Alexandra DeFelice
Alexandra DeFelice

Rewarding Talent Beyond Billable Hours

Talented CPAs may not always be recognized when firms reward their staff based on billable hours.

January 21, 2010
by Alexandra DeFelice

Like many firms, Rochester, N.Y.-based Bonn, Shortsleeve & Ray LLP used to conduct annual reviews based on how many hours its accountants pounded out each year.

“I wasn’t getting the most out of my talented employees because I didn’t reward staff and recognize them for what they liked to do and are good at,” said partner Tim Shortsleeve, CPA.CITP. He also believes many partners at firms in general tend to rush through reviews because those aren’t billable, either and that the employees aren’t typically involved in the review process.

So he decided to change things and reward them based on their talents and individual goals instead. That meant first changing the firm’s fee structure. Shortsleeve interviewed some clients prior to switching to a fixed-fee environment and said that 98 percent to 99 percent of them “loved” the idea. The firm stepped up its rates by five percent to 10 percent, depending on the client, but added value services like unlimited phone calls, which made clients happy because they didn’t feel they were being billed for the social parts of the conversations and also allowed his staff to better serve those clients.

On January 1, 2009, he introduced his staff to a concept called a Results Only Work Environment, in which employees could work wherever they wanted and whatever hours they wanted as long as they got their work done by the assigned due dates.

A year later, Shortsleeve said, his employees are actually working harder and they are happier. “They love the freedom to come and go as they please and not worry about (people’s perceptions) if they run out of gas at 3 p.m. or need to run home to make dinner,” he said. “No one cares if you pick up and leave.”

But it’s also important to remind all the staff that just because their co-workers aren’t physically in the office doesn’t mean they aren’t working — and that just because they are in the office doesn’t mean they are working any harder or getting the most accomplished.

Of course, there is still accountability.

People have to check in with their managers at least twice a week and the firm created an electronic workflow system in SharePoint that tracks every assignment and ties it into Outlook, based on due-dates. And if a manager or client requests an employee to attend an in-person meeting, that employee is expected to attend.

“Staff people don’t have to show up every day, but we have to manage them and make them productive,” Shortsleeve said. “Your work is a priority — it’s not built around personal convenience. People are still structured and still need rules.”

He also still needed a way to provide them with reviews. So he built his firm’s own online performance achievement tracking system, Targeted Performance, based on 11 core competencies he wants all staff to possess in order to work toward a common goal of continuously improving the firm. They include things like technical knowledge, accuracy and reliability, marketing skills, client relationships and communication. The system also includes customized individual targets designed to help staff improve and grow while also helping the firm achieve its annual goals.

His 15 staff members are evaluated three times a year and annual salary increases are awarded the first week of January — a process that began in June 2007. Previously reviews took place annually and some employees felt as though their performance in the past 60 days might slant the results.

Now each individual is evaluated based upon a balanced scorecard approach that takes into consideration each individual’s current skill-sets and presents results in a color-coded format. Colors — which range from red to blue to green to gold, with gold being the best — were used instead of grades or scores. Most people are visual learners, Shortsleeve said and colors were what his staff voted for. Managers talk to employees about how to progress from one color to the next. They can review their performance online and the comments remain there so they can track their own progress over time.

“You have to have the right alignment, get the right people in the right spots so everyone understands their responsibility for trying to keep things on the right track, right focus and give them the right environment to succeed. This system has allowed us to [do] that,” Shortsleeve said.

What also made the change possible is that the firm moved to a paperless environment, starting with tax preparation and worked with an outsourced IT provider to enable the remote environment.

This past year was the firm’s second best year since forming in 1992. It experienced a 10-percent increase in revenue and staff rarely worked more than 55 hours a week during tax season, despite preparing roughly 1,600 personal and 400 business returns. Instead of overtime pay, the professionals received a tax-season bonus, which was “totally subjective and discretionary” because they are no longer paid by the hour.

Shortsleeve said he’s receiving more resumes now than ever before based on the work environment the firm has created, which he says a time-based environment would never have allowed him to do.

“There’s no glass ceiling, but I can’t make everyone partner,” Shortsleeve said. “If I can reward them intellectually, they’re going to stick around.”

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Alexandra DeFelice is a Journal of Accountancy senior editor and an AICPA CPA Insider™ columnist. To comment on this story or suggest future technology column ideas, e-mail her or call (212) 596-6122.