Who's managing the accounting business?

There is an emerging trend in our profession for firms with as few as 8 team members to appoint a full time Business Manager. (Some firms refer to this person as the CEO)

Accounting firms often squirm when I raise this trend. It's as if they're automatically doing the maths and calculating that the annual salary of the Business Manager will come off the bottom line.

Nothing could be further from the truth. Reality is that an effective Business Manager should provide a return on investment of at least 100%. (sometimes in excess of 200%)

Why Partners in accounting firms aren't usually effective Business Managers

Frankly most of us were raised as technicians. At some point in our career many of us were literally tapped on the shoulder and elevated to Partner status. Most of us didn't benefit from an effective partner development programme that prepared us for the rigours of managing a diverse team of intelligent and independent people, let alone the multitude of processes that happen on a day to day basis.

Many of us are reluctant Business Managers, part time and not very good at it. We didn't sign up for this job. We went into practice and joined the Partnership because we cared about our clients and thought we could make a difference. Suddenly and most unexpectedly we're dealing with everything from the server that needs upgrading to that stubborn team member whose performance just cannot be managed upwards.

The human being is wired to do best what it does best. For many of us that's advising clients on the multitude of tax and wider business issues they need and want advice on. None of us can sustain doing a job we don't like doing forever.

And so it goes when it comes to the business of managing the accounting business. Without a dedicated manager or management team the Partners do some managing "on the side" when they absolutely have to, when it's urgent or deadline driven.

The reality is that great Business Managers don't live full time in the 'urgent' time quadrant. They hang out more in the 'important' time zone. They do today what they could  get away with putting off until tomorrow. They implement workflow systems that release a month of capacity. They change your clients' perception of your debtor management culture forever. They also manage, truly manage, the performance of you and your team.

That's right, they manage the Partners where they need managing. That's the acid test for me. When working with a firm that's close to appointing a Business Manager, I always ask the question "are you prepared to be managed?" If not, there is no point appointing that person. Without their promised autonomy in key areas, give them time and they'll become frustrated and leave.

Key deliverables a Business Manager brings

The deliverables a Business Manager brings can have a hugely positive effect on profitability, growth and cash flow, quite apart from the more holistic benefits such as reduced stress and improved client performance and lifestyle.

Firms who struggle with the economics of appointing a Business Manager need to approach the subject in this manner.

Review your KPI's. If you don't subscribe to a meaningful Accountants' Benchmarking Survey, do so. Work out in which key areas you're underperforming and do the maths.

Productivity and efficiency. Whatever way you look at this one you can improve your bottom line if you get through the jobs quicker and on or under budget.

Write offs. I've seen firms go from 12% write offs to 3% write ons in the space of 1 year.

Lock up. i.e. cash. Trimming 25 days off debtors and 30 days off WIP will inject significant cash.

Partner and senior accountant capacity to spend quality time with clients. Removing management and associated admistravia from Partners increases their fee earning capacity. It's that simple.

Get new service layers to market. Business Managers aren't just talkers, they're  implementers. They'll take your ideas (for example a Trust Administration service), apply good processes and make it happen.

Leadership versus Management

It's hard to separate leadership and management in a small to medium sized business.

It's often been said that "Leaders do the right thing" while "Managers do things right".

Leadership is about creating the environment in which team members work willingly together to achieve common goals. It's about leaders working with and through others in their teams. People.

Management is more about systems, processes, things.

The reality is simpler. Good leaders (the Partners) need to be credible managers and at times supervisors, and mangers sometimes need to lead rather than just manage or supervise their work.

The result is functional leadership, a natural interaction between the Partners and the Business Manager.

Having said that, some conflict ( I prefer to call it open and healthy debate) between leadership and management is inevitable and even beneficial.

The Business Manager's Background

I'm often asked if the Business Manager should be a CA with experience in public practice or have more of a business management background and new to the industry.

Let's get real here. What we're looking for in this instance is business management skill, not an in depth knowledge of how to file a tax return. Managing a debtors' ledger is pretty much the same world over. You provide goods or services to a customer, send them an invoice, then you make sure you get paid.

Every time I'll suggest experience in business and people management over a background within this industry. It doesn't take long to teach a new Business Manager our key business drivers.

Just recently I held my very first Business Managers in Accounting Practices forum. Most of those managers originated from outside of this industry.

Managers at that forum spoke candidly about their initial frustration with Partners and accountants. They had all experienced in their early days the real reluctance of Partners to let go of their old ways and beliefs. Most of them had been at the receiving end of 'accountant cynicism' (the accountants' reluctance to support the business manager's appointment because he or she "wouldn't know how we work as accountants")

A Business Manager without a background in our industry comes to us without the baggage that we acquire after years in the chair. They assume nothing. This means they don't make unsubstantiated assumptions about clients' likely reactions or behaviours. They're much less likely to under price work or take big write offs on jobs. They're objective. They'll see sloppy performance from a team member for what it is. They have the time and patience to quietly go about fixing what needs to be fixed, without the emotional (and not always rational) pull of the Partner's unique relationship with his or her clients.

Viv Brownrigg is a chartered accountant and the chief executive and founder of Business Fitness NZ and Viv Brownrigg Consulting Ltd, both organisations specialising in the systemisation and performance improvement of NZ accounting businesses.

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