When I first arrive at a client's office to talk about governance, I'm often greeted with skepticism. Many employees, especially those in the middle or latter stages of their careers, are bracing themselves for another discussion about ESG (environmental, social and governance). But I'm talking about a different kind of "G."
The "G" we help our clients incorporate is different. It's about making the organization's purpose crystal clear to everyone and using proven mechanisms to keep people focused on that purpose. It's about making sure everyone's rowing in the same direction, and stressing the importance of shared values, culture and efficient flow of information. Our "G" is rooted in the brass tacks of driving privately held organizations to be accountable and to achieve outsized results in the most efficient and effective manner possible.
One of the first things we do with new clients is to try to understand what it's like to work for the organization. Are people excited about being there or do they have to drag themselves to the office every day, counting the hours until the weekend? Are the overall organizational goals clear to all employees? Or is there confusion, especially between staff and management or between in-house and remote employees?
As a CPA, I've worked in a toxic workplace culture. I know what it's like to have a disengaged leadership team and clients who don't respect the work you do, which is often viewed as a necessary evil. It doesn't have to be that way. It shouldn't be that way. There's a three-step process we use to get firms in alignment so they can achieve management objectives and provide a healthier workplace experience for their teams:
1. Identifying the firm's purpose: Is your firm's purpose to churn out as many billable hours as possible to maximize profits and enhance the partners' wealth? Or does your organization aspire to higher goals? Is it mission-driven for a social purpose or for the benefit of the firm's employees and stakeholders? If the firm's overall purpose needs sharpening — and it often does — we help them develop a "sustainable purpose" that can be used going forward. Try this exercise at your firm: "Our firm exists because [fill in the blank]."
We once worked with a firm that had no stated values, but we saw the words: "A Commitment to Excellence" posted around the office and highlighted in certain marketing publications. The staff, managers and partners we talked to had no idea what that phrase meant to the firm beyond its literal translation.
We later learned the firm's culture was toxic and, from an operational perspective, the firm was not aligned with any strategic direction. When we asked the leadership group about this, we learned that many partners had lost confidence in the firm's ability to sustain itself due to a leadership gap that existed at the next level of management. Needless to say, the lack of strategic direction was killing this firm. In response, we placed a priority on defining its strategic direction and making sure that everyone within the organization understood it, which led to all team members banding together seamlessly in pursuit of achieving their ultimate goal of merging into another firm.
2. Achieving buy-in: Once we have clarity about the firm's purpose, and we're confident that its leadership will commit to that purpose, we start the difficult process of obtaining "buy-in" at all levels of the organization. Buy-in begins with the culture and with the values of the people who work there. When working with a firm that doesn't have its values well defined, we hit the pause button and spend valuable time helping them solidify those values. If there appears to be a set of clearly defined values, we test the values in discussions with firm personnel at all levels to make sure they're consistent and relevant.
I once worked with a firm led by a group of old-school men in the later years of their careers. Many came up through the ranks of a command-and-control hierarchy and were determined to preserve the my-way-or-the-highway form of leadership. I had my work cut out for me when I became aware of the partners' entitlement issues, which I needed to break down and replace with sound leadership norms. One partner told me: "When you talk about our values, it sounds like you're spending too much time on our website." His skepticism about the core values touted on the firm's website spoke volumes about why the firm needed our help. Needless to say, I set out on a path to challenge the firm's status quo in order to create a workplace culture that was on par with high-performing firms.
When you have the right values, and you make hiring and firing decisions based on those values, it builds a sense of focus, predictability and stability within the firm. This fosters a healthy working environment between employees and leadership. In my experience, firms that have everyone rowing in the same direction accomplish far more than siloed firms in which it's every man and woman for themselves.
3. Clarity at the core: Once we understand the firm's values, purpose and culture, we understand the environment in which the firm's governance structure will function. We then break down the firm's activities into three central components:
- Roles and responsibilities;
- Policies and procedures;
- Metrics and goals.
Most firms we work with have these areas developed to a certain extent, but we rarely see all three areas well-developed and functioning symbiotically. We spend a great deal of time refining these areas with the performance management process and getting management to align the firm's strategic objectives clearly with these core areas.
Putting it all together
Ask any manager at a public company to define governance and he or she will likely give you a clear answer. That's because public company governance is regulated by federal statutes and compliance is required. But at private companies, governance is up to the discretion of the owners. Since there is no one-size-fits-all governance structure for a private company, we developed the Sphere of Governance model to help our clients visualize what is meant by corporate governance. The sphere illustrates all of the critical elements of an effectively operating corporate governance structure operating symbiotically in the ecosystem that is your firm.
The three central areas identified above are prevalent at the center of this model and defined further as follows:
Roles and responsibilities: Our experience is that business owners who adhere to an effective corporate governance system have the flexibility and freedom to pursue what is most important to them, both professionally and personally. When these important areas are aligned, accounting firm owners gain flexibility at the partner and manager levels. For instance, they can emphasize work-life balance and quality of life for their teams. Management of firms that have implemented a strong sense of governance structure do not lose sleep at night worrying about things slipping through the cracks or escaping out the back door of their organization. Team members enjoy going to work every day and the partner and manager-level professionals not only have a better quality of life, but they share in the growth of a more profitable business.
Policies and procedures: Firms with good governance have well-documented policies and procedures and are clear about how each person's roles and responsibilities intersect with the standard operating procedures. So, when people are going through their performance evaluations every year, there is no ambiguity about what they're measured against and what they actually accomplished. At the same time, the firm is protected from risks that can arise from an ad hoc approach to job performance
Metrics and goals: Firms with good governance are clear about the metrics and goals used to measure performance as the team progresses forward. For instance, if your firm has an incentive to bring in a certain amount of business, you need a metric that says very clearly: "This is the amount of business you need to bring in." The firm then needs straightforward internal reporting to track how much business that person brought in, as well as the level of effort each person undertook to bring in the business, serve the clients or invest in their intellectual development.
