Building Bench Strength Presented by: Art Kuesel LEA HR SIG June 7, 2016

Art Kuesel, President Growth Plan Development/Implementation EXPERTISE (Cont.) Growth Plan Development/Implementation Managing Partner Coaching Sales & Marketing Recruiting Partner Roundtables STREET CRED Top 100 Most Influential Person in Public Accounting: 2014 In-house and external experience Clients include scores of T250 Firms including a third of the T100 Frequent writer and blogger for Accounting Today Accomplished speaker and presenter on growth trends EXPERIENCE Sales Executive 3 years @ $225M CPA firm 5 years @ $40M CPA firm 6 years at PDI/Koltin Consulting 3 years at Kuesel Consulting EXPERTISE Leadership and Sales Coaching Sales/Marketing Training

Today’s Discussion Survey Results Industry Trends What’s in a Succession Plan Your Succession Planning Matrix Building your Bench Bench Building Programs Boosting the Bench Timeline, Contingencies and Best Practices 3

MP Survey Results

Succession Planning @ LEA Firms 1. What percentage of LEA firms have a formal, written succession plan in place? LEA Yes = 55% Nationally/Top 250 Yes = 30% (AICPA) 2. Does your firm have a mandatory retirement age? LEA Yes = 91% Nationally/Top 250 Yes = 64% (Rosenberg)

Succession Planning @ LEA Firms 3. We want to remain independent? LEA Yes = 91% Nationally/Top 250 Yes = “vast majority” 4. What percentage of your partners will retire in the next five years? 1-24% = 45% 25-49% = 55% 50-74% = 0% 75+% = 0%

Succession Planning @ our Firms 5. Please rate your firm’s “bench”: 18% = GREAT (more candidates than partner slots) 73% = GOOD (1:1 ratio) 9% = FAIR (maybe 1 rising star) 0% = POOR (bench is empty)

Succession Planning @ LEA Firms 6. Do your firm’s “rising stars” know what it takes to be a partner? 86% = Yes 14% = No

Succession Planning @ our Firms 7. What is your firm doing to build the bench and develop top talent? 86% = Mentorship 64% = External development programs 59% = Personal development plans for rising stars 50% = Internal development programs for rising stars (XYZ Path to Partner Program)

Succession Planning @ LEA Firms 7. What is your firm doing to build the bench and develop top talent? 41% = Experienced lateral hires aligning with our current practices 45% = Internal development programs (XYZ University) 41% = Real-time feedback 41% = Performance Coaching 36% = Experienced lateral hires bringing new practices/niches

Succession Planning @ our Firms 8. How is your firm fueling growth? 95% = Service line expansion 86% = Active client development 62% = M&A 48% = Practice innovation 38% = Lateral hires 29% = “Productization” ??% = BDE’s ??% = Other?

Succession Planning @ LEA Firms 9. My Firms biggest Succession Planning Challenge: (4) Finding the time to develop/train future partners especially in BD/rainmaking (3) Getting Partners to Transition Clients by 65 (2) Fueling Growth (2) People Retention Building the Bench with Laterals Effectively using BDE’s

Succession Planning @ LEA Firms 9. My Firms biggest Succession Planning Challenge: Aligning all Partners under Common Vision/Strategy Keeping outgoing partners busy during last three years while work is being transitioned Equity vs Income Partners (Income want it handed to me vs growing it) Not enough 4-8 year talent to allow rising stars at SM level to become partner

Succession Planning @ LEA Firms 9. My Firms biggest Succession Planning Challenge: Commitment of NG partners to relationship development, problem solving, and consulting Finding good leaders 10 years out Gap in business strategy knowledge among HP’s

Industry Trends

#1 Average Age of Equity Partners In 1995: 46 In 2000: 48 In 2015: 52 Percent of Partners 50+ in 2015 61% Source Rosenberg Survey and IPA

#2 Population Size by Generation Availability of Accounting Grads Source: Pew Research

#3 Labor Force Size by Generation Population Size

#4 Availability of Accounting Grads Source: AICPA 2003: 53,000 2009: 35,000

#5 MP Job description Turn lights on @ 5:05am, client service, business development, people issues, partner issues, technical knowledge, physical space issues, financial management, hiring decisions, niche expansion, competitive intelligence, public relations, client retention, technology, vision, leadership, sports tickets, vendor relationships, industry knowledge, referral sources, recruiting and retention, legal and liability issues, lateral hires, M&A, partner performance, realization, profitability, strategic alliances, partner compensation, succession planning, and turn lights off @ 9:27pm.

#6 Perceptions Our perception of the immediacy of this issue Our perception of the need to help/develop the next generation Our perception of the work ethic or style of the next generation of partner Their (NG) perception of our firm Their perception of the partner role Their perception of the current partners Our perception of our options And the list goes on>>>>

What’s in a Comprehensive Succession Plan?

What’s in a Succession Plan? Strategic Vision: 5-10+++ Years (vision, mission, size goal, services, geography, niches, etc.) ID retirement scope for each current partner Identify people development needs to fill retirements and meet growth targets Assess gaps & how we’ll fill them Define criteria for future partners ID partner candidates and plans for each Buyout plan, buy-in plan Client transition plans for “A” and “B” (process for “C”)

Your Succession Planning Matrix

Step 1: Your Partner Age Matrix Partners & Ages 2016 2017 2018 2019 2020 Jim 64 65 66 Nancy 62 63 Mike 53 54 55 56 57 Graham 49 50 51 52 Jennifer 42 43 44 45 46

Step 2: Revenue/Partners Needed Year Revenue Growth at 9% Partners Desired Fees/ Partner Retiring Needed Need to Prep 2016 $10M 5 $2M > 2017 $10.9M $2.2M 2018 $11.8M 6 1 2 ??? 2019 $13M 2020 $14M 7

> What Percentage of Managers “With Potential” Actually Make Partner? 10% 33% 50% 75% 100%

Step 2: Revenue/Partners Needed Year Revenue Growth at 9% Partners Desired Fees/ Partner Retiring Needed Need to Prep 2016 $10M 5 $2M > 2017 $10.9M $2.2M 2018 $11.8M 6 1 2 3-4 2019 $13M 2020 $14M 7 ???

> What Percentage of Supervisors “With Potential” Make Partner? 10% 33% 50% 75% 100%

Step 2: Revenue/Partners Needed Year Revenue Growth at 9% Partners Desired Fees/ Partner Retiring Needed Need to Prep 2016 $10M 5 $2M > 2017 $10.9M $2.2M 2018 $11.8M 6 1 2 3-4 2019 $13M 2020 $14M 7 OMG

Building your Bench

So, Who’s on the Bench for 12/31/18? 2 spots open and we have 2 potentials… Our Statistics tell us that up to 50% will: Get recruited away, leave the profession, be terminated, have a major family change, have a personal life crisis, doesn’t end up being partner material, won’t delegate, can’t develop business, can’t develop people, cause internal issues, etc. and so on… So We Ideally Need 3-4 Partner Potentials in Development…NOW.

Building the Bench for 12/31/18 Finding 1-2 more… a) Accelerated development of YP’s with HP 8 years to partner? Why not! There is no law that says it needs to be 12-15 years “just because that’s the way it was for me…” (In fact, we can’t afford that luxury right now) Create a customized internal plan* for your HP’s that are a bit “green” but are clearly partner material Plug these people into external programs or internal programs earlier ADVOCATE and SPONSOR

Building the Bench for 12/31/18 Finding 1-2 more… b) Laterals/Experienced Recruitment Retained search firm – with acute target(s) in mind Recruiters on-staff Staff communication and bonuses to recruit their friends Personal talent pipelines – required @ all levels Boomerangs (geography and firm) WHITE GLOVES OFF

Building the Bench for 12/31/18 Finding 1-2 more… c) Rewrite the Requirements Non-Equity PT, Virtual, Flex, 70% Non-CPA’s?!?!?! Look outside our market Use better VALUE PROPOSITIONS

Building the Bench for 12/31/18 Finding 1-2 more… d) M&A If the talent matrix works – why not? Just make sure the culture is right

Who’s on the Bench for 12/31/20

Who’s on the Bench for 12/31/25

Bench Building Programs

“Path to Partner” Program (2018’s) An intense program that combines evaluation, mentoring, coaching, sponsorship, shadowing, training/CPE, leadership project(s), roundtable forums, information sharing, Q&A, and more Eligible candidates are senior managers (or equivalent) Usually time-limited (for example 2 years) Monthly touch-points and quarterly review-points Significant commitment from participants and direct supervisors Annual self-review/review Partner memo

“Leadership Development” Program (2020’s) A program that combines mentoring, training/CPE, roundtable forums, leadership projects, sponsorship, information sharing, Q&A, and more Eligible candidates are new managers Usually time-limited (for example 4 years) 6x annual touch points Moderate commitment from participants and direct supervisors Annual self-review/review

“XYZ Firm University/Academy” (2025’s) A program that combines mentorship and training/CPE Everyone is eligible, no time limits 4-12x annual touch points Limited commitment from participants Limited commitment from direct supervisors

Boosting the Bench

Core Skills for Leaders in CPA Firms Firm Development Business Development People Development Client Development Personal/Professional Development

Personal and Professional Development Technical Expertise Personal SWOT/Defining your Personal Leadership Style Time Management 101 Accounting Firm 101 Credibility Communication Strong Work Ethic Billable Hours/Realization Goals

Client Development Understanding your Role with the Client Being a Proactive Advisor Developing Relationships and Building Trust Cross-Serving/Selling Achieving Loyalty – and Referrals!

People Development Delegation and Leverage as a Development Tool Team Building 101 Serving as a Mentor and Coach to your Team Performance Management of Others Delivering Effective Feedback

Business Development Building a Personal Brand and/or Niche Capitalizing on your Biggest Asset: Clients Developing a Referral Source Network Succeeding at the Sales Process Achieving a Goal for Originations

Firm Development Herding Cats: Leading Other Partners Creating a Culture of Accountability Strategic Planning 101 Leveraging Technology Talent Acquisition Niche Growth and Expansion

Each Plan will be Different Firm Development Business Development People Development Client Development Personal/Professional Development

Plan as Foundation Objective Strategies/Actions Goals Advisors/Coaches Process/Approach

Timeline, Contingencies and Best Practices

Budget Path to Partner Leadership Academy XYZ University $4,000-7,500 per candidate per year 100-200 hours/year per candidate Leadership Academy $1,500 - $2,000 per learner per year 100-150 hours/year per candidate XYZ University $1,000 – $1,500 per learner per year 50-99 hours/year per candidate Does not include time and resources used in establishing the programs.

Fueling Growth: Three Ingredients 1 Part Organic + 1 Part Laterals + 1 Part M&A = Growth!

Reasonable BD Targets for P2P Candidates Year 1: $50K Years 2-3: $50-100K Years 4+: $100K+ Requirements for Originations to be Made Partner: $100K-500K Yes, this is more than many of your current partners!

Deconstructing a Successful BDE Culture, Culture, Culture Previous Success Consultative Selling Knows our Services Worked in a Partnership Strong Network of Ideal Clients 2 Year Runway for Success Motivating Compensation Structure

External Programs Rainmaker Upstream Academy The Growth Partnership

LEA Support LEA YP Group Promotes professional growth and advancement for future leaders: Conference Calls In-Person Sessions @ LEA Conferences LEA YP Volunteer Week Best Practices Sharing

Find Resources: kueselconsulting.com/LEA

THANK YOU! Art Kuesel, President Kuesel Consulting, Inc. 312.208.8774 art@kueselconsulting.com www.kueselconsulting.com