Do you know where your firm’s waterline is?


These are not the easiest of times for professional service firms, including CPAs. From a rush of new tax laws, to constantly shifting deadlines, to emerging technologies, to staffers working from home, to seeing clients exclusively on Zoom, the “new normal” is anything but routine. When you look at what separates the great firms from the average ones today, good decision-making stands out. The top-tier firms seem to have confident, empowered decision makers at every level of the organization — regardless of what their job title is.

Do elite firms only hire arrogant, self-confident people? No. They’ve simply put in place a structure that gives everyone at the organization the ability to take charge and make decisions commensurate with their skills and experience. Juniors don’t have to keep getting the greenlight from superiors to make simple decisions and seniors free up more time to do high value work for the firm’s clients — and bring in new business.

In other words, they have a very good sense of where their “waterline” is.

Think of your firm as a ship on the ocean — with you as the captain. Sometimes it’s smooth sailing. But at times like these, risks come at you from every direction, whether they be adverse weather, internal mechanical failure or enemy/competitor aggression. As a leader of your firm, you can’t be everywhere at all times defending every square inch of the ship. You have to pick and choose your spots and let your reports defend the areas you can’t cover.

Your less experienced reports should cover the areas “above the waterline,” so if there’s a breach or an accident there, the ship won’t sink. This allows you and your top commanders to defend the most critical areas of the ship that are “below the waterline” — the areas that could cause the ship to sink if severely damaged.

As a leader, you have a lot of leeway when it comes to how much you will delegate.

Delegation is not an exact science. You want to give your team enough freedom to make some decisions on their own — so they don’t have to keep coming to you for permission — but not so much leeway that they make catastrophic decisions that end up sinking your firm.

Decisions above the waterline (mistakes that won’t sink the ship): Mistakes that won’t have a material negative impact on your client experience include mistakes on the website, internal meetings and processes. We let team members run internal meetings. If they make a mistake it’s okay. We can fix it; everyone can learn from it and it won’t adversely affect our clients.

Decisions below the waterline (mistakes that could sink the ship): Mistakes that could negatively impact a client’s financial wellbeing and damage your firm’s reputation include missing an important filing deadline, using the wrong form, or making a six-figure mistake on a complex client tax issue. When issues hit below the waterline, you can’t risk delegating and having a bad or expensive outcome for your client. If you do, it’s going to deteriorate the client’s trust in your firm and damage your reputation. These are times when leaders need to step up and be accountable.

As a leader or manager in your organization, one of your jobs is to decide exactly where the waterline is — and make sure everyone at your firm knows where that line is. Then, empower others to make decisions that are “above the waterline,” and only involve you in “below the waterline” decisions. This is the essence of healthy delegation.

If your goal is to have a thriving firm, where you can spend the majority of your time at your highest and best use — helping clients solve complex problems — then you need to let decisions at your firm be made by others at your firm.

As knowledge workers, we are effectively selling better decisions and outcomes through our team members. So, we have to help our team members become better advisors to our clients. To do that, you have to give enough “rope” to make some decisions on their own, but not enough rope to hang themselves. They have to know they won’t be chastised or publicly humiliated for making a mistake. That’s the only way they’ll gain confidence to get outside their comfort zone and grow. For more about this philosophy, see my article “Autopsies without blame.”

Mistakes are one of the best ways for us to learn and grow. If the mistakes are above the waterline, team members are going to learn how to anticipate mistakes before they happen and how to fix things on their own. It’s all part of becoming a learning organization.

Learning from decisions

As you’re allowing people to start making decisions on their own, it’s important to follow up with them regularly and close the loop. Don’t just let them make decisions in isolation. Make sure to review with them regularly the following questions: “What was the outcome of the decision that you or the group made?” and “What did you implement?” and “How did it go? Good or bad, what did we learn?”

If you follow this process consistently, you’ll be amazed by how much your team’s decision-making skills improve. Mistakes are going to happen. But if you can learn from every one of those decisions, and think about what you’ll do differently the next time the same situation arises, everyone on your team is going to get better. At the end of the day, you’re not just selling yourself and your expertise — you’re selling your team’s ability to help clients make better decisions. To do that, you can’t have your boots on the ground at every single client meeting. That’s just not sustainable long-term if you want to grow.

The ability to make good decisions and move forward with confidence is what separates the great firms from the rest of the pack. Start them above the waterline with decisions that won’t cause irreparable damage to your clients or firm if something goes wrong. Keep reviewing progress and close the loop with debrief sessions. That way mistakes become learning opportunities and progress markers, not career derailers.

By closing this decision loop, you’ll free up more time to do high-value work for clients, bring in new business — all while creating a scalable organization of great decision makers who will continue to learn and get even better at making those “above the waterline” decisions.

For more about creating a learning organization that solves its own problems, see my recent articleTiered huddles help firms manage busy season.”

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