Written by Greg Crabtree
You have watched your newest hire work for their first 30 days and you are looking back at their great resume and 15 years of experience. All you can think is, “Does he really have 15 years of experience or just one year of experience 15 times?”
It was this experience that led us to make “you have to love training” one of our core values. As we tried to differentiate our CPA firm from our peers, we chose to have professional staff that could do 5 core areas of work instead of just audits or tax returns. Every time I would try to hire someone with experience, they would be competent in only one area out of the five. Since they also had “years” of experience, they demanded a premium pay that bore a poor relationship to profitability.
Instead of just passing on the cost to my clients of my paying too much for labor, I decided to solve the problem a different way. By growing my own talent, I would be able to keep access to our services more affordable and fulfill our mission of serving businesses between startup and $5 million in revenue. But, I would have to prove we could train people and stay profitable. We would also have to accept the slower growth curve that comes with growing your own talent.
The first step was to identify the 5 core areas we needed them to be competent in. For us, that was personal tax, business tax, accounting system implementation, financial statement preparation and forecast modeling. The next step was to identify the personality characteristics needed and screen for those with our test from Caliper (www.calipercorp.com). Using Caliper has been like having a corporate psychologist on staff. For a onetime fee of $285 for the test, we get an email with basic results within 24 hours and a call from their consultant to discuss the results. After the call, we get a written report with even greater detail findings within 3 days. Since we have tested all of our team with this service going back to 1998, the consultant can give us incredible feedback on how new hires will work with an existing member of our team as well as guidance (all included in the original cost of the test) as we transition existing team members into new roles.
Once we hired our prototype employee, we had to schedule the work for them to stretch but not break them. We employed a 70/20/10 training philosophy that we told them when they were hired. 10% of your training will be classroom, 20% will be one on one mentoring and 70% will be throw you off the deep end of the pool to see what you can do. You will take a lung of water, but we won’t let you die. Until I throw them off the deep end of the pool, I do not know what they really can do.
When we started this process in 2003, I had just asked some partners to leave that were not aligned around this mindset and we were at breakeven profitability, down to 9 employees and $1 million of revenue. Up to this point, when we added an expensive person with narrow experience, we could get some growth but no profit since they could not be used for more than one service offering and they were resistant to expanding their skill sets. When they would leave by our choice or theirs, we would start the crazy cycle all over again.
By 2010, we were on pace to do $1.8 million in revenue and had 21 employees and were on target for 10% pre-tax profit. The employee we hired as our prototype is still with us and is one of our top client managers. We had only one client manager leave to take a job with a client and only one new hire did not make the cut. Going from turning over 1 to 2 professional staff each year to turning over 2 professional staff in 7 years is a pretty good turn around. We have always had plenty of new business opportunities, our only bottleneck was how quickly we could add the right people. This process allowed us to peg our growth rate to our talent development rate.
What did we learn?
About the Author: Greg Crabtree has worked in the financial industry for more than 30 years. He founded Crabtree, Rowe & Berger, PC, a CPA firm dedicated to helping entrepreneurs build the economic engine of their business. Crabtree leads the business consulting team, helping clients align their financial goals with their profit model and their core business values. He is the author of Simple Numbers, Straight Talk, Big Profits! For more information, please visit: http://www.seeingbeyondnumbers.com/