Editor: April Walker, CPA, CGMA
A coaching student, who is also the owner of a small accounting firm, came to the author with a problem. The firm could not retain its first few staff members, which cost the firm immensely. This might not seem abnormal for the tax industry, but most firms offer consistent services throughout the year besides seasonal tax preparation. The first few hires that a new company makes are critical — not that they necessarily retain those new hires, but key lessons are learned whether they do or not.
Once someone faces the challenges of having a workforce, like abuse of the time clock or ethical relations, they then naturally learn how to hire smarter. Gallup reports: "The cost of replacing an individual employee can range from one-half to two times the employee's annual salary — and that's a conservative estimate" (McFeely and Wigert, "This Fixable Problem Costs U.S. Businesses $1 Trillion," Gallup (March 13, 2019)). This could put a new business owner out of business, so it is important to correlate hiring with production levels. Furthermore, "turnover has many costs that never register directly on a spreadsheet" (id.). This column explores these costs further.
Just like many, I started my own CPA practice to work for myself and not have to rely on anyone else in the process. Being a leader was the least of my aspirations, but as my practice expanded and clients and new staff, as well as other accountants, thrived from my knowledge sharing, I realized that the vitality of my firm depended on leadership concepts, including defining our cultures and values. I only wish I had done this with just a few staff, before a crisis emerged. These authors describe the situation well:
In the earliest stages of the organizational life cycle, organizations tend to be dominated by the adhocracy quadrant — without formal structure and characterized by entrepreneurship. They are largely devoid of formal policies and structures, and they are often led by a single, powerful, visionary leader. As they develop over time, they supplement that orientation with a clan culture — a family feeling, a strong sense of belonging, and personal identification with the organization. Organization members get many of their social and emotional needs fulfilled in the organization, and a sense of community and personal friendship exists. A potential crisis frequently arises, however, as the organization grows. It eventually finds itself faced with the need to emphasize structure and standard procedures in order to control the expanding responsibilities. [Cameron and Quinn, Diagnosing and Changing Organizational Culture: Based on the Competing Values Framework, p. 64 (Wiley 3d ed. 2011)]
Ten years after forming, Meyer Tax (the author's firm) finally has an official and documented mission statement and vision statement, and I can now appreciate these concepts with 12 remote staff members. Individuals have values and their own cultural influences, and when these individuals form organizations, they must revisit the most important values of that company with others employed. It is almost impossible to retain staff, Millennials especially, without defined culture and values. James Kouzes and Barry Posner model the alignment of values and truth with followers in an excellent case study:
Sumaya [a company leader] put together a checklist of basic guiding principles and shared her values with each of her teammates. Instead of telling everyone what she wanted out of them, she stated clearly what values she held and what performance criteria she demanded of herself every day. She openly communicated her values, in her own words, and provided her team with a vivid understanding of what kind of person she was and what they could expect from her. By sharing and explaining her values, people were better prepared to understand the reasoning behind her actions and decisions. Knowing what she stood for, and why, made it possible, Sumaya found, for others to explore their own values and make them transparent to their teammates. As a result, she said, "We were able to build a set of shared values that enabled the team to work together effectively." [Kouzes and Posner, The Leadership Challenge: How to Make Extraordinary Things Happen in Organizations, p. 47 (Wiley, Jossey-Bass 2017)]
Accountants are technicians and often not natural born leaders and therefore must develop their leadership muscle. "[Exemplary leaders] strive mightily to deliver the best leadership in the world because they firmly believe that people deserve it" (id., p. 298). Companies that cannot look creatively at the bigger picture and instead are bogged down with compliance processes and procedures simply will not have the capacity to learn managerial and leadership topics or retain top talent. Growing firms must hire and retain those hires to survive, or face burnout of the owner. Every small business has a culture, whether the people involved know it or share it:
Virtually every leading firm you can name, small or large, has developed a distinctive culture that its employees can clearly identify. This culture is sometimes created by the initial founder of the firm (such as Walt Disney). Sometimes it emerges over time as an organization encounters and overcomes challenges and obstacles in its environment (as at Coca-Cola). Sometimes it is developed consciously by management teams that decide to improve their company's performance in systematic ways (as did Google). Simply stated, successful companies have developed something special that supersedes corporate strategy, market presence, and technological advantages." [Cameron and Quinn, pp. 5-6]
Not considering or sharing that culture sets new team members up for failure. It is the blind leading the blind.
Small business owners just hiring their first few staff members may think that cultures and values are for big corporations and that their firm is exempt. But they will notice something as hiring begins: Retaining staff is difficult, and even more so without having clear, shared culture and values. Some will not correlate retention with shared culture and values and will ultimately fail. The culture of Meyer Tax evolved from the utilitarian purpose of the firm (being a lifestyle practice to balance family and work) to a higher calling of providing the best tax strategies for clients and colleagues to leave legacies. This took many years, but, looking back, it was what the firm always strove for.
Defining a culture in a small business is much easier than retaining it in a large one. An example was DEC, a major computer corporation for decades before it was acquired by Compaq:
When the company was small and everyone knew everyone else, when "functional familiarity" was high, there was always time to renegotiate, and basic consensus and trust were high enough to ensure that if time pressure forced people to make their own decisions and to be insubordinate, others would, after the fact, mostly agree with the decisions that had been made locally. In other words, if initial decisions made at higher levels did not stick, this did not bother anyone — until the organization became larger and more complex. [Schein and Schein, Organizational Culture and Leadership, p. 134 (Wiley 5th ed. 2016)]
Therefore, it is important to invest a relatively small amount of time in defining the company's core values as soon as it hires the first employee other than the owner. The steps are simple but retain their value indefinitely. Look at other companies' mission and vision statements (for inspiration), consider what is key to the company, write it down, ask for input from the team to modify it (and solidify the team's consensus), then release it publicly (or at least internally). These simple yet overlooked steps will define a company's culture and the greater purpose of why your staff work for and with you. This in turn will retain more staff for success. Kouzes and Posner state:
There is a clear connection between challenge and change; and there's a clear connection between challenge and being an effective leader. The more frequently people see their leader "searching outside the formal boundaries of his or her organization for innovative ways to improve," the more strongly they agree that their leader is effective ... the effectiveness ratings of leaders increases the more their direct reports observe them actively searching for innovative ways to improve. [p. 148]
In an effort to prove this theory, the author located a relevant study from the Academy of Management that:
investigated the retention rates of 904 college graduates hired in six public accounting firms over a six-year period. Organizational culture values varied significantly among the firms. The variation in cultural values had a significant effect on the rates at which the newly hired employees voluntarily terminated employment. The relationship between the employees' job performance and their retention also varied significantly with organizational culture values. The cultural effects were stronger than the combined exogenous influences of the labor market and the new employees' demographic characteristics. The cultural effects are estimated to have resulted in over six million dollars' difference in human resource costs between firms with different cultural values. [Sheridan, "Organizational Culture and Employee Retention," Academy of Management Journal (November 2017)]
This study solidified the author's theory with facts.
What will your firm look like once you conquer culture? Top traits of a strong culture and leader include: Treat staff like family, have their back, hold them accountable, communicate disappointments along with celebrations, be truthful, emphasize their contributions and growth abilities, understand and encourage their goals, and find how those goals align with yours. According to Brené Brown, a leader is "anyone who takes responsibility for finding the potential in people and processes, and who has the courage to develop that potential" (Brown, Dare to Lead (Random House 2018)). Brown's main point of research is: "Courage can be learned if we are willing to put down our armor and pick up the shared language, tools, and skills we need for rumbling with vulnerability, living into our values, braving trust, and learning to rise" (id., p. 299). Small business owners must step into their leadership role.
The bottom line is that employee retention is about developing leadership skills, especially a caring culture — caring for that employee, caring for the team, caring for the clients, caring for the community, and having a greater mission than profits. This should be the first steppingstone of any growing company, without overfocusing on perfection. The core values, mission, and vision statement of an organization's culture will evolve and improve over time.
|Jackie Meyer, CPA, is the president and founder of Meyer Tax Consulting in Southlake, Texas, and is a nationally award-winning CPA firm owner and coach and speaker, currently pursuing a doctorate in strategic leadership from Regent University. April Walker, CPA, CGMA, is lead manager—Tax Practice & Ethics, Public Accounting, for the Association of International Certified Professional Accountants. Ms. Walker is the staff liaison of the AICPA Tax Practice Management Committee (TPMC). Ms. Meyer is a member of the TPMC. For more information about this column, contact email@example.com.