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 Merge With CareAccounting firms that merge face opportunities and pitfalls. These tips help ensure success...
By Kerry McDonald
If you think that the hardest part of a firm merger is closing the deal, think again. Partners of small and mid-sized CPA firms that are growing through mergers and acquisitions often underestimate the internal challenges following a merger, which frequently lead to productivity losses, declines in staff morale, and frustrations about where the new firm is headed.
CPA firms that are in the process of merging or are anticipating a future restructuring should consider following 10 simple steps to ensure a smooth merger and minimize integration problems.
STEP #1 – Create a new firm identity, vision and values.
While it may sound somewhat abstract and trivial, creating a new firm image is an important first step for merged firms to take. One of the most common pitfalls of company mergers is that the management team thinks its job is done once the deal documents are signed. One firm merges with another and from then on it's business-as-usual, right? The reality is that when small firms merge to create bigger firms, they must identify a new direction and a new identity that will inspire both clients and staff. Some questions that may help a merged firm determine its identity, include:
- What do you hope to achieve from the merger?
Ask yourself why you decided to undertake this merger. Are you hoping to expand your service offerings? Deepen your expertise? Penetrate new markets? Your decision to merge likely changes the strategic direction of your firm, and thus its vision and identity. Consider the advantages associated with your merger when constructing a new or redefined vision statement and firm identity.
- If a prospective client asks you how you are different from another CPA firm in your area, how do you respond?
Most CPA firms market their technical expertise, exceptional client service, "out-of-the-box" thinking, and other hackneyed phrases. But what is it about your firm that sets you apart? When you go on a client pitch and the prospect asks you what makes your firm special, what do you say? Come up with a key phrase that serves as a memorable differentiator for your firm.
- What characterizes the culture of each merged firm?
Each firm in a merger may already have an established identity and culture. It's important to think about the strengths of each firm when building a new firm identity. For example, if one firm's culture is characterized by fun and teamwork and another firm's culture is characterized by hard work and competition, then consider what you want the new culture to be like. Maybe you will decide that the best way to merge these two sample cultures, for example, would be to create an atmosphere defined by a "work hard, play hard" mentality.
- What does each partner think is the greatest attribute of the new firm?
Firm partners should go through a brainstorming process to come up with the firm's new identity. Each partner should have an opportunity to share ideas on the new firm's greatest strength, such as experience, reliability, creative thinking, responsiveness, and smart people. After each partner shares his/her thoughts on the firm's best attribute, then narrow the list to three key strengths to focus on constructing a unique identity.
- After each partner retires and a second generation of professionals assumes control of your firm, what do you want your firm legacy to be?
Think about your firm's longevity and enduring values. Construct an identity that is flexible enough to change with time, but solid enough to remind future generations of partners what the firm stands for.
STEP #2 – Establish short- and long-term organizational goals and action steps.
Once the new firm decides what it wants to be known for and where it wants to go, it needs a road-map to get there. Partners should establish short-term and long-term goals that will help the firm grow, stay competitive, and ensure financial rewards for themselves and their employees. Specific, measurable goals should be set in each of the following key areas:
- Revenue – How much additional revenue does the firm hope to bring in within the next year? Within the next five years?
- Profitability - How profitable does the firm hope to be in the near future? What steps will it take to increase profits?
- Client Service – Are there client service goals that the firm hopes to accomplish in the months following a merger? For example, a newly merged firm may decide to weed out low-profit, individual tax returns and focus on providing better-quality service to existing, high-profit clients.
- Service Offerings – What new service offerings does the newly merged firm hope to offer and how will it develop and market these services? Firm partners should set goals and deadlines to create and sell expanded service offerings to new and existing clients.
- Infrastructure – How should the firm's infrastructure change over time to support the firm's goals? Partners should consider establishing goals to elevate internal technology, develop policies and procedures, and create a more sophisticated internal structure.
- Growth – Does the firm want to continue to grow? Partners should discuss their long-term goals for the new firm and determine when and how it should grow. If the partners decide to acquire or merge with other firms in the future, they should make certain to allow enough time to absorb the current merger.
STEP #3 – Use scheduling as an integration tool.
One area that often gets pushed aside in the aftermath of a merger is scheduling and workload management. Too often merger efforts fail because workload integration does not occur. Partners work with their usual staff people and clients remain the property of each partner, not of the firm. A scheduling system will help to integrate staff and clients by objectively assigning workload responsibilities. Rather than postponing the development of a firm-wide scheduling system, partners should begin immediately to determine each employee's professional strengths and weaknesses and assign staff people to engagements based on expertise, not familiarity.
STEP #4 – Plan a welcome gathering.
Another area that is often overlooked when two firms merge is planning a welcome gathering for all staff. This gathering need not be long or extensive. Partners may consider planning an off-site breakfast or lunch once the new firms come together to allow all employees to meet each other. The Managing Partner should speak of the new firm's identity and direction and should encourage the other partners to share their expectations of the new firm's future. Partners may also consider creating a slide show or creative performance featuring employees to set the tone for the new firm's culture.
STEP #5 – Establish staff performance benchmarks.
What are the firm's new performance and productivity expectations? Partners should create new performance benchmarks for staff at each level. These benchmarks will help to improve productivity by encouraging and rewarding the type of professional behavior that will lead to the firm's success. The benchmarks should be incorporated into the new firm's performance appraisal system to guide promotion and compensation decisions.
STEP #6 – Create a strategic training plan.
Once your firm has constructed proficiency benchmarks and has a performance appraisal system to assess skill development, construct a firm-wide training plan to help your staff to master high performance standards. Your plan should include targeted internal and external courses, linked directly to your proficiency benchmarks. A strategic training plan, clearly focused on your firm's staff development goals, will help to ensure that your investments in employee training yield the highest returns on performance, productivity and firm growth.
STEP #7 – Survey staff about merger successes and failures.
Six to eight weeks following your firm merger, ask your staff people to complete a survey about merger successes and remaining concerns. This process will help you to spot organizational problems early and implement solutions. An online survey is a quick and easy way to receive confidential feedback from staff people firm-wide, or you could distribute a hard copy survey with a response incentive to prompt employee input.
Questions that you may want to consider incorporating into your post-merger, firm-wide survey include:
- How effective has the merger integration been to a "one-firm" culture and vision?
- What do you recommend to continue to improve the integration process?
- What concerns or suggestions do you have regarding the firm's continued growth and development?
- Many of the changes that the firm is implementing are designed to create a more rewarding and prosperous future for the firm and its professionals. What is your outlook on the firm's future?
STEP #8 – Ensure ongoing communication.
The primary reason that most organizational change efforts fail in the long-run is that communication breaks down. A once inspired leadership team, committed to a "one-firm" direction and goals can become side-tracked with other responsibilities and can neglect to communicate regularly with staff. To prevent your firm from meeting the fate of many others, the management team should consider holding an all-firm meeting at least once a month within the first year following the merger. These meetings, which can take place in the office and can be brief, roundtable discussions, should involve a five or ten-minute presentation by the Managing Partner, presentations as needed by other partners, and at least 20 minutes of group discussion time on the firm's vision and goals. These meetings will take very little time and will communicate a continuous, consistent message about the firm's direction.
STEP #9 – Be creative when introducing policy and procedural changes.
Firm mergers often result in procedural changes and new ways of working. Traditional memos and voicemails are cold, top-down methods of communicating with employees. When introducing policy and procedural changes in your firm, be creative! Send animated e-mails to all employees representing the efficiencies gained by a new system. Have the partners perform a skit showing the old being replaced with the new. Showcase employees who are demonstrating new work habits and ask for testimonials to encourage others to try something new. Find creative ways to show enthusiasm for your firm's changed direction and policies and you will be surprised at how much quicker people will catch on.
STEP #10 – Inspire your firm to seek and embrace change.
Set an expectation in your firm that change is constant and essential. Let your employees know that your merger isn't a bump in the road and soon things will be back to normal. Inspire your employees to identify new process improvements, new client prospects, new procedures that can lead your firm to higher productivity and efficiency. Show your staff that the partners are energized by change and are eager to discover new opportunities.
These 10 simple steps can help guide your firm through a merger and ensure that your growth efforts are successful. By recognizing that your merger efforts begin, not end, with signing the deal documents, you will be better prepared to set a new firm direction and goals, integrate cultures, set high performance standards and inspire ongoing change.
Kerry McDonald is President of Point of Action, a full-service training consulting firm based in Cambridge, Mass. that works with CPA firms undergoing organizational change. Kerry can be reached at (617) 429-0083, or you can visit her company's website at www.pointofaction.net.
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