As senior partners in accounting firms retire, an opportunity arises to review and update the process used to bring new partners into the firm. While simply replacing each partner as he or she retires is an option, firms that put some thought into the process stand to improve efficiency, productivity, and quality of service provided to clients.
The “best practices” for admitting new partners to an accounting firm include:
Know how many new partners you really need.
Many accounting firms are currently trying to support too many partners with too little revenue – which means the partners, must handle a great deal of work that can be performed by staff. As partners retire, avoid the urge to simply “fill the gap” with a new equity partner. Instead, seize the opportunity to evaluate the firm’s needs and identify ways to improve both leverage and client service.
Create a “partner-in-training” (PIT) program.
A partner-in-training (PIT) program focuses on identifying promising candidates for partnership and preparing them for the position. Most PIT programs last for a year or two, during which the candidate is asked to participate in partner meetings, exposed to financial and other partner information, and given the tools to step into a leadership position in the firm. In this way, the PIT program acts as specialized mentoring targeted toward creating effective new partners. During the program, both the potential partner and the firm can evaluate whether partnership will work for both parties.
In order to address the “too many partners” problem, many firms are creating a position known as the “non-equity” or “low-equity” partner. These partners carry significant responsibility for serving clients and are recognized as partners outside the firm, but they do not bear the full burden of a full-equity partner. Some non- or low-equity partners eventually become full partners, while others stay in the position indefinitely.
Traditionally, new partner “buy in” valuations included a significant goodwill factor as well as a capital account total. Today, however, capital transactions for partners are controlled by the firm’s partner agreements, and buy-in value is often based on the firm’s accrual basis balance sheet. Goodwill is earned over time via a vesting process. Whichever method your organization uses, partner retirement and replacement create an opportunity to determine whether the system really works for the firm.
The experienced staffing partners at Daley and Associates help financial firms throughout Boston and the Northeast find the right people. Contact us today to learn more.
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