The Case For Hiring A Chief Operating Officer

While facilitating a Partner Retreat in the summer of 2005, a client firm of mine, let’s call them Brown, Gray & White, started debating the merits of hiring a chief administrator for the firm.

Gray, a 53-year-old CA and a founding partner of the five partner, 35 staff firm, wasn’t convinced.

His 4 other partners though, thought the idea had legs and they agreed to debate the matter some more on day two.

On the second day, the topic was discussed in more detail, having covered all the other areas on the agenda, and as the summer late afternoon heat was kicking-in, we debated some more.

“What the heck is this person going to do?” quipped Gray.

‘Well’ I said, ‘what tasks are you still doing that you don’t really enjoy, and don’t even directly generate revenue?’ I asked.

Without any delay the partners each contributed one major responsibility they each had, and when they were done we had the following list:

· Information technology
· Human Resources
· Administration & Operations (Including Credit Control & Cash Collection)
· Quality Control
· Marketing

Now, some of the tasks listed had elements that simply had to involve a partner or all of them, such as spending $100,000 on a new computer system and software, whereas many issues certainly didn’t need a Partner’s involvement (such as where to buy paperclips or what colour to paint the washrooms).

But each of the five categories above consumed huge amounts of partner time.

Take human resources, for example. Recruiting people to the firm as it continues to grow was taking up massive amounts of time of the partner responsible for that function.

IT was another black hole where Partner time just got sucked into the vortex, and implementing the new quality control procedures and writing the new staff manual was just another huge Partner brain (and time) drain.

When the Partners started discussing this in more detail Gray’s “What the heck is this person going to do?” comment sounded a little redundant.

They agreed, unanimously I might add, to go to market and find someone who could handle this mammoth task.

Before too long, and not without a large helping of luck, they had found the perfect candidate – a former executive at a client who had sold their business and gone overseas.

Mary joined the firm in early 2006.

The principle was very simple; let’s get Partners to stop doing non-partner stuff, and reinvest that time with their existing clients and see what happens.

And boy, did it work. Eighteen months in, and the firm has saved over 6 hours per week per partner.

Yes, that’s right, over six hours per week per partner.

Let’s do the math behind this:

The partners now take 6 weeks vacation each, so let’s call a year 46 weeks.

Their charge-out rates are, on average $350 an hour, so, 46 weeks x 6 hours x 5 partners x $350 an hour = $483,000.

Almost half a million dollars a year, every year!

What would your firm do with this sudden windfall of chargeable time?

Let me tell you what my client did.

They decided to take 25% of that ‘pool’ and put it into a series of marketing projects.

They took another 25% and invested that in mentoring and training their staff to a much higher standard than ever before.

The other 50% they ‘gave’ back to their clients. They created a ‘non-chargeable, chargeable’ work code where their productivity would not be penalized, but the client would be charged for the work at $0 per hour, so the Partners could now pick up the phone just to say ‘Hi, how’s business?’

This freedom was well used by the firm, and even more welcomed by their clients.

As a direct result, they have grown by over 20% in billings (or in cash terms, almost a million bucks) in the same year, most of which came from new projects for their existing clients. Yes, the marketing effort started to bear fruit too, but the majority of growth came from sitting down with clients and getting the client to talk about their businesses.

Guess what? If a client takes the time to talk to us, we can almost always learn more about them and more often than not we will discover additional areas where we can help them improve their businesses.

This type of work is also not fee sensitive, and we can very often ‘value price’ these projects and the clients will happily pay a much higher fee for the time involved, because they see tangible results for themselves.

Everybody wins!

Mary’s enjoying her new role too. Sure there was a bit of a steep learning curve for her, not being a CA and never having worked in a CA firm before, but she had the key components that would make a success of the role:

· Maturity
· Common Sense
· Tact & Diplomacy
· Sound management Experience
· Flexibility

So there we are. A happy set of CAs who have a vision for the future and the means to make it happy. They spend more time with their families, and encourage each other to take their full six weeks vacation every year.

They share profits equally, and clients are seen as belonging to the firm, not the Partner serving them, and I have very high hopes for them for the future.

As a post-script to the tale, I was delighted to be able to help them find another CA firm to merge with recently, a young CA ( early 40’s) who immediately took the average partner age down, and IQ up! (Just kidding about the last bit guys!)

One of the major influencers that made the young CA want to role his firm into their was the fact that they had a Chief Operating Officer who would take all the admin off his desk, and the collegial atmosphere created in the office by the Partners, and indeed the staff!

If ever you had any doubts about the merits of hiring a COO for a CA firm, I hope this little tale, based entirely on a true story, might inspire you to investigate further.

© MFA Group Inc, 2007