Governance Series: The Rise of Non-CPA Leaders in Public Accounting

Developed by the AICPA and CIMA, the PCPS team, along with Gary Thomson, Founder and Principal of Thomson Consulting, and Sarah Dobek, Founder and President of Inovautus Consulting, the toolkit 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, reevaluating 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.

We're joined by a non-CPA managing partner in his firm to hear more about the value that he brings, the challenges he's faced, and how his firm has evolved by embracing diverse leadership. Eric, if you'll do a quick introduction for our audience?

That's been the majority of my career in public accounting has been as a marketing and growth leader for two different firms BeachFleischman being the one I'm currently at, and prior to Beach was a firm in Western New York, which was a top 100 firm, and BeachFleischman is a top 200 firm.

I want to say they were managing it by committee, so they had a marketing committee, and that's how they were making their decisions. They made a decision to bring an ''industry expert'' I'm putting it in quotes, to come and develop a growth culture, a marketing department, and to grow and help scale the firm. I came out here in 2012 to do that. I came from New York State from another firm that had already a fully functioning marketing department.

I had learned some lessons at that firm I was able to bring to BeachFleischman.

Thinking about it from a non-CPA perspective, what are some of the skill sets that yourself or other non-CPAs bring to a profession, which at times, and since I'm one of them, I can say this has been a little bit resistant to thinking differently and using the other side of the brain. What are some of those skills, and how has it benefited you and your leadership?

Just bringing an outside of the profession experience is important, I think, especially in an industry that's ever changing now with transformation and disruption to see maybe more holistically where that business needs to go. In terms of a specific skill set, I would say it's strategic mindset. Then, also having mastery in a business-critical function like marketing and growth was something that BeachFleischman wanted on their team.

Just bringing that in-house to that firm so that accountants didn't have to manage that function by committee.

How has that evolved within your firm, where they can take, again, the other side of the brain and relate to what you're trying to drive?

Having that strategic mindset and that framework for developing a plan also translates to launching joint ventures, new service lines. Within those plans, as you know, it is holistic. You're looking at the full circle of that initiative, whether it's people, talent, capacity, operations, technology, funding, marketing strategy. That's what I mean when I say it's holistic.

Really developing that language and that dialogue internally has been very important where all of our partner group now really talks about the overall strategy of the firm, the different aspects of it. We also talk about how important it is for leaders to get their heads out of what's right in front of them. They're silo, if you will, and think more like business owners.

I think we've been pretty successful at that, and that's been an enjoyable part of my role here is keeping people focused on the overall strategy.

Sorry to interrupt, Sarah.

Can you talk a little bit more about how that's transpired, what that's look like for you all at BeachFleischman, and your role in that more particularly.

Right now it's internally focused on transforming the business model, the revenue model, our technology platforms that we use, breaking away from legacy platforms, the metrics that we use. Essentially, a lot of it is innovation, as we define it in our firm, is taking a mostly inward-looking culture and firm, and I'm really talking about the profession and how that translates to a more outward mindset, and the impact on clients and what clients really care about.

For example, part of our innovation journey is reforming our revenue model away from ours as units of revenue or billable hours because we realize that model is 100 years old. We don't think as an ownership group, that that model is going to make us successful into the future, where we're supposed to be embracing automation, artificial intelligence, technology that's going to severely shorten the duration that it takes to get engagements out the door or to deliver a product or a service.

The model has to change. That's part of it. Then also how we define success, instead of success measured by inputs such as hours, utilization, realization, outcome-based, things like turnaround time, client satisfaction, engagement phases or steps, or milestones, as opposed to how many hours it took us to do it. Things like that is part of the innovation and creating more value for clients.

We think that if we're going to be focused more on clients, we're going to deliver more value than if we're focused more internally on what accountants and the leadership cares about. Just because it's efficient for us doesn't mean it's good for the client, so we have to figure out where that balance is.

How did you overcome some of those challenges and build the trust level that was necessary to get to where you are?

That financial mindset he can translate stuff for me in a manner I can understand that help me make decisions. That was one challenge, I would say. I would also say the way a non-CPA executive leader is measured in terms of metrics and goals, our goals and metrics look much different than, let's say, a line partner or department heads would be. I have an overall growth goal for the firm.

That's part of my bonus, and but a lot of my goals and metrics, I'm judged on the success of those things, and they're pretty strategic, whether we want to enter a new market, launch a new service, get into a joint venture with another firm, reform our pricing model. That's the stuff that I'm working on and measured on as opposed to revenue for my particular area of practice, or we're moving away, obviously, from realization and those types of standard metrics from accounting firms.

But figuring that stuff out took some work. How are non-CPA owners going to be what goals are they going to have? How are they going to be judged in terms of success? It just takes a different type of conversation to do that. We have a couple of non-CPA owners in our firm, including our COO.

We know in the CPA context, to your point, what skill sets are, what expectations, but how do you and the firm whether it's your role, your COO's role or other roles, and even your president's role because as you know, in many firms, we can have a CEO and a chairman, and sometimes if those roles aren't clearly defined, we cause conflict as opposed to harmony. How did you and BeachFleischman go about just making sure roles and responsibilities were understood?

But by and large, even for the non-CPA owners of the firm, are competencies align with that of the competency model that the AICPA puts out there and that we follow. When you're creating roles and expectations, so there's technical ability. There's productivity, people development, development of your team and leadership, client service, skills, and then growth activities, business development, or growth. The non-CPA leaders in our firm still follow those competencies.

It just looks a little different within there. Instead of client service, it's still client service, but it's internal clients. I don't have a book of business. I'm not providing services to our clients. They are, but I'm not, but everybody internal, I think of it as a service, essentially, to make other successful in my firm, and they are my clients, whether it's my fellow partners, or staff, or other key constituents.

There is some alignment there, but it just within those competencies, it looks a little different, Gary?

With me, mine was more my involvement in the national scene in public accounting and having done a whole host of webinars and training for other accounting firms on growth, being highly involved in the association for accounting marketing, getting some acknowledgments, some awards, and things like that, put me above that threshold that was needed to put me in that ownership group.

What's the message of the communication been out to the firm and how have you intentionally thought about that to support this transition over the years?

Making sure that when we hold things like management summits or firm summits where we're bringing everybody together that those non CPA leaders have a prominent role in those events so that they're up on stage, they're communicating. That's very important. Then just in general, Sarah, I would say for my firm, specifically BeachFleischman, our purpose is about the power of collaboration and what it can accomplish. We have to live that and demonstrate it on a daily basis.

It wouldn't be quite collaborative if we were shutting out a whole section of our professionals inside the firm that didn't have their CPA designation. We include them in decisions in committees, in task forces, and we empower them to make those decisions. But they still got to do all the hard work like everybody else

does. That's pretty important. But I think the key to success for that they do need an ambassador, somebody who backs them, a mentor if you will, who has their interests at heart when we're not in the room, so to speak. I think that's important for success as well.

They'll go from being collaborative and having a say to feeling like someone else has taken over. At the same time, if you move too slowly, then you frustrate the people you brought in to do their job. How did you and your firm transition as you professionalize your C suite, brought in the Karens and the Erics and others of the world? What did that transition look like and how were the CPA partners, ones that maybe moved at a little bit of a slower pace.

How did you get them the confidence and trust they needed in that transition? Eric Majchrzak: Yeah, speaking from my personal experience, transitioning into the role of CEO was a two year experience for me. Now, some people may say, that's way too long. I'm actually grateful I had that time, but it was a very involved transition where I met with my managing partner on a weekly basis and we carved off some time together.

We went over every aspect that would touch the CEOs, come across the CEO's desk, whether it was clients, the financial aspects of the firm, risk, growth, insurance for the firm, health insurance, legal representation, governance, all of that stuff, talent, technology. We would sit down and depending on what area I was talking about with him, we would bring people into the room to essentially inform me of what the key issues are with some of these areas.

The firm wanted me to go through a boot camp which I did. I went through a managing partner boot camp which was really important for me, which I enjoyed very much. Ironically, the managing partner boot camp did not have a financial module. I have to get that acumen and that skill set elsewhere. But that's something I'm learning over time.

But I would say generally, because our firm was focused on the future and remaining independent, the partner group understood that there are different forces hitting their profession of disruption, whether it's emerging technology, whether it's private equity, the need for growth, the talent shortage, any of that stuff, it forced us to ask the question, is the future success of our firm better suited with experts in some of these areas that are non traditional accounting,

nontraditional areas like growth, technology, talent or are we bound to the past the way CPA firms have always done it with a traditional CPA firm model? Our group was very open to the fact that we are going to need different skill sets to tackle those areas.

But what are some strategies that have been effective in developing leadership skills among other non CPA leaders, whether they have ownership in the firm or we're bringing them along and empowering them to be part of the leadership team for the firm. How have you done that?

Then also for outside, training and leadership development in Phoenix and in Tucson here, where we're located, there are leadership programs that are part of those cities. We send non CPA owners to those programs. We're involved in the Leading Edge Alliance. There's all sorts of abilities for non CPA professionals to learn about the profession.

We take a lot of people to those conferences so that they can learn those skills and understand the broader context of what's happening in the profession. I think that's critical for leadership. Then also, I think I just mentioned this earlier. We do give our people a lot of face time in front of the key stakeholders in the firm. Our HR leader will come in and present to the executive committee, our IT leaders, our marketing leaders.

That's a good training ground for the real thing and that's how they build trust. That's how they see them in action, so to speak. They're actually visually witnessing them in front of a room, making a case and so all that stuff is very helpful.

That there is this opportunity for us to bring people who really know what they're doing in certain areas and then complement that with effective leadership. Eric, I would love to think and say that everything's just gone rosy for you, that all your partners bought into it and I believe they probably did buy into it.

But as you reflect back on the change and the transition, have some lessons learned for me and Sarah and the people who are listening to this podcast that may be really intrigued with the idea, understand it intellectually, but maybe you're just challenged about. What are some things that you'd say, boy, I would absolutely do it the same way or I might think about it differently as you have an opportunity to reflect?

I know there's different percentages, whether it's a majority owned or three quarter owned by CPAs, but there might be one more state or two hanging out there that still require a license to be an owner. That's where it starts. Number 1, the opportunity. Number 2, I would say, I think we spent a lot of time.

Maybe something I would do differently or we would do differently is there are subtle biases when an ownership group talks about allowing or letting in a non CPA owner into a firm and some of it might be intentional and some of it might be not intentional.

But I would say maybe raising those issues when we stumble upon them, calling it out, having that dialogue sooner rather than later would probably have served everybody a little bit better than, it just took so long, I think, for us to have this conversation. It's a long dialogue. It's not a decision you make overnight and I think that dialogue has to start early, and it has to be substantial and everybody's got to buy into it.

You definitely want to have everybody on the same page if you adopt a model like this. Something that did work I think too, is talking to peer firms that have a similar model or the model that you want and not having to go it alone. One of the first things I did when I became CEO is I started calling other managing partners and CEOs around the profession. I reached out to non CPA owners and had conversations with them.

Just finding your peers out there, comparing notes and bringing some of those lessons back to the firm is helpful.

Then what final thoughts or pieces of advice might you give a firm that is thinking about this journey or somebody that is maybe in a similar role to you that might be going down this path?

Well, by definition, we're going to have leaders in disciplines that are not accounting related that are going to be driving the success of that firm. It could be a technology professional, a financial professional, HR people professional, marketing and growth professional. With the push to advisory, I think non CPAs are going to play an increasingly important role in driving the success of a firm.

Then I would say, in terms of advice to firms that are considering doing this, I think again, it goes back to where do you want your firm to be in 5-10 years? Where's the profession headed? Where are your clients headed? Then asking the question, are we going to need more, I'll say non traditional non CPA leaders to help us navigate through all this disruption and change, or are we going to need less?

I think the answer will be if they pose that question that we're going to need more leaders with a different mindset, with different experiences to bring that skill set into the firm to help make that firm more successful.

has been super helpful. As an outsider, Sarah and I both having some visibility into your firm. I think people just step back and you said this very early in the podcast and look at some of the different things that you as a firm have done. From acquiring and investing in the outsourcing firm to thinking differently about other service line offerings and joint ventures and stuff.

It validates the diversity of a mindset and kudos to you and your firm, for one, being willing to do this, two, for you being willing to take the risk of this and then to see your firm embrace it and move forward. For those that are listening to this podcast, there's so many different ways to be successful in governance. You can look at BeachFleischman and Eric's success and know that, let's think differently and be willing to think differently where the opportunity presents itself.

I know, Eric, you didn't get there overnight and there's a lot you didn't share with our audience today about your journey, but there's a lot of baby steps before you got pulled in to be the next managing partner or the current managing partner of your firm as it stands today, but at the time, the next.

We're having more at bats on initiatives and as a result, we're succeeding more, but we're also failing in some areas and learning valuable lessons. I think that's part of this. It's the risk quotient of the firm and understanding that you have to take more risks to be successful in this environment that we're in.

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