1. CPA LEADERSHIP INSTITUTE DECEMBER, 2011

2. August is the CEO of AQUILA Global Advisors, LLC which specializes in succession planning, mergers and acquisitions, compensation plans and transformational strategic planning Selected as one of the “Top 100 Most Influential People” in the Accounting Profession by Accounting Today in 2004, 2007, 2009 - 2011 AAM Hall of Fame member, founding AAM Board Member First marketing director to become a partner in Top 100 Firm (1985) Former partner in top 100 firm – Friedman, Eisenstein, Raemer & Schwartz (FERS) Former executive with American Express Tax & Business Services, Inc 2

3. How many partners are in your firm? ( ) 2 to 5 ( ) 6 to 10 ( ) 11to 20 ( ) 21 or more 3

4.  Introduction – What is accountability and why is accountability important  Seven organizational building blocks  What does trust have to do with it?  Do your firm leaders have what it takes? 4

5. Part I 5

6.  Culture is a system of beliefs about the behavior that is appropriate to attain goals  Culture is the “way we do things around here” 6

7.  Accountability, according to the Merriam- Webster dictionary, is “the obligation or responsibility to accept responsibility or to account for one’s actions  An obligation is a promise to do something  It’s personal 7

8.  Changing Environment ◦ No growth economy ◦ Fee pressure on audits ◦ Pressure to produce results for clients ◦ Clients demanding more ◦ Profit squeeze 8

9.  Common Errors ◦ Make it into a checklist ◦ Create a list of obligations ◦ Capture more production information ◦ Tinker with isolated compensation elements ◦ Lack a clear framework 9

10.  Must permeate the culture of the organization  Becomes a way of life  It affects the way the firm: ◦ Governs and manages itself ◦ Creates its policies and systems ◦ Allocates and accounts for resources ◦ Engages owners and employees  Must come from firm leaders! 10

11. How would you define the level of accountability in your firm today? ( ) We have no accountability ( ) We have some accountability ( ) We have accountability ( ) We have a strong culture of accountability 11

12. What is not working? 12

13. Do it Solve it Own it See it Versus Ignore it Not my job Finger pointing Tell me what to do Cover your tail Wait & see Source: The Oz Principle 13

14. Part 2 14

15. Partner Accountability and Complacency Trust Strategic Leadership Shared Vision & Mission Embedded Core Values Partner Standards Performance Compensation Embrace Change Seven Building Blocks 15

16. 16

17.  Think of a person you trust? ◦ Why do you trust them?  Think of a person that trusts you ◦ Why do they trust you? 17

18.  According to Steven M. R. Covey “trust means confidence”* ◦ Confidence in the individual’s:  Character - Integrity and Intent  Competence - Capabilities and Results  Trust is a function of character and competence ◦ Both are observable *The Speed of Trust (Free Press, 2008), 18

19.  Personal Trust – our own confidence in our ability to set and achieve goals, to inspire trust in others  Four Trust Elements: ◦ Integrity ◦ Intent ◦ Capabilities ◦ Results Source: Speed of Trust Steven M. R. Covey 19

20. Trust consists of :  Character ◦ Integrity ◦ Motives and Intent * Source: The Speed of Trust, Stephen M.R. Covey 20

21.  Integrity – ◦ I am honest with my interactions with others ◦ What I say and do is what I think and feel  Intent – ◦ I am aware of my motives ◦ I make sure I do the right things for the right reasons 21

22. Trust consists of :  Competence ◦ Capabilities and Skills ◦ Results and Track Record * Source: The Speed of Trust, Stephen M.R. Covey 22

23.  Capabilities – ◦ I upgrade and increase my knowledge and skills ◦ There is a high match between my talents and the work I’m doing  Results – ◦ I have a good track record ◦ I often finish what I start 23

24. 24 Low Character High CompetenceCompetence High

25.  Micromanagement  Unhappy employees  “Cover your a@#” behavior  Wasting time defending decisions  Hidden agendas  Little collaboration  A lot of bureaucratic rules  Systems and structures not aligned 25

26.  Low trust organization ◦ More meetings ◦ More time to get things done ◦ More hallway conversations ◦ More closed door meetings  Higher cost to the firm  High trust organization ◦ Fewer meetings ◦ Shorter meetings ◦ Less time to accomplish projects ◦ Fewer or no hallway conversations or closed door meetings  Higher profits for firm 26

27. What is the level of trust among your partners? ( ) There is no trust ( ) We have some trust ( ) We have trust ( ) We have a high degree of trust 27

28. 28

29.  No one else wanted the job  Thinks in terms of two separate roles ◦ Producer/client server ◦ Strategic leader 29

30.  Best Practices ◦ Set direction  Provide a compelling direction  Know where the firm is and what is possible  Focus partners’ attention and actions around key priorities ◦ Gain commitment to direction  Take the partners with them  Motivate, empower and trust their partners  Balance being a business and a profession 30

31.  Best Practices ◦ Execute  Initiate activities that drive and support the strategy  Appoint people who get things done  Help clients and firm’s people exceed their expectations ◦ Set personal example  Seek opinions but know when to act  Take the tough people decisions  Ask for help when they need it 31

32. 32

33.  Firm members need to have shared vision, goals and values  The more tightly aligned your firm is, the better your performance will be 33

34.  Partners and staff aren’t sure what it is  Does not motivate partners and staff  What do the partners want the firm to become? 34

35.  Do we have a clear, compelling and realistic mission and vision?  Are our decisions based on achieving our mission and vision?  Do we ensure that we have the right capacity (human, financial, infrastructure) to effectively implement new services and activities? 35

36.  Do we a shared vision for what we want the firm to become?  Have each of our partners bought into what they have clearly and specifically promised to achieve?  Are all owners and staff members recognized and held responsible for achieving what they said they would accomplish? 36

37.  How would you explain the way we do things around here?  What are our standards for behavior?  Are we a group of Lone Rangers or a team?  What shared goals do we have?  What shared values do we have?  How aligned are we as a group?  What behaviors do we accept that are harmful to the firm’s success?  What behaviors do we exhibit that are important to the firm’s success? 37

38.  Best Practices ◦ No involvement no commitment ◦ Commitment flows from trust ◦ Alignment between what leaders say and do ◦ Connecting with your professionals on a personal and emotional basis 38

39.  The Core Values are much more than minimum standards. They remind us what it takes to get the mission done. They inspire us to do our very best at all times. They are the common bond among all comrades in arms, and they are the glue that unifies the force and ties us to the great warriors and public servants of the past.  Integrity first, Service before self, and Excellence in all we do. These are the Air Force Core Values. Study them... understand them... follow them... and encourage others to do the same. Source: The Little Blue Book, US Air Force 39

40.  Are we driven by a set of core values?  Will we turn down work if we would have to break or bend a core value?  Do we annually evaluate owners and staff on living the core values?  Is compensation tied to living the core values? 40

41.  Best Practices – Do you ◦ Identify your core values? ◦ Define your core values? ◦ Describe specific behaviors? ◦ 360 degree evaluations? ◦ Tie to compensation or bonus? ◦ Reward those who live the values? ◦ Remove those who do not? 41

42.  Do your partners have what it takes?  Partner Key Competence 42

43.  Personal Production  Marketing  Business Development  Business Management  People Development  Firm Leadership  Client Service  Technical/Niche Expertise 43

44.  Production ◦ A/R collection ◦ WIP management ◦ Dollars collected  Business Development $$ ◦ From existing clients ◦ From new clients ◦ For self ◦ For others  Productive Time ◦ Firm/niche leader ◦ Training ◦ Building systems ◦ Recruiting  Value Creation ◦ Engagement profitability ◦ Reputation enhancement ◦ Marketing activities 44

45. ◦ Most partners must be working partners ◦ Partners need to generate business ◦ Non billable time needs to be productive time ◦ Partners look for ways to enhance firm’s profitability ◦ Partners do things that enhance firm’s reputation 45

46.  Deliver Results vs. Deliver Activities  Get Better vs. Deteriorate  Confront Reality vs. Bury Head in Sand  Clarify Expectations vs. Create Vague Expectations  Practice Accountability vs. Don’t Take Responsibility 46

47. Firm Goal #1 Tax Department Consulting Group Firm Goal #2 Estate Planning Group 47

48.  Knowledge workers want to make contributions  Your people want to know how they contribute to the firm’s success  Leading causes of work complexity and inefficiencies: ◦ Unclear goals and objectives ◦ Lack of alignment of goal  Alignment provides a line of sight for all employees back to the lofty goals in the strategic plan 48

49.  Develop individual partner plans that ◦ maximizes their unique strengths ◦ identifies their weaknesses ◦ articulates their role in their department or line of service  Plans should be explicit as to: ◦ what you expect the partner to do during the current year ◦ the career trajectory over the next 3 years ◦ what they need to demonstrate to move on to the next level 49

50.  All partners are not equal  Design a partner growth path 50

51. LEVEL ProductionExpertiseClient ServiceLeadershipBusiness Development LEVEL 4 Book >$1.5M Firm GuruHolds firm leadership position >$150,000 annually LEVEL 3 Book at least $1M Has area of expertise Cross SellsTeam Leader $100,000 to $150,000 LEVEL 2 Book $600k to $999k Develops strong client relationships Serves as mentor $75,000 to $100,000 LEVEL 1 Minimum 1100 billable hours Strong Technician Attains gross profit margins Trains & develops staff on the job <$75,000 51

52. Level ProductionExpertiseClient ServiceBuilds the Team Business Development Compensation Level 4 Major Book Industry expert Holds firm leadership position Chief Rainmaker $320,000 to $600,000 Level 3 Book at least $2M Has area of expertise Practice leaderRainmaker and Cross Sells $275,000 to $340,000 Level 2 Book >$1.5 Develops expertise Develops strong client relationships Trains & develops staff Industry Team Leader $200,000 to $290,000 Level 1 1200 billable hours Strong technician Attains gross profit margins Community Involvement $160,000 to $220,000 52

53.  Pay for Performance 53

54. Entitlement vs. Performance Continuum  Weak performance management process  What is rewarded in your firm?  Is compensation aligned to the strategic plan? 54

55.  Do we regularly and rigorously evaluate the right measures?  Do we take prompt and corrective action in response to the performance information?  Do we reduce barriers to higher levels of performance?  Do we generate new and better ways of doing things and approach challenges creatively? 55

56. 56

57.  Pay-for-performance is frequently referred to as merit or incentive pay  Pay-for-performance is compensating an individual beyond their base pay or salary for accomplishing specific, agreed-upon measures of performance rather only for time worked, seniority and/or ownership 57

58.  Is the compensation system fair?  Is the compensation system fairly applied?  Have you involved those most affected by the plan?  Does everyone understand how it works?  Does it promote the most profitable work for the firm?  Does it create a one-firm concept, rather than silos?  Does it encourage the owners to live the firm’s core values?  Does it encourage everyone to do what’s best for the clients?  Does it substantially reward performers over nonperformers?  Does it reward for current production as well as building future capacity?  Is the compensation system tied to the firm’s strategic goals?  Does the system usually provide for predictability in total compensation year over year?  Is the system modified from time to time based on the changing needs of the firm?  Will the system keep the firm alive after the retirement of the senior owners?  Does it drive the desired behaviors?  Is there some flexibility to reward exceptional performance? 58

59.  What factors are currently measured?  How are these factors weighted?  Which of these factors drive desired behavior(s)?  Do all owners complete a self-evaluation form at the end of the year? If so, is the self-evaluation form shared with each of the other owners? 59

60.  Do you provide owners with a base salary and then allocate profits based on specific criteria, other than equity/points  On average, what percentage of an owner’s compensation comes from his/her base salary? From a bonus pool? From other source(s)? 60

61.  Rewards for current production as well as capacity building activities  Rewards for individual and team goals  Rewards for value enhancement 61

62.  Too complex  Creates wrong behavior  Employees focus only on individual goals  Firm unwilling to commit to training  Firm gives only lip service to core values and competencies  Unable to track data 62

63.  Motivates owners (or staff) to peak performance  Rewards results first and efforts second  Modifies behavior in support of firm values  Separates top performers from average performers  Helps non-performers move to different roles (or a different firm)  Assists with recruitment, retention and succession 63

64. What percentage of your total partner compensation is paid as a bonus: ( ) None ( ) 5 to 10% ( ) 11 – 20% ( ) 21 – 30% ( ) More than 30% 64

65. 65

66.  Lack of trust in the organization  Partners are afraid to embrace real change  Leaders are afraid to commit to change  Barriers to change ◦ Lack of urgency ◦ Financial ◦ Resources 66

67.  Create a sense of urgency  Pull together the guiding team  Develop the change, vision and strategy  Communicate vision to all to create a supportive organization  Produce short term wins  Empower others to act  Don’t let up or fall back to old ways 67

68.  An environment with more: ◦ Trust ◦ Communication ◦ Empowerment ◦ Buy-in ◦ Motivation ◦ Accountability 68

69.  To achieve accountability: ◦ Create a motivating firm vision ◦ Align owner and staff goals with strategic plan ◦ Identify minimum partner competencies ◦ Develop clearly defined partner career paths ◦ Create a pay for performance system 69

70. 1. How do you make a difference to our firm? 2. What new ideas are you working on? 3. When did you last get coaching from your mentor? 4. When did you last give coaching to your mentee or a staff person? 5. How have you increased the firm’s value 70

71.  What did I forget to say? 71

72. For a free consultation please contact August Aquila 952.930.1295 aaquila@aquilaadvisors.com 72