Ira Rosenbloom of Optimum Strategies in Spring House, Pa., joins us for the fourth of his five-part series on CPA firm management priorities. So far, he has covered metrics, client service systems, and succession planning. In this podcast, he focuses on personnel and covers aspects such as gathering feedback, assessing skills, and addressing incentive compensation.

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By: Bill Hayes, Pennsylvania CPA Journal Managing Editor

Podcast Transcript

Welcome to the fourth of our five-part series of podcasts with Ira Rosenbloom of Optimum Strategies on the top firm management priorities for CPA firms. In March, we discussed the top five metric categories to make a priority. In April, we covered the top five client service system must-haves, and in May, we looked at the top five priorities CPA firms need to keep in mind in the area of succession. You can access all of those podcasts at www.picpa.org/conversations. This month, we are taking a look at the top five priorities in the area of personnel.

As we take a look at the top five priorities for CPA firms as it pertains to personnel, we've got refresh, feedback, skill assessment, incentive compensation, and job descriptions. Let's start with job descriptions: what is the significance of that?

[Rosenbloom] Every person needs to have a boundaries and goals and missions statement as it relates to their job. And the job description provides those three parameters so that each of the members of the organization need to understand what their responsibilities are, what parts of the firm rely on their contribution, what is the nature of their contribution, and what, if any, granular components can be attached within that job description so that they can have their own sense of their quality of performance. The more information in a job description, the more somebody can be well-focused on delivering the right outcomes, and the more that the job descriptions are available, it serves as a sense of motivation for somebody who may have one job, and once they find out about the particulars about a different job, it gives them the motivation to succeed in their current job to move on to the next job.

So job descriptions are important not only to the people who are performing the jobs, but they're important to the totality of the organization, so that people understand how everybody will interplay, and also so that people can get a sense of what their future can be if they tackle their required performance components in a successful fashion.

The next one sounds particularly interesting, especially for the personnel, I would imagine. We're talking here about incentive compensation. Is this where we figure out basically how much people are going to get paid?

[Rosenbloom] Well, it's certainly a very, very important component of compensation, in terms of, do you have a system that provides merely for a salary and overtime as it relates to your accounting community, and do you have a system that provides for a salary for a particular level of performance or production, and then motivations to get you into performing and producing beyond the expectation or above the average. The financial rewards that are tied to that generally stimulate people to go the extra mile.

What we know now, as we're speaking in the midst of a COVID economy, is that CPA firms throughout the country, and especially here in the Delaware Valley, are taking a hard look at what it is they can afford and what it is they're going to expect of their people on a go-forward basis. It may be the case that firms will make a decision, due to the economic challenges, to hold salaries flat, but to set out the potential for people to make more than their salary based upon some performance achievements.

I believe that incentive compensation's become much more realistic in a COVID economy, and it's going to be spread throughout all of the departments within a CPA firm; it's not going to just be tied to the people who are doing the raw accounting and tax. I think it's going to incorporate the infrastructure and the administrative people with a bonus pool tied to the overall success of the firm, and then some bonus pools tied to new tasks that people are being asked to perform, and what the margin of performance within those new tasks are. We are going to be, by necessity, looking at ways to have the staff be entrepreneurial, and be respectful of the entrepreneurial issues that exist. Not to say that there was no respect before, but it's going to be the opportunity to enhance the awareness of the business aspect of a CPA firm and potentially inspire some people to want to become more vested in the business, and perhaps become partners where they weren't thinking about that before.

Along with incentive compensation and whatever these targets may be is the need to be transparent, and to share data that would potentially encourage somebody to want to dig deep in and around the metrics of a CPA firm, and how they all translate.

Next on the list is skill assessment. Who is being assessed here and what are you looking to find out?

[Rosenbloom] I think this goes back to the first question you asked me with reference to job description. If we know that a particular job is described in a certain way, then we also would think that certain skills would be tied to somebody performing that particular type of job, or certain attributes would be necessary to succeed in that kind of job. So you have to have a first start with, what is the job, and then what are the skills and the attributes, and then how do we assess upfront, and as we go, whether or not the fit is there.

Rather than waiting until the end and saying, "OK, well they really didn't do a good job here," what are some of the warning signals upfront? Or better stated, what are some of the things that we can coach and work with the person, based upon a picture and profile of their skills and their attributes, that would allow that person the best possible chance to succeed, or potentially guide management to say, "You know what, while this person's motivation might be extremely high and very exciting, the test results there are telling us that it's a very big stretch for us to expect success for this person in that job, but they can succeed in this job.”

And I think, again, it's an important management priority to have people put to their highest and best use. But even more so now, as every dollar is becoming that much more important because of the challenges of COVID, is that we understand what to properly expect. If we're going to have somebody do more or different things, let's not set ourselves up for frustration, but let's also not ignore the fact that we do need people to take on different tasks and perform differently. Even technologically, some things may come easier to one person versus another. Being in awareness of that beforehand is exactly what is a very vital top five component within the personnel matrix.

What about feedback? Who are you getting this feedback from, and what are you hoping to get clarity on? Or do you even know before you get it back?

[Rosenbloom] The feedback has to come in a variety of ways. The first thing that we don't get enough feedback on is the candor from the client base. What do the clients see as the highs and lows of our team's performance? Seeking that out with some type of regularity is really important, and it is a function of how routinely somebody will communicate with that client, or interface with the client. If you have a client that you're working with monthly, well, we can get a lot of feedback or frequent feedback. If you're working with a client only once a year, then you're needing to focus on getting that feedback very quickly in and around the completion or the ongoing component of performance within that particular year's engagement.

Client feedback is very important, and you have to have, in my opinion, five questions that you're going to put out there. You don't want to stress your clients so you're not going to ask every client, but client feedback is critically important.

The individual's feedback itself, a self-assessment that they prepare, to tell management what they think has been their pluses and minuses, as well as for them to give some feedback on the overall architecture of the personnel function, how are people in general progressing, how is communication going, is a critically important part of feedback.

Then, who internally is impacted by the job of these particular people, and getting their feedback, and getting from a cross-section of people. In a team environment, where people are touching many, many players in the organization or a diverse group of people, you want to get the input from the diverse group of people. Now, it's not about Big Brother or Big Sister watching; it's all about how do we build a better organization. So getting that feedback is something that is going to facilitate the growth of the quality of the firm, and the quality of an individual's professional life.

The last one sounds a bit cryptic so I'm just going to leave the question open-ended: What do you mean when you say refresh?

[Rosenbloom] What I mean is that you have to have an annual, or semi-annual, look back at the entirety of your personnel division, or your personnel practices, and say to yourselves, "What do we need to tweak? What are the things that other firms are doing that we could emulate? What should we be researching to improve the well-being of our community?" And the personnel is our community. So you need to be able to do the research with some target date, and then re-engineer, tweak, modify. That's the refresh. Just to say "this is the way we've always done it" may end up being a fine result, but only after you've taken a look back to see whether or not that's the case.

To succeed, you can't be rigid about your tradition, you have to be open-minded to the ability to carry legacy forward, which is a commitment to quality, and a commitment to excellence, and that is exactly what refresh should achieve.