The human element in practice management

When dealing with practice management and development issues in medium sized practices some of the most difficult problems to face up to and handle are those caused by what can best be described as ‘the human factor’.  We are not talking about general HR problems here, but situations that have the potential to undermine the practice, either through lack of communication between partners or because the senior or managing partner has tried to avoid unpleasant confrontations and allowed a molehill to turn into a mountain.

In firms where one or more of the partners are approaching retirement such problems can be acute.  Trying to persuade older partners that they should adopt more modern management methods in order to provide a better service to clients as well as making the business more efficient is often an uphill struggle.  A typical situation is the older partner with a sizeable portfolio and a protectionist attitude.  He will resist all attempts to integrate him into a departmental management structure as it would mean giving other partners or specialists within the practice access to ‘his’ clients. 

At best, this means that the firm is missing opportunities to sell added value services such as corporate finance, specialist tax advice or financial services, but there could be far worse problems to be dealt with in the future if he is offering clients advice that he is not qualified to provide.  It is not unusual for such partners to discuss ‘hypothetical’ situations with colleagues who are blissfully unaware that the solutions they propose will be taken straight back to a client and put into practice.  One day factors that should have been taken into account but were never revealed may cause something to go horribly wrong, leaving the firm checking the small print in their professional indemnity insurance.

Another problem with older partners clutching all their clients firmly to their bosom is the can of worms that is likely to be revealed when they are eventually prised loose. Where a difficult partner is due to retire in a couple of years his colleagues are very likely to allow him to carry on doing things the way he always has rather than cause a lot of unpleasantness and aggravation, but they could be in for a nasty shock.  When he is safely out of the door the full extent of the problem will swiftly become apparent.  There may be yawning gaps between the amount of work expended on clients’ work and the fees they have been charged (time not being booked and “free” advice being given), invoices that have remained unpaid for months which may have been raised but never issued with a hold put on statements by the partner and a host of other problems.  Even where a partner has been persuaded to go through a formal handover of his clients to other people in the practice it could still be a long time before the true extent of the situation is revealed.

As well as losing the business a great deal of money – if such practices have been established over a long period of time it may be impossible to calculate the true extent of the loss – trying to establish a proper commercial relationship with clients who have been so leniently treated and received so much for so little will be extremely difficult. 

It is true to say, as well, that sometimes these things are true of other, non-retiring, partners and emphasises just why the managing partner has to be an efficient and effective CEO with management reporting systems and key performance indicators in place (essential in every firm) that help him in his role.

There is no reason why partners cannot still retain a close personal relationship with their clients, whilst still ensuring that they receive the benefit of all the services the firm has to offer.   If older partners can be persuaded of this then they are much more likely to open their portfolios to colleagues, otherwise more direct action will be needed.

Of course such problems are not the sole province of older partners.  There are plenty of younger ones with attitudes that do not coincide with the direction or philosophy of the firm. In most cases, however, the other partners will bite the bullet and deal with the situation because they know that otherwise they will have to live with it (and any detrimental effect on the business) for a long time.

Time was when a great many independent practices were a collection of sole practitioners who simply happened to work under the same roof.  Thanks to the needs of the modern marketplace few such firms have survived and partners are much more focussed on working together to grow and develop their business.  However, another opportunity for the human element gremlin to creep in comes with the appointment of a new partner.

Bearing in mind the scarcity of young talent and the need to address both succession issues and the ever-increasing range of services required by clients, competition to recruit the best potential partners is fierce.  It is therefore tempting to grab the first person to come along that looks as though they could fit the bill – a strategy that frequently leads to regrets on both sides – and experience shows that most practices do not clearly specify what characteristics they require and promote/recruit on the basis of technical ability without due regard to the commercial, development, managerial or personal attributes of the individual. 

Just because someone has the required technical or intellectual capabilities does not necessarily mean that they are going to fit in to the culture of the practice, or indeed the clients.  It is therefore well worth taking the time and trouble to allow all the partners to get to know their potential colleague before a decision is reached and, just as importantly, to allow the candidate to get a real feel for the firm, its people and its philosophy.  Of course there is a risk that said candidate will decide to go elsewhere, but if that happens then the chances are that he or she was not the right person after all.

Take this scenario a stage further; add a few more people of varying ages, talents and attitudes into the mix and you have the potential for disaster that is a merger.  In a previous article (Accountancy Ireland, August) we looked at the general marketplace for mergers and acquisitions and an important element in seeking any deal is the personal chemistry between the respective sets of partners

The partners on both sides do need to get to know each other during the negotiation process.  Once the ink is dry on the contract individual personalities can change quite dramatically.  It will almost always be the case that one of the firms will be dominant and it is therefore all too easy for its partners (or some of them) to become domineering.  Just as in a marriage, the little foibles that seemed unimportant on first acquaintance, can become intensely irritating over time; the small inadequacies that seemed too easily overcome to derail the merger are suddenly insurmountable problems.  And any dissention at the top will quickly filter down to the rest of the firm no matter how well everyone else is getting along.

Change management is an extremely difficult process which is why many firms use specialist to help them.  The DIY approach requires a firm but fair approach, preferably from a partner in charge who is both liked and respected by both sides.  It also helps if they can combine the wisdom of Solomon with the patience of Job.

The human element is the one thing that can scupper almost any strategy or plan.  Making allowances for it is often the only thing that separates success from failure.