The 18th Annual Management Summit was held at the Red Rock Resort in Las Vegas this past week and was attended by over 135 partners from leading firms from around the country and overseas.  Below, we have summarized the highlights from Day One including Mark Keely's Keynote, the Mark of a Leader, Bob Bunting and Jim Metzler's "Fireside Chat" with Bill Carlino, and Jennifer Wilson's session on managing difficult conversations successfully.

Doug Keely: The Mark of a Leader 
The mark of a leader is the ability to reinvent your business to inspire people to come to work with you and to interact with your organization.  The difficulty lies in that we all have filters based on what we do and we have voices in our heads that tell us what we can and can’t do.  Think of your life as a story and you are the author.  The benefit of this is that YOU are the person that decides what YOUR story is.  You are the hero of the story as you decide who you are, what you do, where you go, what you like, and don’t like…it’s all up to you.  You are in control. Doug then went on to describe five characteristics found in all great leaders, teams and organizations:

1-Total clarity of vision; knowing exactly what you want
2-Belief is about the voices in your head and sticking to what you believe you can do
3-Commitment-Have to stick to it, need unwavering perseverance
4-Passion-Need to have passion for what you do and want to do
5-Courage-Doing things you have never done and thinking outside the box

To do great things, you must surround yourself with a great team…same goes for family.  Need to have great chemistry to make the team work.

Bob Bunting/Jim Metzler: Accounting Profession Fireside Chat

• Standards Discussion on IFAC/US GAAP: IFERS is coming but US perception is that it will require huge changes; Bob Bunting feels that it will not be extreme and estimated 95% of the requirements are the same as what firms are doing today.  The biggest issue for US firms is how you make decisions, which requires wisdom and judgment as the primary factor. 

• Jim Metzler: Independence may not be the cornerstone of audit, AICPA is looking into reliability as being the standard, particularly for small and private businesses.

• Succession Planning: Bob: One of biggest issues in firms today as firm’s feel they don’t need to worry about succession planning until the last six months before the partner heads for the door. Bob feels this has to start much earlier and partners need to constantly pick their replacement and continually train them.  In the old days there were people that used to “write a check” which created an environment that has caused firms to delay succession planning.  When other CPA firms evaluate firms for acquisition and see a bunch of older guys followed by young guys without leadership skills, they are going to walk from the deal.  Jim concurs that in the medium sized firms there is an attitude that someone will come riding up with bags of money to buy them out, which will not happen.  Jim feels the smaller firms (roughly 33,000) are at higher risk because it is not even on their radar and these firms don’t have any kind of exit strategy, so they plan on just turning out the lights when they are done.  92% of these people don’t have any business continuation agreements today.  The AICPA is developing web-based tools for these groups onsite.

• People Issue: Jim stated that this is a huge component of the AICPA’s strategic plan to get to young people in high school interested in accounting.  Their website StartHereGoPlaces.com has games for them to get interested in the profession by playing accounting video games.  The AICPA has collected over 800,000 active email addresses and have found that these people were eight times more likely to go into accounting.  In addition, Business Week recently picked accounting as one of top three majors in business today.  The bigger problem is the declining number of PHDs that are not filling in the education channels so there may be a shortage there in the future. The AICPA is also working on diversity programs to bring more minorities closer to profession.  AICPA has developed a Human Capital Center for PCPS members.  Bob added that he felt that Moss Adams has been good at getting the right entry level candidates as they have become an employer of choice.  At the experienced level, Bob felt there was a permanent global shortage of people and this is true in every part of the world.  Bob noted that around the rest of the English speaking world that they could not keep PHDs also.  Bob feels the AICPA will have to develop a very liberal scholarship program to encourage middle-class candidates to go that route.

• Mobility and Licensing Laws: Many CPAs are doing work in other states as they have clients in other locations and could be in violation of local laws so the AICPA and NASBA are working together to resolve the issue.  Jim mentioned that approximately 21 states will be together by the end of this year.  Bob stated that  we are the only country in the world where you are not a "US: CPA, you are a "Florida" or "New York" or other state CPA, so if they don’t work it out soon, there will be a strong push to national licensing.  The state boards would then be responsible for disciplining CPAs, but they would no longer be responsible for testing or licensing.

• IT Security is on top of AICPA List: Where do you see technology going? Jim: Now firms are looking at technology as it impacts all of their production and seriously looking at process improvements.  Getting data captured one time at the front end.  Jim expects firms to integrate XBRL and more standardization of tools and process.  Web 2.0 is going to have a huge impact due to the social networking that is occurring in the future accountants.  Bob: Technology has allowed employees to continue to work for the firm through remote locations, even if their spouses move.  This has allowed them to keep people for an additional 3-4 years and they only come into the office for CPE.

• Network relationships: They are critical for both large and small firms so the use of networks for education and partnering will continue.  Those networks/associations that come together to do joint projects can expect more legislation, registration and inspection requirements to make sure they are working as expected.  Jim expects that there will be more PCAOB inspection.  Bob mentioned that the US is the highest risk area of running a firm and that if one of the Big Four CPA firms goes down, it will have a global impact.  Other parts of the world are trying to develop firms that can rise to join the Big Four so that the impact would not be as extreme.  Unfortunately Bob felt that Associations in the US are “clubs” in that they lock down a territory regardless of performance.  Bob sees that the successful associations will require that people do something (Meritocracy) to stay in the network.  Networks will have to generate business and education.

• Outsourcing: India is seeing they are going towards the higher end of outsourcing and the gap between pricing with the US is reducing.  Indian companies are now saying that their biggest competitor is the Philippines where the cost is even less then India.  Outsourcing is not just about cost differential, but by providing capacity that is not available so the cost issue is only short term.

• 150 Hours Issue: Jim believes this is not the reason for the staffing shortage and there is no statistical difference between states with and without the requirement. Bob: Some of larger firms want to allow accountants in at 120 hours and require that they earn the last 30 while at the firm, which would mean that they would stay longer to get the certification process completed.  Bob felt not getting these additional hours would cause people to think twice before they consider leaving a firm.  Bob feels there needs to be ways to keep people engaged in the profession so they don’t make a “stupid” decision early in their career and leave the profession.

• Marketing vs. Recruiting: Jim has seen a shift in firms budgeting for recruiting and using CRM systems to track these people and bring them into the firm as well as track them after they leave or don’t accept a position. 

• Wealth Services: Bob: there will be strong local groups that become known for this locally but CPAs will have an advantage because we do tax work, tax planning and do their audits.  Bob believes that firms will re-invest in wealth services and business valuations.  Bob: Most firms think they have a practice when they have one person that is leading the charge and keeping busy.  Bob feels that this practice should work to get the best and biggest so that if someone leaves, the practice does not die.  Bob sees this failure over and over again when firms have no depth.  Jim stated that he often saw this occur in the IT niche where one person thought they could be a complete niche. 

Jennifer Wilson: Managing Difficult Conversations Successfully 
Jennifer began by stating that people judge others all day long and when they get into conflict situation, they tend to focus on why they are right and the other person is wrong, with a lot of emphasis on their own personal feelings.  She felt that conflict can be good as it highlights problems, promotes changes, encourages compromises, and shared solutions and that it can increase morale when the environment learns they can deal with issues openly.

Jennifer felt there were four ways in which people handle conflicts and all of us use one or another throughout our lives:

• Avoiders: Pretend the problem does not exist hoping that it will go away, but archive every issue until they have had enough and then beat you up with all the details.

• Givers: Accommodate everyone with "whatever you say or decide is fine" but they often talk about it in the background.

• Confronters: Those that feel "they are right and you are wrong" and will bite off your head with a direct attack so that you will back down.

• Peacemakers: The person that feels both parties should compromise and give up a little to stop the conflict, but seldom get to the root cause of the problem, so it simmers.

Jennifer felt there was a fifth, better way to resolve issues which she called the collaborating style or the "Win-Win-er" which projects a "desired outcome" for both parties to the situation.  The first step is to interpret the situation by brainstorming all the ways the situation occurred in both an "ugly" (worse case scenarios) and "hopeful" (I did not communicate properly) manner and then prepare for a meeting where the issue can be addressed.  Preparation begins by first defining the conflict and identifying that it really exists.  The second step is to commit to discuss the conflict with the other person and to set aside a time and place to do so. The third step is to outline your understanding of the situation and try to understand the root cause.  The fourth step is to share your understanding of the conflict and Jennifer suggested using the "expected, observed, inquiry" approach.  "I expected that you would complete this tax return on time, I observed you working on marketing materials, I want to know why the return was not completed."  The fifth step is to stop and listen carefully to their response and look for clues or new information to resolve the issue.  The sixth step is to share your view on the situation, how it makes you feel, and your commitment to resolving the conflict.  The seventh step is to ask them for help in developing the solution and the eighth step is putting the understanding in writing so that the resolution is documented.

Management Summit then broke into groups by firm size to discuss firm issues which were specific to each group. These are amongst the highest rated of the sessions as it allows partners to discuss confidential issues freely without worrying about competitive firms finding out.

For any questions or comments, please email me at roman@itpan.com.

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