WELCOME TO INSIDE PUBLIC ACCOUNTING

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1 MAY 2013 INSIDE PUBLIC ACCOUNTING / 1 CONGRATULATIONS ON BEING NAMED MANAGING PARTNER WELCOME TO INSIDE PUBLIC ACCOUNTING

2 WELCOME TO INSIDE PUBLIC ACCOUNTING MAY 2013 INSIDE PUBLIC ACCOUNTING / 2 What Are The Skills Needed To Be An Effective Managing Partner? IPA asked three current and past Best of the Best MPs to talk about the skills it takes to unify and lead a successful firm. We spoke with Andy Armanino of San Ramon, Calif.-based Armanino (FY11 net revenue of $84.0 million), Bill Hubly of Itasca, Ill.-based Corbett Duncan & Hubly (FY11 net revenue of $7.8 million) and Tony Argiz of Miami-based MBAF (FY11 net revenue of $80.2 million). Armanino Says The MP must be the Vision Keeper Of The Firm Some people possess natural athletic ability; others have great analytical minds; some live to perform on stage. Still others are born leaders, says Andy Armanino. I don t care how much I study, if you ask me to sing, I would look like a clown, he says. It s not in me. It s not in the DNA, but in terms of leadership, it was in the DNA. Armanino believes that leaders are born and not made, but the MP of San Ramon, Calif.- based Armanino is quick to add that many avenues are available to improve the skills needed to become an effective MP. But before an up-and-comer goes about developing those skills, the entire firm has an important job to do: figure out what kind of MP is best for the long-term success of the business. Armanino is usually called the CEO rather than the MP and there s a reason for that. He believes a partnership structure, with decisions made by committee, can be inefficient and difficult to manage. (Some partner groups will actually vote on paint colors, he jokes.) A corporate structure, with a CEO who is a decision-maker and vision-keeper works best at larger firms, says Armanino, who is marking 10 years in the top job. At Armanino, governance has evolved into a more corporate structure because the firm has grown dramatically, going from $18.4 million to $84.0 million over a 10-year period. With that growth has come numerous opportunities for young professionals to show whether they have the right stuff to lead. One opportunity is the firm s Staff Advisory Board. Professionals are voted in by their peers to sit on the committee, which meets with Armanino once a month to solve firm problems. When it started, the group focused too much on little

3 MAY 2013 INSIDE PUBLIC ACCOUNTING / 3 things the mess in the office kitchen, jeans, snacks but the board has prioritized its work and is now making things happen, Armanino says. A similar, but higher-level group, the Management Advisory Board, also identifies leadership potential. We give young leaders the opportunity to come to the forefront early, Armanino says. The firm recently formed an Innovation Committee, which is looking at every key process in the firm with an eye toward improved efficiency. What have you learned during your 10 years of leading the firm? Be a good listener. Really. We think we know everything, and we don t, Armanino says of MPs in general. The best leaders out there, I think, have the ability to take everything in, to listen and to actually pull information from people, to encourage them to give you input. Lead. Don t back away from it. Don t try to lead by consensus. When he started as MP, he wanted to make everyone happy and be everyone s best friend. It doesn t work. You need to do what s right for the firm, over and over. Remain positive. Armanino, who has a tall stack of leadership books on his desk, particularly likes a Gen. Colin Powell quote: Perpetual optimism is a force multiplier. He says, Be positive about your firm, and your direction, your people, and encourage others to be positive. It s huge. Make mistakes. Accountants resist creativity sometimes, Armanino says, but it s important to challenge people to see into the future and try new things, regardless of whether it works out. Mistakes are part of the learning process. Embrace technology. Armanino said his father, who founded the firm, retired at 54. The next MP retired at 52. In both cases, the technology was changing faster than their ability to adapt to it. Be accountable. MPs often focus on partner accountability but not their own. Accountability has got to come from the top. The role of MP has evolved across the profession. Armanino says firms often go in one of two ways: choosing the person with the best handle on the financials and administration or the top business developer. Both approaches have potential downfalls. A good administrator is not necessarily a good strategist, and a rainmaker is going to be taken out of the role best suited to his or her skills if made MP, Armanino says. I think we continue to evolve as a profession and the role of MP has to continue to evolve too. We have to keep looking at it and make sure the role serves the firm, and not the MP. Hubly Says Building Trusting Relationships is One Of The Biggest Challenges Of New MPs

4 MAY 2013 INSIDE PUBLIC ACCOUNTING / 4 Most new MPs are not new at all. They ve usually been around the firm for years, working their way up the leadership ladder with their fellow partners, who express their vote of confidence by selecting him or her for the top position. That step from working alongside your peers to holding them accountable as a boss is a huge transition that needs to be recognized and discussed openly, says Bill Hubly, MP of Corbett Duncan and Hubly since What s really tricky is they believe in you as a peer; they don t necessarily believe in you as a boss. Questions such as, How will it feel when I hold you accountable? or, How can we work through this together? can get the conversation started. That s why Hubly says effective communication is the No. 1 skill a new MP needs, since building trusting relationships with the partner group is essential to operate as one, united firm. Entirely new relationships must be forged and improved, and trust is essential. A new MP should sit down with the partners, listen carefully to what they re trying to achieve as individuals and make sure that they are on board with the firm s long-term vision. Young professionals who are interested in becoming MP should take on as many leadership projects as they can, particularly ones that cut across several departments. He also advises potential leaders to become experts on themselves. Understand how you react to others, how you build relationships and how you present yourself. Hubly said he learned that early in his MP career that what he perceived as passion for the job was coming across as intensity, and he was coached to communicate differently. An MP should also know what he or she is NOT good at. You have to surround yourself with great people who are empowered to do what they need to do and you have to hold yourself accountable too. Also, it s important to recognize that the MP role is usually nothing like the job held previously. Digging into the details of the firm is completely different than working with clients. An MP has only one client, the firm. People underestimate that, Hubly says. It s working with people to effectively get the things done that you ve set out to do, as an organization, and that s a totally different skill set than serving clients and developing business. A Hunger to Succeed, the Power of Observation and the Lessons of Baseball Form Leadership Skills in MBAF s MP MP Tony Argiz has grown Miami-based MBAF from a $7 million firm to one that is more than 10 times that size, but he s always on the lookout for his replacement. I analyze the partners and determine if they really care about the business, says Argiz, who has led the firm for 15 years. Are they really looking to see how they can succeed, or are

5 MAY 2013 INSIDE PUBLIC ACCOUNTING / 5 they really looking at the potential of the firm? Are they caring people? Can they listen to people? Argiz says. I think a big portion of the job is listening to people and hearing their concerns. Leading a firm requires something intangible, and that s a drive to succeed, an openness to learn from others, a willingness to work on your weaknesses and a natural ability to engage with others. There s a certain spark you ve got to have, Argiz says. I think it s almost in the genes. Argiz, born in Havana, Cuba, says he learned much from his father, whose business was confiscated two years after Fidel Castro took power in The family decided to send Argiz, then 8 years old, to the U.S. In what was known as the Peter Pan exodus, 14,000 children between the ages of 8 and 14 were given waiver visas to leave Cuba. Argiz spent five years in a Catholic boarding school before his parents were able to leave the country and join him. That experience surviving as a child with no family or money gave him the drive to succeed and a commitment to give back to the community that has never left him. Argiz went on to pitch for a championship baseball team in high school and won a baseball scholarship to Florida International University. Baseball, he says, taught him not only about teamwork, but also about using his intellect. Pitchers can t throw fastballs every time in an attempt to overpower the batter, but must carefully watch the hitter, getting to know his quirks and patterns to outsmart him at the plate. He later transferred that skill for keen observation to his work as an accountant. Argiz watched how his MP interacted in the community and studied Big Four leaders in Miami and how they presented themselves. Just as he copied pitchers who were throwing pitches he couldn t master, Argiz looked to leaders in the profession and tried to emulate their successes. His job of MP has changed as the firm has grown. While he has strong partners who help with administration and a host of other matters, he is very much expected to be the face of the firm in southern Florida, so he is often seen at charity events or leading community projects. Clients also expect him to remain visible and involved, and Argiz says he realized early on that handing off certain work would hurt the firm. Therefore, he has continued to devote quite a bit of time to the firm s litigation practice. Sometimes it requires six and seven days a week, and you ve got to be thinking all the time. A good candidate with the skills for the top job would be someone who already leads a large, profitable department, relates to people well, is open and humble and leads by example, Argiz says. Since he took over as MP in 1997, he acknowledges that he s had to adapt his style. I was probably too aggressive and too demanding when I started. Citing Teddy

6 INSIDE Public Accounting With Our Compliments Roosevelt s philosophy of speaking softly and carrying a big stick, Argiz says he s learned when to use the big stick rarely. Argiz stresses that leadership training academies, which are much more prevalent and sophisticated now than when he became MP, can help professionals become better salespeople while assisting them with other skills. You have to tackle many things at one time and you have to have a little salesman in you. If you look at my personality index I m more of an introvert. It s crazy, but my leadership skills pushed me to such an extent that I had to overcome that. The MP must be a big thinker, he says. In the future I guess you might even have a CEO in a lot of these firms that works on the business, but not for the business. Argiz will continue to do both. I still never get tired, thank God. He says he wakes up full of energy and ideas for new opportunities. I m never satisfied. nipa