major business and personal financial decisions • Excels at client retention • Provides a greater level of client service with each year • Receives referrals from clients • Generates additional revenue from clients

48. Client Service & Relationships • Generates additional revenue from clients • Transfers clients to others when appropriate • Culls out C & D clients when appropriate • Has strong client relations and is considered a “Trusted Advisor”. • Clients are not just satisfied, they are “delighted clients”. • Has a strong history of client retention. • Clients refer friends and colleagues.

49. Practice Development • Has a strong network of relationships with professionals outside the firm, such as attorneys, bankers, high-net-worth individuals and corporate executives • Commitment to firm/niche marketing • Ability to generate new revenue • Ability to generate additional revenue from existing clients • Ability to cross-sell firm services • Ability to increase personal billing rate and collect it

50. Practice Development • Continuously demonstrates the ability to engage new business. • Markets for quality clients, not quantity and continuously upgrades his client base. • Strong relationships with referral sources and the business community. • Generates additional work from existing clients.