Latest / Transforming: Tales of Business Evolution / Governance Series: Key Success Factors for Better Governance

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Governance Series: Key Success Factors for Better Governance · Transforming: Tales of Business Evolution

0:01
Erin Hartman: Thank you for tuning in
0:03
to the special edition
0:04
Transforming Tales of Business Evolution Podcast,
0:08
focused on firm governance.
0:09
We hope you enjoy these
0:11
special episodes that are designed to
0:13
tie to and enrich our brand new PCPS governance toolkit.
0:17
Developed by the AICPA and CIMA,
0:20
the PCPS team, along with Gary Thompson,
0:23
founder and principal of Thompson Consulting,
0:25
and Sarah Dobek, founder and
0:27
president of Inovautus Consulting,
0:29
the toolkit and these special podcast episodes
0:32
focus on decision making
0:34
and accountability within firms.
0:36
Whether firms are experiencing changes due
0:38
to internal growth, external market forces,
0:41
or other key triggers,
0:42
re-evaluating current governance structure
0:45
can be a game-changer.
0:47
Listen to all four episodes.
0:49
The episodes are hosted by Gary and Sarah,
0:51
and they're joined by practitioners who have
0:53
made these real-life changes in their firms,
0:56
and areas including the benefits
0:58
of using an operating model,
1:00
ideas to consider related to partnership agreements,
1:03
and introducing non-CPAs into
1:06
leadership roles and setting them up for success.
1:09
In the final episode,
1:11
Gary and Sarah share with
1:13
our PCPS team all
1:14
about what they've learned to drive success in firms.
1:18
Listen and learn about how proper governance
1:21
is not just something for big firms to think about.
1:23
It involves behavioral changes that are
1:26
applicable to even the smallest firms.
1:28
We hope you enjoy.
1:30
Hi, I'm Erin Hartman,
1:33
senior manager of the Firm Services team
1:35
here at the AICPA,
1:36
and I'm joined by Sarah Johnson Dobek
1:38
and Gary Thompson in
1:40
our final episode of
1:41
the Special Governance Four Part Series.
1:44
If you haven't listened to the others,
1:46
please check them out.
1:47
We have an episode on operating models.
1:50
This talks to you about how you can make it easier in
1:53
resetting or setting up
1:54
governance structures within your firms.
1:57
Partnership agreements and best practices around those,
2:00
and also an episode on non-CPAs as firm leaders.
2:05
Gary and Sarah are joined by
2:07
various practitioners in these podcasts who share
2:10
their stories on how these topics have
2:11
reshaped their firms and set them up for the future.
2:15
Today, we're here to wrap it all up
2:16
and talk about what does all this
2:18
mean for me as a firm owner or as a leader in my firm,
2:23
and what are key success factors.
2:26
Sarah, Gary, thank you guys for being here.
2:29
Sarah Dobek: Thanks, Erin.
2:30
I'm excited to be here today.
2:31
Gary Thomson: Likewise, thank you, Erin.
2:33
Sarah, it's always great to partner with you on this.
2:35
Erin Hartman: I have learned so much being on
2:37
this journey with you guys as
2:39
you've worked on these resources,
2:40
and I know our audience has and will as well.
2:43
Reflecting on what we've shared in previous episodes,
2:48
what are the key mindset shifts
2:50
you've seen in firms around governance?
2:53
Sarah Dobek: One of the things
2:54
that I'm noticing of
2:55
firms of all sizes as we deliver
2:58
this and we have these conversations is
3:01
just the acceptance of non CPA leaders at the table,
3:04
and it looks different depending on the size of firm.
3:07
But I think over the last couple of years,
3:09
I've really seen firms lean in to bringing
3:12
a different way of thinking
3:13
into these firms and really value it.
3:16
It's encouraging to see
3:17
that as long as I've been in the profession,
3:19
and just watching CPA firms evolve.
3:22
I think it's such an important element for
3:24
the conversation that we've been
3:26
having on governance and transformation.
3:28
Gary Thomson: I think back to just five years ago when
3:30
we were going through the COVID situation,
3:32
which in April 2020, we were really feeling it right.
3:35
I remember saying at the time,
3:37
and Sarah and I actually talked about this
3:39
that don't let a crisis go to waste.
3:41
I think that post-COVID,
3:44
looking at all the things that
3:47
industry is facing from retirement of the boomers,
3:50
private equity, disruption, etc.,
3:54
the uncertainty that exists has created a lot
3:58
of urgency and looking
4:00
at what supports the firm of the future.
4:02
For me and for us,
4:03
is taking that uncertainty
4:05
and turning it around and saying,
4:06
can we use this as a reason to
4:09
evaluate whether it's capital resources, etc.
4:12
But in the context of what the
4:13
three of us are talking about today,
4:15
let's use it as a reason to
4:17
evaluate what about our governance structure is
4:19
or isn't working and we're really
4:21
pleased to see that type of pivot going on.
4:23
Maybe we didn't get here on our own. That's okay.
4:26
We're here at a time where
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a lot of reflection is going on about governance.
4:30
Erin Hartman: For sure. I just want to say,
4:32
from working with you guys,
4:34
going from thinking about frameworks,
4:37
responsibilities, organizational accountability,
4:40
I know it's all those things,
4:41
but trying to think about
4:44
how you really sum it up in my mind,
4:47
from learning from you guys,
4:48
it's about optimizing efficiencies,
4:51
but it's also about having each leader
4:54
at their highest value use and I think that's important.
4:57
That sets you up for success within your firm.
5:00
You have the right people
5:00
with the right responsibilities,
5:03
and to your point,
5:04
Sarah, about non CPA leaders,
5:06
empowering them to be in that position.
5:09
Those are great thoughts to reflect on.
5:12
What's one misconception about governance that you
5:16
think we've successfully challenged through this series?
5:19
Gary Thomson: For me, it's not just about large firms.
5:22
It almost sounds too fancy at
5:24
times for a lot of the firms
5:25
that Sarah and I are privileged to work with.
5:27
Great God who want us to talk about governance.
5:29
We got this. No, we don't.
5:31
Whether we're a small firm
5:33
with a couple of us in the room,
5:34
governance is a mindset.
5:37
It's a mindset to how we most effectively run,
5:40
and I think these discussions,
5:42
particularly those with the practitioners,
5:44
have made us all aware that
5:45
there's no firm excluded from
5:48
the opportunity to evaluate
5:49
governance and what benefits them long-term wise.
5:52
Sarah Dobek: I would add that I completely
5:53
agree that this impacts every firm,
5:55
and there's not one way to do it.
5:57
I think that because really clear through all of
5:59
the practitioner interviews that we
6:01
did is everybody is
6:03
approaching it a little bit differently,
6:04
and it's working for their firms.
6:07
It's not like there's this one model
6:10
that everybody has to apply,
6:11
which I think is part of what Gary was talking about.
6:14
We make it this big thing, and it's really not.
6:17
I also think that governance is a little bit scary,
6:19
and I hope through
6:21
our toolkit and our resources
6:23
that we've made it a little less scary.
6:25
That it's a little bit more practical
6:27
than most firms realize,
6:29
and that it's possible to
6:30
accomplish that and take steps towards it.
6:33
Erin Hartman: I think you're right. I think it can come
6:35
across as this, like, daunting,
6:37
gigantic project that nobody
6:40
really understands or has time to deal with.
6:43
To keep on that train of thought,
6:45
for firms that are just starting to think about this,
6:48
what's the first step that they can take
6:50
tomorrow to begin implementing governance change?
6:53
Gary Thomson: One of the things that
6:54
Sarah and I talked a lot
6:55
about through all these sessions and in
6:57
the toolkit was just
6:59
starting with some type of self-assessment.
7:02
Using a simple framework to evaluate decisions,
7:07
meetings, all the things that we're doing as a firm,
7:10
understanding our vision for the firm,
7:14
and to the extent that
7:16
that self-assessment needs to involve others,
7:18
absolutely.
7:20
You use people to help us with that.
7:22
But this testing and as
7:24
we said in a couple of our sessions with people,
7:27
inflection points, time to
7:30
admit a new partner, we have a goal to grow.
7:33
We're going to add a new office.
7:34
We're going to add new service lines,
7:36
having ourselves aware that
7:39
every time we get to an inflection point,
7:41
that we're ready to test it.
7:44
Sometimes those are planned inflection points.
7:47
We will every so often, annually,
7:50
every three years, whatever it is,
7:52
test. That's a planned one.
7:54
But even at those unplanned ones, something new happens,
7:57
the industries change, competitors change,
8:00
new people in the firm, having
8:02
a thought process is in how we operate,
8:04
we're going to regularly assess
8:06
and test where we are in our governance.
8:08
Sarah Dobek: Yeah, I couldn't agree more with
8:10
what Gary was talking about.
8:11
He summed it up really nicely as
8:13
far as where we start as a firm.
8:15
It's a little bit simpler
8:16
than sometimes I think we want to make it.
8:18
Erin Hartman: I'm glad you're talking about make it
8:21
simpler because like we talked about it,
8:23
if you think about it as a monumental hurdle
8:26
or monumental overhaul,
8:28
it's going to be difficult to do,
8:30
and you're simply just not going to do it.
8:33
How can firms avoid the common trap of
8:36
over-engineering it or making
8:38
it more complex than it needs to be?
8:41
Sarah Dobek: One of the things
8:42
that they can start
8:42
with is just clarity and purpose.
8:45
Part of what Gary was talking about,
8:46
what decisions are we making?
8:48
If we start with that
8:50
and keeping proportionality in mind,
8:52
I think we can avoid the over-engineering.
8:56
Our ultimate goal is to enable decision making
8:58
and accountability in a government model.
9:01
We don't want to create
9:03
a whole bunch of bureaucratic red tape around that.
9:05
That's not the goal. The goal is, how do we do that?
9:07
If we keep that in mind,
9:09
I think we start to be able
9:11
to simplify it and not over-engineer it,
9:13
but still accomplish what we're trying to accomplish,
9:17
which is to be able to move faster.
9:19
Speed matters today a great deal.
9:21
Just staying focused on that purpose alone will help
9:25
to really narrow it and make
9:27
sure that we're putting in place
9:29
the right things for your firm.
9:30
Gary Thomson: I really like
9:31
Sarah's choice of words there
9:32
particularly thinking about the idea
9:34
of keeping it fit for purpose.
9:36
It needs to match your firm's size, scope, strategy.
9:40
Just don't copy other firms because it looks great.
9:43
We do in our profession,
9:45
learn well, and benchmark well.
9:47
It's a great part of our profession,
9:48
but in this area, we need to really test ourselves.
9:51
Then for me, and this is a lesson learned, Erin.
9:56
Really making sure that I
9:58
prioritize clarity over complexity.
10:02
We do in our profession.
10:03
We see this in goal setting and accountability,
10:06
and I could go through the list.
10:08
Value processes so much that we tend to overprocess.
10:13
If we had to spend 10 hours on governance in a year,
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I'd spend one hour on the process
10:20
and nine hours on the effectiveness.
10:22
Just really valuing clarity
10:24
over the nuance process elements of it all.
10:27
By the way, I'm not anti-process.
10:28
I am after all CPA,
10:30
but the point is making sure
10:32
that we put a proper balance in that.
10:34
Erin Hartman: The implementation of
10:35
that is more important than making
10:38
sure you have everything documented correctly, perhaps.
10:42
You mentioned strategy, and our transforming
10:46
your business model project leaned on
10:48
five pillars of strategy, governance, service offerings,
10:52
technology, and talent,
10:54
and we would like to create a journey for our firms as
10:59
far as where do I start
11:01
in this transforming my firm journey?
11:04
To me, it starts with strategy.
11:07
The next step is governance.
11:09
Can you talk about that,
11:10
how firms can better
11:12
align governance with their strategic execution?
11:15
Gary Thomson: Absolutely. Can you give us
11:17
an hour just on this topic here, Erin?
11:19
I think Sarah and I would both like an hour.
11:21
I'm going to use the word that you used.
11:23
I think it's important that we
11:25
build governance around execution.
11:27
We tend to build governance
11:29
around control. Now, what do I mean by that?
11:31
We're concerned about who gets
11:32
what vote, who does this, who does that.
11:34
I get those, again, important elements.
11:36
As I make a little lightheartedness about it,
11:39
I'm not negating the need
11:41
to be able to say who does it what,
11:43
who doesn't do what in those roles and responsibilities.
11:46
But governance ought to be about
11:48
our ability to execute and what are we executing on?
11:51
We're executing on our strategy,
11:52
and our strategy is foundationally built on our vision.
11:55
If we have true alignment,
11:57
this is my firm of 2031,
12:00
five years from now, six years from now, whatever it is.
12:03
These are the strategies that
12:05
support that vision accomplishment,
12:07
then we ought to be able to say what
12:09
governance structure enables us to execute on that.
12:12
That's a fundamental. If we look at it and go,
12:15
this is going to get in the way, as an example,
12:18
if M&A is part of our strategy,
12:21
and if we have so many complexities
12:23
built into the evaluation of M&A targets,
12:26
the execution of deals,
12:27
who does what and who does this,
12:29
then what you've essentially
12:30
said is we really don't value M&A in
12:32
our strategy because we've built
12:34
too much complexity into what we say is an objective.
12:38
Really making sure that
12:39
our governance supports the execution of our strategy.
12:42
Sarah Dobek: I love Gary's comment around execution,
12:45
because we forget to also enable
12:46
this into our day-to-day.
12:48
That's ultimately where governance needs to come into.
12:50
When we think about bringing clarity,
12:53
when we think about enabling people to make decisions,
12:55
when we think about how we
12:57
are enabling ourselves to move faster,
12:59
the other thing that we think about is,
13:01
where do we pull this in?
13:03
Part of that strategic alignment
13:05
is thinking about pulling
13:06
it into those everyday cadences
13:08
of what it is that we're doing.
13:10
That's how we make it a little bit more realistic.
13:13
Don't overcomplicate it and think about
13:15
what the leaders that are going
13:17
to be executing on this are facing.
13:19
That's where you start to see some of
13:20
that strategic alignment and
13:22
not over-engineer it at the same time.
13:24
Erin Hartman: You guys talk about partners
13:26
not wanting to lose control.
13:29
How do you do that and also enable
13:31
and encourage partner accountability?
13:34
Sarah Dobek: I actually think we give them
13:35
more control through the right governance structure.
13:38
Maybe not the same control,
13:39
but they still have decision-making authority.
13:42
They still have the ability to
13:43
move within whatever they're owning.
13:45
I think control is
13:48
less about needing to make all those decisions and
13:51
more about feeling like you have input and influence
13:54
into what it is that
13:55
you're doing and you feel like you're contributing.
13:57
That's ultimately what an owner
13:59
is taking on when they're thinking that way.
14:01
I think when we have the right governance structures,
14:04
we are still enabling that ownership,
14:06
which automatically comes with accountability.
14:08
Not always automatically oversight,
14:11
but the concepts of those go hand in hand.
14:13
I don't think we're taking away control I think we're
14:16
actually enabling more ownership
14:18
inside of our organizations.
14:20
Gary Thomson: Add on Sarah, I think there's
14:22
many studies, Harvard recently published one that says,
14:26
the best entrepreneurialism exists
14:29
within the framework of
14:31
a corporation where there's
14:33
strong understanding of roles and
14:34
responsibilities and strong accountability.
14:36
Well, wait a minute. How can that work?
14:38
Because we think of entrepreneurialism in
14:40
the Jeff Bezo's Oprah Winfrey context.
14:43
Maybe it's in the garage or whatever.
14:45
What they were articulating is
14:47
that when we have clarity around our strategy,
14:50
and we have partners in our case,
14:52
partners who have a set of
14:54
goals and action items that are clear,
14:56
that are agreed to, then we're freeing them to act.
15:00
Go do, you don't have to keep coming
15:03
back to us for permission and things of that nature.
15:05
What we owe them is
15:08
better communications so that they
15:10
continue to feel engaged so they know what's going on.
15:12
But to Sarah's point, I think we empower them
15:16
more by having strong accountability
15:18
and a strong governance that said,
15:20
this is what you go do.
15:21
There's a lot of confusion when we're not
15:23
sure on who's calling the shots or I need to
15:25
be in the room for all these meetings about what
15:27
my highest and best use is in
15:28
a given day in a strong governance structure.
15:31
I have clarity around my highest and best use.
15:33
We've agreed to those goals. Now I go do.
15:35
By the way, those that might be in leadership,
15:38
have a few less things to worry about, as well.
15:41
They can go run and do. It's a bit of
15:43
a flywheel for not just
15:45
our partners that you might call
15:47
the day-to-day line partners,
15:48
but even for our leaders.
15:50
Erin Hartman: You're talking about clarity,
15:52
accountability, control, to some extent.
15:55
Hey, keep using that word.
15:57
But I think we all know what we mean by that.
15:59
I think a similar topic
16:01
that we need to talk about is transparency,
16:03
and I know you guys talk about that
16:05
within our governance toolkit a lot,
16:07
and how can that be fostered?
16:09
I think that is important,
16:10
largely because we are saying,
16:12
you don't need to be involved in
16:14
every single decision that this firm makes,
16:17
but you need to feel good about it,
16:18
know that it's being handled well.
16:20
Gary Thomson: I will repeat a little bit of what we
16:24
said in one of our podcasts, Sarah.
16:25
I can't recall which one, but Erin,
16:27
when I work with firms that are
16:29
going through a governance transition,
16:31
what I say to them is, you cannot overcommunicate.
16:35
It's impossible. What we owe,
16:39
particularly in transition to
16:40
our partners is more distinctive,
16:42
deeper communication so that
16:45
what they've given up, the seat at the table,
16:48
the instant knowledge, the hand raise of a vote,
16:51
is substituted with
16:52
better information as to what's going on.
16:55
What you may need to do two years from now likely will
16:58
look distinctively different than what
17:00
it looks like now in transition.
17:02
We gain the confidence of
17:04
our partner group through communication.
17:07
Sarah's the communications guru on this.
17:10
I'll just add before I hand it to the guru,
17:12
that takes all forms and shapes.
17:15
Some are readers, some are listeners,
17:17
some are visual people.
17:19
If we think that there's
17:21
a single way of connecting with a diverse partner group,
17:23
whether that be generationally
17:26
different offices, then we're mistaken.
17:27
We've just got to double down
17:29
on better communication and
17:33
then recognize the lift
17:35
now will likely be
17:36
more than the lift a few years from now,
17:38
but we're just going to get better at it as we go along.
17:41
Sarah Dobek: I would add to what Gary is saying
17:43
that frequency matters in communication.
17:46
I work with a lot of leaders who are like,
17:47
Well, we don't need to say that again.
17:49
I told them six months ago
17:52
what the date of this was going to be.
17:53
They know, they're clear on it, and I'm like,
17:55
well, I'm not sure they are
17:57
clear on it. It's bubbled up to me.
17:59
There's something we need to reinforce here.
18:01
The other thing that I really focus on with
18:03
firms is the tone of the communication matters.
18:06
As leaders who are often
18:08
practitioners and land in their leadership roles,
18:10
sometimes by happenstance, sometimes by choice,
18:13
that tone really matters.
18:16
Being thoughtful and intentional
18:17
with the word choice that we're using,
18:21
really goes a long way to
18:23
the impact that you have
18:25
and how that message is received.
18:27
The advice that I would share with
18:30
them is take the time to do it correctly,
18:32
pull in the people
18:33
inside your firm that are really good communicators.
18:36
Sometimes it's living in human resources,
18:38
sometimes it's living in marketing and leverage
18:42
them to help draft
18:44
really important internal communications.
18:47
I cannot go understated.
18:48
Gary, I think you lived in this world for
18:50
a really long time and had people
18:52
internally helping you translate these messages.
18:54
Gary Thomson: Yeah, Sarah knows this because
18:57
I was privileged many months
18:58
ago to work for Sarah on communication.
19:00
You think you've nailed it.
19:02
Then you realize that someone with
19:04
such a different perspective
19:06
and a mindset and knowledge.
19:07
Like, how could you have
19:09
just interpreted what I said that way?
19:11
While we can't avoid those things,
19:14
I do find that look,
19:16
let's acknowledge that we tend to
19:17
communicate best in our style.
19:20
When you have this awareness that says,
19:23
Erin and Sarah are going to receive
19:24
this message in different ways,
19:26
how do I work on that?
19:29
Let's just quickly acknowledge that you will spend
19:32
your entire communication life frustrated
19:34
by what people did or didn't get from what you said.
19:36
That's part of life. That's humans.
19:38
That's not just CPAs.
19:40
But I do think our people
19:43
in our profession, I should say,
19:45
recognize the genuine effort
19:47
toward transparency and regular communication,
19:49
and they'll reward that
19:50
even if they didn't get everything they wanted to get.
19:52
Erin Hartman: I think it's interesting what you
19:54
talked about just people
19:56
interpreting things differently.
19:57
I think when you think about
19:59
non CPAs and leadership positions,
20:01
that can sometimes be the case because I think it's real
20:04
easy to feel like everybody feels the way I do.
20:07
They're going to take this the way I do.
20:09
I don't know if it's as I
20:11
further my career or just get older.
20:14
You realize you're not that person.
20:15
You don't know what experiences they've had,
20:18
how they internalize something.
20:20
I do think in all these areas,
20:22
in running a business and the governance of it
20:24
is truly understanding how
20:27
other people feel and allowing them to
20:30
feel that way and taking their thoughts
20:32
into consideration and remembering that we don't
20:35
all think and translate things the same way
20:38
is important.
20:39
I can see that being huge in
20:42
communications, especially with this,
20:44
just how people take things are not
20:46
necessarily the way you expect them to.
20:50
Sarah Dobek: We all have cognitive bias, Erin.
20:51
As humans, we can't get past that,
20:54
and sometimes that's hard
20:56
as leaders that we remember, we get frustrated.
20:59
When we have to repeat ourselves
21:01
or we don't understand why they're not getting it.
21:04
I think just keeping that in mind
21:05
that this is part of the process.
21:07
It's change management.
21:08
That's what we're talking about at the end of the day.
21:10
Change management is not fast.
21:12
It's frustrating.
21:14
It's not a straight line.
21:15
We want it to be a straight line,
21:17
and it looks a lot messier than that.
21:19
But at the end goal,
21:20
the reward out of that is
21:22
getting our firms where we need them to be.
21:24
How long that takes.
21:26
Sometimes we just don't know and we've
21:28
got to be patient with that process.
21:30
Erin Hartman: In talking about changes and
21:32
getting our firms where they need to be,
21:35
there are a lot of transitions in the life of a firm.
21:38
On that you might think it's going to be just like this,
21:41
and a year later, it's totally different.
21:43
There are a lot of unknowns,
21:44
as with everything in the future.
21:46
As your firm grows,
21:48
where you shift in your ownership models,
21:51
you have new partners,
21:53
you have M&A activity, private equity investment,
21:57
perhaps, just changes in
21:59
the market that affect you externally.
22:02
How should governance evolve?
22:05
What I really mean about that is,
22:07
how do I set up my governance now so that
22:10
if we do need to shift and change and be flexible,
22:13
that my people are okay with that as well.
22:16
Gary Thomson: Very carefully.
22:17
Two thoughts come to mind on that one, Erin.
22:20
I think it's important that we have
22:22
a broad set of governance principles.
22:25
Principles are different than rules.
22:27
Rules are defining that structure and everything.
22:30
But if we have a broad set of principles
22:33
around how we think and respond to governance,
22:37
then it no longer is surprising to
22:40
our people that we might
22:42
be revisiting, revising governance.
22:45
These broad based principles
22:48
from fairness to efficiency,
22:52
transparency, we get through a list of things.
22:55
If they exist, then that says to our leaders,
23:00
expect this on a regular basis.
23:02
The second thing in
23:05
taking the list that you articulated just a second ago,
23:08
maybe if we park private equity over to the side.
23:11
If we just think about a firm in a normal
23:15
non PE context,
23:17
I think it is possible to build
23:19
scalability into our governance.
23:22
It says, here's what we'll look like now.
23:25
But as these dimensions change,
23:28
be expecting this difference in
23:31
scale to one of the areas that
23:33
Sarah will be speaking at a conference in the near term,
23:37
the area of a practice group leader,
23:39
industry, service line niche.
23:41
They may not be embedded in
23:44
a smaller firms governance structure.
23:47
But there's this principle that says,
23:49
as we scale and add people or get better
23:52
at niches or get better at specialization,
23:55
anticipate that the next level of governance is we will
23:58
introduce these people not only
24:00
to drive success and revenue growth,
24:03
but to be an important part of our governance team.
24:06
Broad based principles that make it
24:08
not surprising when we have to make governance changes.
24:11
Then, secondly, to the extent that we can
24:14
anticipate allow for sustainability in what we do.
24:18
Sarah Dobek: Yeah, I would add into
24:20
what Gary's touching on,
24:21
and he said before in
24:23
some previous conversations that we've had
24:24
is we've got to build some flexibility.
24:26
The governance, whatever it is that we're creating,
24:28
however we're defining and giving that clarity,
24:31
we can't be so rigid that it can't move with us.
24:34
I think managing and setting
24:35
that expectation internally that,
24:37
this isn't a one and done.
24:39
I think in the past,
24:40
a lot of firms set their governance or
24:42
accidentally set their governance because they
24:45
didn't really think about it and define it
24:48
and then didn't touch it until the wheel was broken,
24:51
until it was really, really painful.
24:54
They realized something needed to change or we had
24:56
COVID and the market changed for us.
24:59
Just understanding and managing that expectation with
25:02
our leadership group that this is a framework.
25:05
It's not a one and done.
25:06
It's not like we're not going to touch
25:07
this for 20 years.
25:08
We're going to evolve it as it needs to evolve,
25:10
and we're going to build some flexibility
25:12
into our model. We don't know.
25:14
Maybe this is going to be right for us for three years,
25:16
and we're going to double tie,
25:18
and we're going to need to revisit it,
25:19
or maybe it's going to be right for the next 10 years.
25:21
I don't know. I'm not sure anybody can really
25:23
predict that in this stage of the game right now.
25:26
Erin Hartman: You're talking about,
25:27
once you've got it in place,
25:29
you're not going to touch it.
25:30
You don't make any changes.
25:31
I think firms also here on the side of
25:34
until we have it absolutely perfect,
25:37
we're not going to implement it.
25:39
I'd love to hear your thoughts
25:41
on that because you're talking about
25:42
rules and structures and process, but also flexibility.
25:46
I feel like from
25:48
really all the practitioners we've talked to lately,
25:51
like, just start.
25:53
Whatever you're talking about, governance,
25:55
some new service offering that you want to offer,
25:58
you've just got to start at someplace.
26:00
I love your thoughts on that as well.
26:03
Sarah Dobek: Anybody that's spent
26:04
any time around me knows
26:05
my catchphrase, progress, not perfection.
26:07
I probably say it 50 times a day.
26:10
Part of starting is
26:13
picking something and starting the conversation.
26:15
I think we have to be bold as leaders and raise it.
26:17
This is a scary topic to
26:19
sometimes raise within our partner groups.
26:21
But beginning there and
26:22
starting with some of that clarity and roles and
26:24
responsibility is an easy place to begin.
26:27
We've got some toolkits and resources that we've
26:29
built out for some of those things.
26:31
But keeping that in mind is
26:33
a really important element to beginning the journey.
26:36
Gary Thomson: Yeah, I couldn't agree more.
26:38
The idea of waiting for perfection doesn't exist.
26:41
There never will be a time where it's perfect.
26:45
Our profession, like many other professions are
26:48
just operating with such speed that we back
26:51
to this idea of principles based
26:54
and the ability to be flexible
26:56
at the end of the day is what drives us.
26:58
Now, at the same time,
27:01
I see a lot of firms who put
27:03
off difficult governance decisions,
27:05
and we can't do that.
27:07
Waiting for perfection doesn't mean, oh,
27:10
let's do all the easy fixes
27:11
and save the hard ones for later.
27:13
But there's a terrific bounce to getting clarity,
27:18
having an understanding,
27:20
then waiting for perfection.
27:22
Here's what Sarah and I will promise you.
27:24
The day you finish with your governance document,
27:27
the next day, we can already begin
27:28
to think about something we will change.
27:31
It's really important Erin to
27:34
your point that we encourage people
27:36
to use the tool kits the AICPA has
27:38
provided to make assessments,
27:40
to look at their partnership agreements,
27:42
back to the one conversation we
27:43
had specific to our partnership agreements.
27:46
To say, we're going to push
27:48
ourselves to get most of this right.
27:50
Then to the extent there things that
27:52
we need to deal with later, great.
27:54
But let's get these things
27:55
done and done now for this reason.
27:58
Let's not wait on it for sure.
28:00
Erin Hartman: Getting back to the toolkit, like I said,
28:02
we have introduced the PCPS governance toolkit
28:05
that the two of you worked on with us.
28:08
What are some ways that firms can use
28:11
these resources and the tools that are within it?
28:13
Gary Thomson: My mind immediately goes to
28:15
the templates that have been developed
28:17
and kudos to the AICPA for providing those resources.
28:22
Sarah and I love to talk
28:24
with firms and help them think through it.
28:26
We're consultants. That's what we do.
28:27
At the same time, many will just
28:29
benefit from pulling those templates up,
28:32
thinking and looking and
28:33
talking at the leadership team about them.
28:36
Some really smart, talented
28:38
professionals in our business,
28:39
regardless of firm size,
28:41
you can access those templates.
28:43
Know where to start from
28:45
charters to scorecards to roll definitions.
28:48
You can go through the list
28:48
of all things that are there.
28:50
Allow that to generate more ideas, more questions,
28:53
and more curiosity about information,
28:55
but I think those templates are ready to go.
28:57
Sarah Dobek: The other thing that I
28:58
would say is listen to
28:59
the podcasts that we've put together
29:01
and the other interviews that
29:02
the AICPA has done and that have included in here.
29:05
Mindset shift matters when
29:07
we're talking about governance,
29:08
and a leader can be way out ahead,
29:11
but we've got to have the whole leadership team
29:13
tracking with us about changes.
29:16
Part of mindset shift means hearing from
29:18
other practitioners as to how they approached it,
29:22
what they're thinking, what
29:23
their journey was and all of that.
29:25
As a leadership team,
29:26
I would encourage you to sit down and listen
29:29
to those and continue
29:30
that conversation about the templates,
29:31
the resources, and what's happening at our firm.
29:35
Why should we be having this conversation?
29:37
What does that mean for us?
29:39
But start the conversation.
29:41
Be bold enough to speak up and start that conversation.
29:43
Erin Hartman: I know we've talked about this
29:45
in some of the other podcasts,
29:47
but one of my favorite tools in the toolkit is
29:50
the key triggers for rethinking your governance.
29:53
Can you guys talk about that?
29:55
Maybe what are the warning signs
29:56
that a firm's governance
29:57
does need to change and
29:59
how to think about them proactively?
30:01
Gary Thomson: I think if I'm a leader of
30:03
a firm and I'm losing my hair,
30:05
my hair is gray, that might be a sign,
30:06
but we'll leave that one to the side for later.
30:09
Two things that I think about.
30:11
First of all, if we see partner frustration,
30:14
let's just say partner shareholder principles,
30:16
all the names that firms use
30:18
leader frustration, even disengagement.
30:22
That's a warning sign.
30:23
It's got to be a warning sign,
30:25
and occasionally, it's a personality thing,
30:27
and we accept that, but some type of change,
30:30
noticeable change, people are just frustrated.
30:32
Sarah and I have both been in rings with
30:33
firms where the knives are out for whatever reason.
30:36
That's a pretty good trigger that
30:39
something's not working well
30:40
in governance because after all,
30:41
it's about leadership and
30:43
leaderships in better than that.
30:44
Then the second thing is just really
30:46
challenging ourselves around delayed decision making,
30:49
if it's taking forever to make decisions.
30:51
We can't do that in 2025 and beyond.
30:54
Just looking at both of those
30:56
and being really fair and saying,
30:58
are there things that have been on our to do
31:00
list for an incomprehensible amount of time,
31:03
and we just can't move them?
31:05
Sarah and I will leave a lot of
31:06
strategic planning meetings and
31:08
come back the next year or six months later.
31:10
What's happening? Nothing. There's a warning sign
31:13
there about governance.
31:14
There obviously could be other elements of that,
31:17
not to isolate just the governance,
31:18
but those two things come to mind,
31:20
Erin as potential triggers or we need to re-evaluate,
31:25
why aren't we able to execute on these things?
31:27
Or why are people frustrated?
31:29
Sarah Dobek: Yeah. That execution piece is so important.
31:32
We can't afford to not move year to year.
31:34
We can't get into a situation in
31:36
this market and be competitive and not just
31:39
survive but thrive as a firm if
31:42
we aren't moving fast enough on some of those things.
31:45
That doesn't mean being impulsive.
31:46
We still want to be intentional,
31:47
but it can't take us
31:49
three years to make a change on something.
31:52
I think the other thing that I would add to that
31:54
is really has the firm grown or changed.
31:56
Whether that's mindset shift,
31:58
whether that is how we go to
32:00
market, has our market changed.
32:02
The market that we serve and what's happening.
32:06
So much of what I think we're talking about
32:08
today is triggered by events
32:10
outside of our control that just
32:12
spiraled this momentum of
32:14
transformation in this profession,
32:16
and so part of the response right now is out of that,
32:20
not necessarily always something
32:22
that's changed in firms,
32:23
but we have to change to
32:24
meet what's going on in the world around us.
32:27
Erin Hartman: For sure. I think you're touching on
32:29
something that's really important right now and why
32:32
governance seems so important at this moment.
32:35
The pandemic clearly accelerated a lot of things that
32:39
I know Gary you were talking about,
32:41
taking advantage of
32:42
the positives that can come out of that.
32:43
But all of these things may have happened,
32:45
but it clearly accelerated.
32:47
The demographics of the workforce, technology,
32:51
changes and advancements and
32:52
also just mind shift changes.
32:55
I do think this is a really great time to look at this.
32:59
Again, I'll talk about the tool that
33:00
you guys are talking about, the warning signs,
33:02
the triggers that you need to maybe change something.
33:06
Have I grown in people?
33:07
Have I changed my service offerings,
33:10
my more advisory than I used to be.
33:12
For example, do my people not
33:15
understand what their roles
33:17
are or what they don't seem accountable?
33:19
All of these things in this tool,
33:22
you can rate yourself,
33:23
and then you get results like I love
33:26
the results that you guys put together
33:28
with that because it's not just yeah,
33:30
you need to change your governance.
33:32
It talks to you about like, okay,
33:34
well, maybe this is wrong,
33:35
but you don't need an entire overhaul,
33:38
or you do, or I think things are going well.
33:42
It's a nice check to see how you're doing and think
33:46
about these other areas of governance
33:49
and whether or not there
33:50
are things that you need to consider.
33:51
We really appreciate you putting that together.
33:55
If you can give firms one challenge or
33:58
next step coming out of this series, what would it be?
34:02
Sarah Dobek: Pick one thing to start with.
34:03
That's always my advice.
34:05
Momentum is built off of action.
34:08
Pick something to start on,
34:10
whether it's have that conversation
34:12
in your partner group meeting,
34:13
whether it's listen to the podcast and encourage
34:15
your partners to do the same thing, start somewhere.
34:19
We don't have to bite off the whole thing,
34:21
but pick an area to focus on.
34:23
Gary Thomson: Erin I think most practitioners
34:26
are competitive people.
34:28
They want to do well.
34:29
They want to be the best at what they do,
34:32
client service, taking care of their people.
34:35
My point is, use
34:37
that competitive edge in the governance area.
34:40
Make governance an asset for your firm,
34:43
an edge for your firm.
34:45
Your future clients will see that,
34:47
see the way you operate,
34:49
your future talent will see that,
34:51
your future owners will see it.
34:53
Rather than being something we just take care of it,
34:56
make it a priority.
34:58
Make it something that we say will form
35:00
an edge for our firm going forward.
35:03
Erin Hartman: I love that. Thank you, guys.
35:05
I do think, to your point, too, Sarah,
35:07
about starting somewhere, and like I said before,
35:11
in this whole transforming your business model series,
35:14
everyone I've talked to about
35:15
different changes they've made
35:17
within their business model,
35:19
they need to start someplace,
35:21
and they're glad they started.
35:23
Nobody regrets making decisions for the future.
35:26
I haven't heard one firm talk about,
35:29
I wish I hadn't relooked at my governance.
35:31
I wish I hadn't right sized my client base.
35:35
I wish I hadn't changed my billing practices.
35:39
These are all good decisions that need to be made.
35:42
What they all have in common is they
35:44
say they wish they had started sooner.
35:46
Never a better time.
35:48
This has been great working with both of you
35:50
on this project. I've learned so much.
35:52
I know our listeners will.
35:54
I know you guys will be back with us for
35:56
our webcast series in June.
35:58
We have a whole webcast series
35:59
on this business model project,
36:02
and you guys will be back with us to
36:04
talk more about governance.
36:06
I hope you will join us again
36:08
on other related topics as we
36:09
continue to develop this
36:11
transforming your business model project.
36:13
Thank you so much.
36:14
Sarah Dobek: Thank you, Erin.
36:15
Gary Thomson: Thank you, Erin and Sarah.
36:19
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