The $10,000 Hour? It's Key To Growing The Value Of Your Firm, Bunting Says

When Seattle-based Moss Adams needed to hire 40 senior managers and partners, then-CEO Robert Bunting got on the phone. He didn't call headhimters or his partners or business contacts. He called 100 people whom the firm identified as prime candidates for the jobs Moss Adams wanted to fill.

Bunting told each candidate that he was looking for the best person to fill a particular role, "and I found you." Then he invited the candidate to breakfast or lunch. In all, he set up 70 breakfasts and lunches and lured 27 senior managers and partners to Moss Adams.

Time spent making those phone calls and meeting promising prospects at those breakfasts and lunches is among the activities that Bunting describes as "the $ 10,000 hour."

He notes that few firms, if any, expect to recruit out of college everyone they need to meet their succession goals, and that most firms expect 30% to 50% of the people they need to hire today to be experienced professionals. But traditional recruiting methods aren't effective ways to recruit top-level experienced talent.

"When firms want to hire experienced people, they place ads or hire a recruiter, but the best people don't respond to those things. They -will respond if you, as the CEO, call them and say, 'We're looking for people to lead our firm into the future, and we've identified you as a potential leader. Can we have breakfast and discuss our firm's plans and the role we think you can play?' They'll usually respond very favorably, and you'll get amazing results. You can change the future of your firm," he told attendees at the sold-out 2006 Management Summit in Las Vegas.

A colleague once told Bunting that the only thing that will make a niche practice successful is a great leader, and through the years, Bunting has come to realize the truth of that statement, he said. Leaders at your firm have access to the best talent specializing in your firm's practice areas, and headhunters don't, he noted. Often such candidates work for your best competitors or you can meet them at industry trade shows. You're in positions to identify them if you keep your eyes open, he said.

The $10,000 Hour Nets More Value Than Billable Hours

Finding and working the $10,000 hour is crucial to successful growth and building your firm's value, Bunting told attendees. "A $10,000 hour comes from doing things like counseling a partner who can do better or getting a senior manager to visualize her future and stay with the firm," he explained. Those types of activities easily bring $10,000 an hour to the firm.

Be prepared to think creatively when filling your human resources, niche-building and succession needs, he advised. Would your firm be willing to hire a talented partner candidate with no practice at $450,000 a year? Moss Adams did to lure a particular candidate from a Big Four firm. "Look at your average partner income. The Big Four get at least half the best and brightest on campus. They give them good training.

Hire middle-market people from them. Their practices at the Big Four are de-emphasized, but many of them feel they can't leave because they won't be able to earn what they're making somewhere else." Among their skills, Bunting points out:

* They know how to run a leveraged practice.

* They've survived in a middle-market practice in a less supportive atmosphere than your firm will provide.

* Their training is best in class.

* They've had to fight for people and learned to keep them.

* They've developed great client service skills.

"They've learned more things in many ways than we have," Bunting said. These Big Four professionals often have noncompete agreements, but Bunting finds that the Big Four often release middle-market professionals from those contracts because they don't want to allocate the resources to keep the practice going without them.

Luring The Stars Enhances The Value Of Your Firm

Recruiting the brightest stars is a key to building your firm's value, Bunting pointed out. Maximizing the value of your firm is crucial as the profession's succession crisis accelerates in the coming years, and the market for accounting firms increasingly favors the buyer, Bunting said.

The factors that make one firm more valuable than another are the same as those that make one convenience store more valuable than another: financial performance, market share, barriers to competition, growth opportunities, differentiated products or services, culture, mission and ongoing leadership.

A valuable firm "is able to pay its owners and employees at levels that are competitive with or greater than its better peers," and is wellpositioned for the transfer of value from each generation of owners to the next, whether the transition is internal or external, he said.

Bunting observes that average partner age is a key indicator of firm value. Moss Adams has 17 offices, and those with the highest performance have an average partner age of 38. The lowest-performing offices have an average partner age in the mid-50s. "Those partners have already built their client base. They don't relate as well to young professionals. They're not as good at recruiting. They have nothing to prove. The offices with the youngest average partner age are high-energy and hungry. They have lower turnover and better financial performance."

Analyze how old your firm is, Bunting advises. Use this formula:

* Compute your average partner age.

* Now compute the average age of the top one-third of your partners.

* What percentage of your partners can or will retire within five years?

* What percentage of your partners are under age 40?

* How many of your non-partner staff will be "great" partners within five years?

Put each partner through a succession exercise annually, Bunting recommends. Moss Adams uses the following and requires each partner to complete it every year. It forces them to think about their roles and responsibilities in building and maintaining the firm's value:

You may be surprised at how your partners answer. The first year Moss Adams required this exercise, 10 partners in one office named the same person, and in another office, three partners named a three-year senior.

Do your younger partners have the business skills to run your firm? Can they generate more business than each partner now generates? Can they keep people and build teams? If not, your firm probably has a succession problem: It doesn't have the people in-house to carry the firm into the next generation, and it doesn't have the value to command a premium price in a buyer's market.