Many CPAs have told me 2020 was the most challenging year they’ve ever faced, but also one of their most exhilarating. Why? Because they’ve done some of the most important work of their careers for clients at a time when everyone needed to step up. In many respects, everything that is geared toward helping the economy get back on its feet is running through the CPA.
The global pandemic required us to absorb a decade’s worth of changes in just a few months. The way we work, communicate with clients, nurture talent, use technology, and balance life and work in a telework environment will never be the same. It wasn’t easy, but we had no choice but to adapt. As German philosopher Friedrich Nietzsche famously said, “What does not kill us makes us stronger.”
Volumes will be written about the tumult of 2020, but history tends to repeat itself from World Wars to the global financial crisis of 2008-2009. Many elite CPA firms had to lay off staff, cut salaries and bonuses, shutter satellite offices and freeze recruiting a dozen years ago. I remember my friend John Sensiba telling me how his Bay Area firm lost over 40 percent of its revenue almost overnight. That’s because its client base was heavily concentrated in local technology and real estate firms that got hit especially hard during the financial crisis.
Today John’s firm, Sensiba San Filippo, is one of the largest CPA and business consulting firms in Northern California. It’s continually rated as one of the fastest-growing firms and best places to work. But it
was a different story after the 2008 financial crisis. John had just taken over as managing partner. In a matter of months, the thrill of the promotion was replaced by recurring nightmares about being the guy “who ran SSF into the ground.”
When you hear “firmwide reboot,” most people think about cutting costs, trimming staff aggressively and cutting back on travel and client entertainment. SSF took a radically different approach: Essentially, they asked themselves: “Why are we really in business?”
Everyone at all levels of the firm had to address three fundamental questions:
1. If you were a client, what would you want in a CPA?
2. If you were just graduating from college, would you want to work at your firm?
3. If your parents walked into one of our offices, would they be proud of the way they saw people treat each other?
Those aren’t the kinds of questions you’ll find on the CPA Exam or in an MBA textbook, although maybe they should be.
Reflecting on 2008, Sensiba told me about a dark period when he and the remaining partners went on a retreat and really started reflecting on why they were in business. At one point, they asked each other: “If you were a client, what would you want in a CPA you were planning to hire?” Most agreed they would want a CPA who was passionate about their industry and helping them succeed. If they were a manufacturer, they’d want a CPA who's excited about manufacturing, who is keeping up with tax laws or pending tax laws that might impact their business, or financial regulations that might impact their financial reporting and their ability to raise capital. Today, it might be a firm that’s an expert in the Paycheck Protection Program or the employee retention credit as it relates to their industry. Either way, if that’s what clients want, why aren’t you giving it to them?
During SSF’s transformation in 2008-2009, the firm came up with a slogan, “National Experts with a Regional Focus,” to emphasize its regional size and focus. Like many generalist small firms, SSF partners tended to be jacks of all trades. But Sensiba was adamant about changing that philosophy. He asked each partner to decide whether they wanted to focus on being the best tax specialist, auditor or consultant they could possibly be, but they couldn’t be all three. They had to choose. Beyond that, each partner had to decide which specific industries they wanted to focus on — they couldn’t try to serve them all.
Further, SSF radically changed its partner compensation model from rewarding billable hours to rewarding accountability, civility and corporate citizenship. Of course, that kind of radical transformation had repercussions. Many partners left, even though SSF had much higher than average net income per partner. What’s more, over 80 percent of staff left within a few years as well, because the firm raised its standards and had much higher expectations for professionalism.
What does not kill us…
Sensiba told me he couldn’t have chosen a tougher time to take over as managing partner, but it turned out to be a tremendous educational experience — for both him and his team. The tough times really focused the firm on what it wanted to be and challenged everyone within the firm to be more accountable to clients and to each other.
One positive result of the rapid staff departures was that those who remained were overwhelmingly onboard with the firm’s new vision. That made it easier to get things done and to recruit likeminded new talent to replace the stars who left. So, the firm redoubled its efforts to make sure it was as transparent as possible with clients, prospective clients and recruits about who it was, where it planned to go and how it would get there.
Like many CPA firms at the time, SSF did not provide a lot of leadership or soft skills training. It was all technical training geared toward fulfilling licensure requirements. So, Sensiba went outside the firm and joined boards of organizations that he knew were leaders in those areas. He learned that community service is not only something that makes you feel good, but it can be a tremendous teaching tool. “I received most of my leadership training and a lot of the philosophies I have related to management, from sitting in a room full of people that are smarter than I am and watching how they operate,” recalled Sensiba.
It all goes back to asking yourself, “What would I want in a CPA if I was the client?” Again, you’d want a CPA who’s passionate about your business and not just focusing on building their own book of business. In SSF’s case, partners are not compensated directly on their book of business, but on doing what’s best for clients, staff and community. That makes it easier to refer clients that aren’t a perfect fit to other firms. In the long run, you get better referrals back from those firms and it becomes a “virtuous circle,” noted Sensiba.
When you’re rebuilding your firm, it’s an ideal time to put yourself in the position of an employee or a college student just joining a firm and getting their first job. What would you want out of a job at a firm like SSF? Whether it’s a flexible work schedule, working from home (permanently), having a clear and transparent career path or being part of a firm that’s socially and environmentally friendly, “we’ll provide it for them if it's within our means and skill set,” Sensiba told me.
Even after we return to some semblance of normal, there is never a bad time to consider restructuring your firm to better serve your clients, employees and community. Take working from home. What began as a temporary crisis stopgap may become a permanent solution for firms looking to hire and retain the very best talent they can — regardless of where those workers live.
Incidentally, the Japanese word for “crisis” is basically a combination of the words "danger” and “opportunity.” Japan certainly embodied that philosophy after it was rebuilt from World War II. The same thing happened for John Sensiba and SSF after 2008, and I’m sure we’ll see more redemption stories after the pandemic fades.
