Thank you for tuning in to the special edition Transforming, Tales of Business Evolution Podcast, : focused on firm governance. We hope you enjoy these special episodes that are designed to tie to and enrich our brand new PCPS Governance toolkit. Developed by AICPA.
: & CIMA, the PCPS team, along with Gary Thompson, founder and principal of Thompson Consulting, and Sarah Dobek, founder and president of Inovautus Consulting, the tool kit and these special podcast episodes focus on decision making and accountability within firms. Whether firms are experiencing changes due to internal growth, external market forces, or other key triggers, re evaluating the current governance structure can be a game changer. Listen to all four episodes.
The episodes are hosted by Gary and Sarah, and they're joined by practitioners who have made these real life changes in their firms, and areas including the benefits of using an operating model, ideas to consider related to partnership agreements, and introducing non-CPAs into leadership roles and setting them up for success. In the final episode, Gary and Sarah share with our PCPS team all about what they've learned to drive success in firms.
Listen and learn about how proper governance is not just something for big firms to think about. It involves behavioral changes that are applicable to even the smallest firms. We hope you enjoy.
Hi. Welcome to our podcast on operating models. I'm Sarah Dobek with Inovautus Consulting, and today I'm joined by my co-host, Gary Thompson.
Hi, Sarah. Good to be with you again for this.
We are excited to be talking about this topic today. It's part of our governance toolkit that we've helped develop with the AICPA and we've got two practitioners here today to share a little bit more about their specific experience with operating models. We know this can play a really important role as we look at governance structure and evolving our governance structure inside of our accounting firms.
I'd like to introduce Chris and Amber and they'll have an opportunity to just introduce themselves and tell you a little bit more about their firms. Chris, why don't you go first?
Thanks, Sarah. I'm Chris Sullivan. I'm the managing partner of VSH CPAs. We're located in Bellingham, Washington, which is about 20 minutes from Canada. We have about 60 people, including some offshore people, and we're about nine million.
Thanks so much, Chris. Amber, if you'll give a quick introduction to everybody.
Hi. I'm Amber Goering. I'm the CEO of Goering & Granatino, now GG Advisors in Leewood, Kansas. It's a suburb of Kansas City. We are a little over 40 people, including 11 of our offshore team in Hyderabad.
Thanks for joining us. We're really excited, like I said, to talk about this topic because it's something that I think has been evolving quite a bit in the profession is we're watching a lot of firms adopt various different types of operating models, and it really plays an important role when we think about governance in accounting firms. Let's jump in and let's talk a little bit about this. I know both of you are on EOS, Entrepreneur Operating System.
When did you select EOS as an operating model and why? Amber, maybe we'll start with you on this one. Sure. I was just becoming popular in our industry and we're a very entrepreneurial firm, oftentimes has been an early adopter of things, sometimes to our detriment, sometimes to our benefit. We had a few friends in the industry that had already adopted it and seemed to be working wonders for their firms. We needed to take the next step in scaling our firm and growing.
I think at the time, I believe it was about 2018 when we adopted EOS. I think we were about 10 people, and so it seemed like the best way to tackle that scalability for the firm. Chris, what about you? When did you all adopt EOS, and what led you to initially look at an operating model? Chris Sullivan: That's great, Amber. We're not usually early adopters, so we actually adopted in 2021, and it was really driven by the need to improve our governance and to make some immediate changes.
VSH stands for three founding legacy partners. The V had exited, and we didn't really know how to govern efficiently and effectively. We had a business coach who was an EOS implementor and I knew him in the community and he brought EOS to us in a way of, this is the way to organize your next generation of leadership and really drive that growth that you're looking for in the firm. We did that in 2021. I would say that COVID was also a stimulator, and you really need to make some changes.
Chris and Amber, thank you for sharing that as some of the foundation. I'd love to dig into this a little bit more and Gary, welcome you to chime in with some questions. But EOS has an ability to not only help you scale but really influence governance practices. I'd love to hear a little bit more on when you were implementing this, not only needing a governance framework, but what were some of the challenges your firm was facing when you chose to really start to work on this?
What were some of those pinpoints? Amber, do you want to jump in first?
Sure, happy to. At the time again, we were looking to scale and we didn't know where to start. As a visionary, I would go to the AICPA conferences and meet with my managing partner round table and come home with all these ideas. Well, as a small business, you can't implement them all at one time.
In EOS, there's what they call a one page plan where you look at your strategic plan, you set your strategic plan for the year for three years, for 10 years out, and then you break that down into quarterly rocks and then weekly meetings. We religiously followed those L10 meetings. It's a very specific iteration and structure of a meeting that helps you No Pun intended, gain traction but stay on track.
We update our strategic plan annually as an executive leadership team to make sure we are always evolving and leveling up. Those meetings and that cadence is very important in doing that.
I have to imagine that vision is such an important part of deciding where we're going. I think one of the challenges I see when we work with accounting firms is that lack of clarity can really impact our ability to make decisions at the end of the day. It's one of the things that I valued about EOS side no here. I am also an EOS firm. We use it in our organization as a consulting group.
But I've always found it really helpful to keep everybody focused on what is it because I've always viewed that as a filter. Our vision is a filter to how we make decisions on things.
For me, for many years, I used the TOS, which is the Thompson operating system. I just assumed that everyone thought the same way I did. Using Sarah's word, they had the same clarity that I had. Using Amber's word, they had the same vision that I had.
Even back to Chris's comments about founding partners, and the differences, and what I found valuable about EOS and similar systems is it level sets for all of us, whether we're someone new walking in the door or an experienced leader like Chris and Amber. Chris and Amber, I have the privilege of working with your firm over time.
I'm sure you're going to tell me that it was the easiest thing in the world to implement EOS, but talk about some of the challenges because both of your firms, you were going from Chris, in your case, founding partners to the Next Gen on leadership. Amber, you were one of the founding partners and I happen to know your main other partner, your differences in the way that you look at the world, the way you view the profession. Chris, maybe I'll start with you.
What were some of the challenges as you went to implement EOS?
There were a lot of challenges. I'm a realist. I like to just face them and put them on the table. I think for VSH, it was that we had a structure, whether we might have identified it as dysfunctional at the time. We did have this structure, and we needed to tear that apart and rebuild. Just the act of implementing takes a time commitment. I think, like Amber noted, you bring all these ideas back, EOS being one of them, you still have a day job.
For us, it was really that top-level commitment with the partner group, really gaining some effectiveness within that group, and then being able to roll it out. We did roll it out to different teams at different stages. In reflection, I'm not sure that's the most effective.
As I reflected on this topic, the things that I would do differently would be a bigger push in the beginning and really getting fully foundational in the firm versus different steps that felt like the only way it was made possible at the time. I think we also had to work through some what of the form over substance. I think the Level 10 meetings are so effective now. We use them in all of our teams.
But at the time of implementing, it had some element of, we have to go in this order and we have to have things here, and we lost sight of the effectiveness it was meant to provide. Those are some of the things that were challenging in the beginning. One of our core values is continuous improvement, and so I appreciate that we're always working towards making governance just better every day.
It was easy. No problems at all.
No, I don't think we had the confidence we could implement it by ourselves. We did invest in a consultant to help us implement it and roll it out and get us to that initial strategic plan. When the challenges came, however, it was when that consulting engagement ended to then take our baby steps to learn how to truly implement it and stay disciplined, to continue it ourselves. What it did, though, was help me step from working in the business to on the business.
Long before it was popular, I stepped out from working and reviewing tax returns to being the CEO of the firm and just doing business develop and practice management. That enabled us to grow very, very quickly. I would like to think a lot of that points to EOS and the implementation of it.
I think one of the misunderstandings about EOS and other similar things is that it has a certain amount of rigidity to it, and that we don't have flexibility. Amber, you mentioned you started 2017 and then COVID hit. Maybe for both of you, how does EOS allow you to react in speed? Because many of us think of EOS as process-oriented, take your time, go through all the steps, but it's really built to support you in times when you have to make critical decisions and speech.
Either one of you, maybe start with Amber and go to Chris on. How does EOS give you flexibility and speed to make tough decisions?
As part of the meeting, there's an IDS portion which is identify, discuss and solve, and that's the longest portion of the meeting. That's where say you have an issue you want to discuss with your partner throughout the week, but it's not extremely urgent. Well, that goes on the docket for the EOS meeting, so you're not just popping into each other's offices, wasting time.
You can really drill down to the issues at hand, have your executive leadership team discuss and solve those in that one meeting and make the decision and assign out the action item on it, and again, keep gaining traction as you're moving forward.
Chris, I'm sure you never have surprises in your role as managing partner, but if you were to have surprises, how does EOS help you with that?
I fall on Amber that I find the IDS the most effective. As I think about prior partner meetings where we just sit around the table invent and not get anything done. But the idea of solving three things every week has really pushed us forward, as well as the scorecard. You start with this segue, which is very important in our multi-faceted lives, and then you go to the scorecard. We continue to improve on our scorecard, but the scorecard is really that snapshots your dashboard.
I find that also really effective.
That's a great point, Chris. That scorecard, to just expand on it a little bit, the KPIs that we chose for the scorecard are not very extensive in nature. There's only maybe 10 or 12, if that. As long as we're paying attention to those and truly measuring those and constantly focusing toward the one page plan and the strategic goal, as long as everything we're doing feeds into that goal, that makes us successful. I think you're right, Chris. That's very important.
Amber, I think what you said was really important in this idea of scorecards. As I work with firms, one of the things that I see in this evolution is that we often aren't using the data to help us make decisions on a daily basis and manage it. Part of this whole governance shift in topic isn't just about the framework, but it's about empowering people to lead in our organizations.
As we go through these different sizes and we go through these governance shifts, as leaders, we need to be able to let go, but we still need to have a line of sight of what we're doing. Those KPIs are one of the elements that give us the ability to see what's going on the business, make sure that we're on track, but also be able to empower the people that we've put in those seats in order to be able to lead.
I don't think we put enough focus on that, even though I know there's some movement in the profession where we're focused on Power BI, but being able to bring it back to what are those metrics that are driving that business?
I find that the scorecard is training module for your lower levels, your managers that are participating in service line. We use EOS model throughout the firm and each service line runs a LTI meeting and starts with their scorecard. These managers, in some cases, are learning to know these KPIs to run a business, if you will, in this small little fashion of their department.
Chris makes another great point on how important it is to have clarity in the organization. In all of our culture amp surveys, initially, it became very apparent that our team members from whatever level they were wanted clarity in where the organization was headed. They wanted to know that.
We started teaching them about the KPIs, just like Chris has done, and that's helped significantly, not only for them to understand where we're going and what our vision and values are, but also to buy in and learn how to run a vision.
I love it. Really excellent points. The other thing that I think you guys touched on that I want to come back to is another really core element of EOS. That's accountability. We know how important that is in governing, but also just in being able to grow our businesses. That is probably not the topic that everybody likes to talk about because we have some misperceptions about what accountability means. For most of us, we define it as micromanagement.
Whereas instead, we should really be looking at the highways safe. We don't ask about it, it means we don't care about it. We see that as an opportunity and a development opportunity. But we struggle in this profession to figure out how to hold people accountable. I think, Chris, one of the things I heard you say is we come out of that with actions.
I think that's such an important thing to talk about because until we have something like an EOS or a TOS, the Thompson operating system or whatever we define it as our firm, we've got to create a culture where accountability is part of the norm that we talk about follow-through and ownership.
Can each of you talk a little bit about the importance of that and what it did for you as you were putting some of this in place and how beneficial that's been as far as creating some of that as part of our culture? Amber, do you want to go first?
Sure, Sarah. The brainstorming activities that we participate in as an executive leadership team, not only from an annual perspective, but from a quarterly perspective, help ensure we're all aligned on our collective vision. Then we have buy-in from everyone. Then, when you have a shared vision down into specific steps to get there annually, weekly, and you intentionally assign those and people take ownership of those, you do have that accountability and then it ensures success.
Chris, what has your experience been with that? I know that you were starting post-COVID and some other challenges going on within your environment?
I think accountability is the biggest challenge any firm has. I say that from the context of where our firm came from where we were looking for this major transition from a founding partner and how it was operated. We really went from silo practices of very successful partners to wanting to be a cohesive firm with a vision. I love the VTO. The vision traction organizer. I think Amber, you mentioned that before.
We have a similar process in that we meet annually for two days session with our business coach who was our EOS implementor, and we identify various aspects and then always review our vision. Identify our goals for that year and then rocks for that quarter. We're able to then roll that out throughout the firm, throughout the different departments so that each department comes up with their goals and rocks that align with that vision.
I would say accountability is still difficult because of Sarah, how you described it. It does have a bad reputation of being micromanaging, but when you bring it together in this forum of we're a team, we agreed on this. This is the vision of the company, and here's where we want to go and here's how we're going to achieve it. It has a different context to it, and everyone's rowing in the same direction.
One of you, and I can't recall which of you mentioned earlier that it's so hard for us sometimes to make decisions. Sarah and I, as we did our first podcast, we talked about CPAs are famous for admiring our problems as opposed to solving our problems. Both of you are in firms that have fewer than 10 partners. Oftentimes, as I work with firms like yours, they think to themselves, "We don't need anything fancy, we don't need an EOS. We can just run the firm."
Yet, I feel the opposite, that we benefit from something structured at your level because you're so busy with so many different aspects of running a firm. Both of you comment, maybe start with you on this one, Chris, as to how this system has allowed you to address the critical priorities that you mentioned earlier, the rocks and to stay consistent in your efforts to scale the firm and grow the firm.
That's an excellent point. I truly believe you must have a business model. As accountants, I think we believe in organized roadmap and getting somewhere and having an end result, and that's what I find EOS does for our firm. We can stay focused on the priorities because we always have our vision in front of us.
We know what the milestones are, the scorecard, for example, we are looking at issues as a leadership group every week, we're sorting them when there are things that just can't be solved that week into a long-term issue that's going to be addressed in our quarterly session. We're prioritizing things. It's making us a more cohesive group. This is something that VSH has had to work with. Again, having a founding partner and then now we have new partners.
It allowed everyone to contribute in a way, but still stay aligned with our vision and goals.
Great point again, Chris, not only the ELT being involved in those, but our culture survey, our engagement survey drives a lot of our quarterly rocks and our annual goals because as everyone knows, our people are our greatest asset and we have to listen to them.
We don't need to be chasing little things here and there, but oftentimes with those surveys, there are recurring themes and when we can be transparent like our team wants us to then communicate back to them how we're solving that issue, that creates stickiness, and I think that's really important.
Amber, you brought up the word, you brought up the word culture. As Sarah and I are working on this and brainstorming, there's this question around how EOS and similar type things, but we're speaking to EOS today help support and actually help form a culture for our firm. Can you talk about how adopting EOS has impacted your firm's culture and even employee engagement?
Sure. When you first start EOS, it's a several day meeting. It's been a long time since we initially adopted it, but I believe it was two days here and then maybe in another six weeks, another two days where you clearly drill down, and you naturally come to what your values are and what culture you want to create. Then what's really important is not just creating that but living it out.
We do lots of little things, but one thing we do every week at our team meeting is we give out a culture and value trophy, and whoever has won the week prior chooses the new recipient and then details out how they've met our values that week. A great thing to note on our engagement survey is we have 100% participation and everyone knows our values.
We try not to just put them on a plaque on the wall but truly live them and help our people understand because the better our culture is internally, the better we can serve external clients.
Amber, I love that. I always say that culture is something that has to be managed too, but being able to recognize that in a super small way, give people ownership of how we're living our values is really what ingrains that. It's not an exercise in copywriting, although we get to copyright it well, as a marketing background person. But I think living it is probably the most important, and that's what actually translates our firms and develops some of these cultures.
I have to just say I love that idea, Amber and I made a quick note, so it's going to come into action here. In EOS, it is the exercise of identifying your core values. We had previously done that and it was an interesting process because we were interviewed in different ways and asked to just talk about our work in the company in the beginning, and what is important to us and we've refined those over the years, but it's people first continuous improvement and strive for excellence.
That's with our people, with our company, with the community, our clients, and it embodies a lot of what we do. With the culture, we have found that EOS makes us more transparent. It is sharing what we're striving for. We are very open about our continuous improvement. I am a very strong believer in continuous improvement over delayed perfection, as Mark Twain said. Those are so important to us that I want our staff to see that.
Currently, we share a core value experience, and again, I love your idea, Amber. I am going to be applying that very soon. I think culture is really important and we as partners, live, breathe it, but it really needs to be within your entire company to actually mean something.
As managing partners and leaders of firms, what's your message to others who may hear this and think, that's a lot of work, that's a lot of process. What's your message to them, how, as leaders, we really have a responsibility and opportunity to use a framework like this. The benefit is, even though it sounds like it's just another few days of non-billable work. Help motivate your fellow managing partners and other leaders who may be listening to this.
I think what's been interesting to learn for me is that so many CPA firms don't operate as a business, as all their clients do. We can learn so much from our clients. I've talked to many practice leaders who aren't looking at KPIs every week. Even though we're entrepreneurial in nature, it can still be difficult to take that time each week to drill down on the issues when most of our ELT has pressing client work to get done. If we take the time to do that, we're able to grow.
We went from whatever we were at the time, 10 or 12 people now to almost 45 in quite a short amount of time with only two partners. That's me stepping completely away from client work and only focusing on the business, and it turned out to be a great thing for our firm.
To build off of that Amber, I'm just going to add in here, it made you more valuable. Do you want to talk a little bit about your recent transaction a couple of years ago?
Sure. I'm sure many of you have heard of Ascend. Ascend is part of a private equity firm that entered the accounting industry a couple of years ago, and I was slated to speak at AICPA Engage with David Wurtzbackher, the CEO of Ascend. We met just five minutes before the speaking engagement and had a great session and got to know each other and we had an LOI three weeks later.
What was so special about that to me is we're one of the smallest firms they purchased, but we had grown the firm in such a way that it was considered valuable to PE. Now, it's important to note that Ascend is also a people-first organization, essentially operating on EOS with their own version of it. It's exciting to be able to continue that as part of Ascend and continue to invest in our culture and our people just as we have always done just with more backing and more expertise behind us.
It's been very exciting for us.
Chris, was there anything that you wanted to add on top of that?
I was going to add on to Gary's question about getting partners to join into this, and I do think it starts with alignment and all partners agreeing on the vision. When they do, they're willing to invest in that time away from client work.
I think that it is a hard shift from the traditional client facing practice management approach and being able to invest their time quarterly to participate in that and then certainly giving that executive-level decision-making to the managing partner, CEO to actually achieve that strategic plan for the year. I think it's a balance of their participation at these key points as well as then allowing for decision-making to occur with the managing partner.
Really, good points that you both have listed here. I think one of the things that I always like to think about are, what are we learning out of this? If we talk about continuous improvement, Chris, one of your values or striving for excellence is another one that we hear a lot in this profession. What do we learn from some of this? Sometimes I think of that as grace, because you talk about the concept of discipline, but we all know that nothing goes as smoothly as we want it to do.
What are some of the things that you stay focused on as you move forward on this?
Always being a student of the business and of our people, you're constantly learning things, and it's important to do that. The minute we stick our heads in the sand, and don't think that we need to listen to our people or that we don't need to grow and evolve, we've essentially died or killed the business. It's just important to completely be open to new ideas. They may be good, they may be bad, but always listening.
I think that's one of the things that I've learned the most is to listen and be willing to evolve.
Where you go from here? Obviously, under an EOS model and under your leadership, we're not sitting still. What's the next evolution when you think about all the things we've talked about today, from structure to vision to alignment to priorities to accountability, we could go through all of this. What's next for the two of you in your evolution of governance?
When we started the firm, we just wanted to create a firm that we would have wanted to work at when we were employees. I think of it as servant leadership. I want to just keep growing the firm, I want to keep getting larger and keep providing a better place to work for people in our profession. Too many are leaving it too quickly, and I'm hearing the busy season hours continue to be awful. We want to change that. We've got to figure out a way to change it.
We've got to figure out a way to make this a desired profession and a valued profession. We're going to continue to learn how to do that and invest in the business and invest in our people.
I see the next phase for CPA firms. Amber has touched on this a lot is to run our business like a business. You don't necessarily need a rigid corporate field, but you are identifying the next idea for public accounting. You're able to implement that quickly. I think EOS allows that to happen.
The other thing that I wanted to add about what I learned along this thing about where people business, I find as the managing partner, I really have to improve and grow in emotional intelligence as it relates to my partners. How do you work the best with them to get the end result? Because you want that leadership from them as well.
As we close this out, I think you both touched on some really important things as we think about the governance model. Amber, you said it without saying it, which is transform our business models and transform public accounting. Chris, you did too. How we think about it, ours. This conversation is part of a large initiative that the AICPA is to put together on transforming the profession and transforming the business model.
Governance is just one aspect of this, and how we operate our firms is a component, a pillar of that. Thank you both for joining us. Thank you, Gary. I don't know if you have any closing thoughts that you want to leave with our participants as well, but we really appreciate you joining this conversation and being able to talk about what your experience has been here.
Amber and Chris been super helpful. The governance conversation oftentimes gets consumed at a different level, and this is a very practical one. How we use things such as in the US system to make us better, to make us run like a business. To the points raised earlier, aligned vision with strategy and accountability, and keeping the appropriate amount of focus on that.
Thanks to you both for your leadership in your firms and the profession and for being part of this podcast series with Sarah and me, as we try to talk more about governance.
Thank you, Gary, and Sarah.
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