Without a doubt, one of the most significant reasons for succession planning problems in public accounting is the vast number of comfort zoners in the partner and manager ranks. Many comfort zoners are good accountants and client service professionals, but lack the passion and entrepreneurial spirit that is vital to take a firm to higher levels of success. The number of comfort zoner partners and managers has reached epidemic proportions and is at the root of the consolidation of the public accounting industry.
Public accounting firms risk becoming irrelevant, obsolete, and eventually less competitive if they allow their comfort zoners to permeate their culture.
In addition, there is an abundance of partners and managers who feel entitled to compensation increases each year, but are not attaining higher levels of performance, nor are they contributing additional value and profitability to the firm on a continuous basis. Comfort zoners become even more complacent, as they receive compensation increases as a matter of course. Thus, there is no incentive to work smart, be creative and innovative, or set challenging goals for themselves. Why take the risk?
The comfort zoner culture was reinforced when public accounting firms abandoned the policy of “up or out”. This culture began to proliferate through the policy of promoting managers to the title of non-equity partner, knowing full well that many of them would never become equity partners.
Managing Partners need to lead their partners and managers out of their comfort zones in the following ways:
- When many of the firms in the country discontinued requiring higher levels of performance and contribution each year as a condition of employment, while increasing compensation, it created and reinforced a culture of entitlement. Move away from the culture of compensation and employment “entitlement” for long-time employees and partners whose careers have plateaued. Institute a pay for performance compensation system and a modified “up or out” policy. Only increase compensation if there has been recognizable increases in contributions to firm value and profitability.
- Put comfort zoners in positions to be technically challenged and to deliver higher levels of client advisory services each year. Encourage and reward them to be creative and innovative, even if they do not initially succeed.
- Force comfort zoners through the scheduling process to delegate appropriate work to lower-level staff and make them accountable. Assign comfort zoners more challenging work and client assignments.
- Measure performance goals very specifically and without ambiguity in terms of contribution and value added. Their goals should be focused on attaining higher levels of competencies and client service, new business development contributions, financial management of their client engagements, and staff development.
- Institute an informal policy of “up or out”, especially at the manger level, without creating management by fear. Transition from being a top-heavy and under-leveraged firm to a pyramid-structured firm.
- Refrain from promoting managers to non-equity partner status who have no chance of becoming an equity partner. This policy reinforces comfort zoners and entitlements for people who will not contribute to the retirement/buyouts of equity partners.
Clarifying expectations of partner and manager comfort zoners is challenging. It is easier to avoid dealing with expectation gaps and to hope things will change. However, be aware of the short-term and long-term consequences to the firm.