In our initial “Knowing Your Place” article, we took a detailed look at the most common roles you will encounter on your public accounting team. Now we’re looking at the rest of the public accounting ecosystem, including the mysterious world of the partner class. With any luck, your interactions with many of the following groups will be brief and painless. Here be the powerful, the shrouded, and the political creatures of public accounting.
Partners
First, a note for clarification: The title “Partner” has experienced some loosening of its meaning in recent years. When we describe “partners,” we mean equity-holding owners of the public accounting firm. Titles like “Principal,” “Junior Partner,” or “Director” may be used to denote terminal or non-terminal positions of equal or lesser rank to equity partners, depending on the firm.
When associates and interns are first introduced to public accounting, the partner class is often presented as a monolith: all partners are influential lords of their own personal fief, equal among each other and above the rest firm’s employees. In actuality, there exists an entirely separate hierarchy within the partner class. Newly minted partners often describe the process of transitioning from W2 employee to equity-holder as starting over at the bottom of the corporate ladder.
To make a very rough comparison, you can think of W2 employees of a public accounting firm as enlisted members of the military and partners as officers. Every partner outranks every W2 employee (just like every officer outranks every enlisted person), but within the partner class is a wide range of tenure, clout, and responsibility. This also means that there are some tenured W2 employees that can exercise more influence over their environment than certain partners, simply because they have more familiarity with the power brokers.
Within the partner class, you’ll typically come across three subgroups: Junior Partners, Senior Partners, and Managing Partners.
Junior Partners
Depending on the accounting firm, “Junior Partner” can have a variety of meanings. In most, junior partners are those who have been invited into the partnership ranks but are still in a trial period. They may not receive all (or any) equity shares until they’ve spent a couple years acclimating to the new role, but they sign off on client deliverables and assume some of the risks of operating the firm. This adjustment period gives junior partners the chance to learn the nuances of being a partner while still earning a conventional salary. Remember, standard (sometimes called “bench”) partners are usually not paid like W2 employees: they typically receive a draw on the residual profits earned by the firm, as described in the traditional model here.
Generally, junior partners are going to be eager and frazzled. The jump from senior manager to partner requires changing your perspective on your role within the firm. Senior managers are primarily focused on preparing and delivering client workpapers. Partners are responsible for that, selling new work, community outreach, building and maintaining a team of accountants, setting goals and targets for the firm, waging eternal war with other partners over the holiday party, and maybe even enjoying their personal lives. A trial period gives new partners the opportunity to make mistakes and learn things without having to pay a mortgage-sized buy-in.
One thing you may notice about someone metamorphosing from a senior manager into a partner is that a new partner may be less forthcoming with information. Partners are given access to more of the firm’s dirty laundry, and new partners may not be familiar with what’s safe to share with subordinates versus what needs to be kept among the partner class. Most will err on the side of being too cautious. If a close friend makes that jump, don’t expect them to just start spilling the tea on their fellow partners to a W2 employee. They’re in a protected class now, and that class values loyalty to the partnership.
Senior Partners
Typically, Senior Partners are tenured partners who have been within the firm long enough to assume one or several leadership positions. In addition to these leadership roles, most senior partners are still responsible for producing revenue for the firm. They will typically run a team or a team of teams that are responsible for client deliverables, just like a bench partner.
Senior Partners often reach this higher echelon through a combination of several skills and personality traits:
- They are a subject matter expert in a niche and lucrative subfield within the greater accounting industry; or
- They have been steadily profitable in their field over the course of 10-15 years as a partner; or
- They are a notably successful salesperson who has brought in several anchor clients for the firm; or
- Their father is the founder of the firm.
Senior Partners are usually relaxed, older, and comfortable in their skin. Most have been with the firm long enough to have an entire career as a W2 employee, and then an entire separate career as a partner. If you’re ever unfortunate enough to encounter a partner fully naked in the gym locker room, there is a 98% chance that it’s a senior partner from your firm. These folks have long since given up on caring about anything except making money and being successful in their field.
Managing Partners
Managing partners exist in a unique bubble within the public accounting ecosystem. Most managing partners are not in client-facing roles and do not generate revenue for the firm. Instead, they are responsible for the operational direction of the firm. This might include things like:
- Managing an entire office or branch of the firm, including leasing, staffing, maintenance decisions, as well as interacting with the headquarters;
- Handling community outreach, negotiating with local business groups, speaking at tradeshows, and otherwise serving as the face of the firm in the region; and
- Organizing and purchasing season tickets to local sporting events, plays, theaters, etc. and distributing them to influential clients, other partners, and their own deadbeat children.
How someone becomes a managing partner is largely a result of firm dynamics and personal preference. In some firms, Managing Partner is considered a desirable position. At those companies, the Managing Partner role will usually be awarded to a senior partner who has earned it through years of good service to the firm. At other firms, Managing Partner is considered a dead-end position, and it will be foisted on a lackluster partner who can’t meet revenue goals but is too important to let go of completely. Other firms may use the Managing Partner role as a type of “sabbatical” for tenured partners; it’s a cushy role where they can recover from the grind of meeting revenue goals and facing clients for years on end.
Managing partners are usually concerned with image and maintaining a consistent environment. If they’re not out glad-handing the editor of your local newspaper or giving a speech at the regional accounting conference, they’ll be in the office quietly lording over their domain. Most W2 employees will have limited interactions with managing partners. If you ever find yourself in a conversation with a managing partner, it’s going to feel like speaking with the captain of your high school’s football team from 30 years before you graduated. Sure, you have some thing(s) in common, but you should still prepare yourself to hear stories about the good ol’ days from before you were born.
C-Suite
Just know their names. You’ll probably never meet them, but boy will you feel stupid if you do meet them and don’t realize it until later.
Clients
Clients pay the bills. Clients make it rain. Clients are the reason anything good has ever happened in your otherwise miserable life, and every bad thing that has ever happened to you is because someone, on your team no less, upset the clients.
At its most rudimentary level, your public accounting firm is just a tool that dispenses professional services to clients. When clients stick a $100,000 check into the Assurance Services vending machine, they expect to receive fully audited financial statements.
Long ago, accountants recognized that they could charge more for their services than it cost to perform them, thereby profiting. Our ancestors began enjoying the creature comforts that came with a growing salary. In modern times, as accountants climb the ranks, their cars get nicer. Their homes get bigger, they spend money to really enjoy their hobbies, and they develop an addiction (either to alcohol or exercise, or both). Your average partner has experienced 18-25 years of consistent lifestyle creep, and all of those upgrades, benefits, and perks are thanks to the clients. It should come as no surprise that smart accountants hold their clients in high regard. Their very livelihood depends on it.
Not all clients are created equal though. Clients that account for a large portion of the firm’s revenue, sometimes called “anchor,” “keystone,” or “cornerstone” clients, will command a lot more of the partner’s attention than relatively small clients. When a client gets too big for the PA firm, it can become a problem. A too-large client will overwhelm a firm’s resources, effectively turning the firm into a private office. Each business line will have a different client mix, but anecdotally, we’ve noticed some issues when a single client provides more than 25% of a group’s annual revenue. When a single client provides more than 50% of your business line’s revenue, you better hope your client overlords are benevolent.
Similarly, tenured clients can hold outsized influence over the firm. Before we launch into this, let’s be clear: it’s best to always view the client-firm relationship through the lens of money. A client that has been with your public accounting firm for 30 years has put two generations of partners’ kids through college. And a public accounting firm that has completed your financial audits for 30 years will never make you go through an arduous and expensive Request For Proposal (RFP) process for professional services. Everyone wins when a client scales slowly and steadily enough that it doesn’t outgrow its PA firm. Smart partners recognize this and maintain long-term client relationships with a ferocity reserved for protecting family members from physical harm.
Most partners understandably recoil at the idea of having to replace a significant chunk of their book of business. Remember, your partner has probably reaped 18-25 years of consistent lifestyle growth courtesy of several important clients. Very few people recognize, let alone aspire to, the life they lived a quarter century ago. So when you accidentally piss off a client by insulting Led Zeppelin IV, a partner has to decide between doing the client a favor or fostering your professional development. The partner can only do one thing: yield to the client’s wishes and take you off the account. Clients pay the bills, employees are a dollar-a-dozen, and inflation is making us update our idioms. It’s a hog-eat-hog world out there.
When you find a partner that can and will say “No” to a client, you have likely found a good boss. Until then, do what the client asks. We don’t get paid if they’re not happy.
HR
If you’ve ever watched The Office (and identified with Michael), you have a fairly accurate representation of your accounting firm’s HR department. There are incredibly thoughtful, sincere individuals who we all benefit from knowing (like Holly!). And there are incredibly spiteful, milquetoast icons of misery whose sole purpose is to ruin your career, and also probably your life (like Toby!).
Our best advice is to never piss off HR, or anyone who has influence with the HR department. They’re not your friends, and while they’re technically not your enemies, they’re really not your friends.
Recruiting
Some firms lump their recruiting arm into the HR department. Do not disparage your recruiters for their department, they did not choose their station.
The majority of your accounting firm’s recruiters are washed-out accountants. We don’t say that as an insult: the client-facing part of accounting is not for everyone, and most recruiters realized that early on. Recruiters aren’t fools, they just didn’t want to be ground down and spit out by the PA machine for a 20% raise. We commend their self-reflection and efforts to help the firm succeed.
With that said, it’s likely that the biggest fool at your firm is a recruiter. Two things can be true at once.
Legal
Legal is the opposite of the C-Suite. Don’t learn their names. You’ll still probably never meet them, but boy will you feel smart if you do meet them and don’t realize it until later.