To Share Financial Data Or Not: A Nuanced Decision

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When it comes to disclosing financial information, some firm leaders take an open-book approach while others believe the numbers are for partners’ eyes only.

The middle ground involves balancing disclosure to motivate staff while protecting sensitive data.


Randy Nail

Randy Nail, MP of Tulsa, Okla.-based IPA 100 firm HoganTaylor (FY22 net revenue of $63.2 million), differentiates between what staff want to know and what they need to know to make them better employees.

“I generally want people to know all that they can know to be successful in what I’ve asked them to do, so if I can share some financial information with them that helps them understand the bigger picture, then why wouldn’t I share that?”

In the annual IPA Firm Administration Survey, we ask if the following financial information is shared – net revenue, firmwide utilization, department utilization, firmwide net fee per hour, firmwide net income, and firmwide and department realization – and with whom.

Responses span a spectrum. Some firms go so far as to keep net revenue private, even though the information is easily found on IPA’s website for IPA 500 firms.

Carl George

About 50% of the 249 respondents to the 2023 IPA Firm Administration Survey share it with all staff. “I think many firms feel that the information is proprietary to partners only, and I understand that model, but I think it’s old school, to be honest with you,” said consultant Carl George.

Compensation Considerations

While net revenue is the metric most often shared with everyone, net income is the least likely. Only 9% of survey respondents do so, perhaps because net income is considered the most personal. In a firm with few partners, staff can quickly estimate who’s making what.

But Nail is open to discussing it. “It’s very sensitive but I like to share it because in addition to that number I try to share broad buckets of benchmarking data,” Nail said. He does not share salary range information for various positions – the range is so broad as to be meaningless, he said – but the firm is clear about the process of determining compensation.

George leans toward openness when it comes to net income. “That’s more aspirational, because I think a lot of firms protect the net income number and I understand both sides of that,” George said. “But frankly, I’m from a perspective of give them more rather than less. I think if staff saw the earnings in most firms, they would be wowed by that. And to me, that’s a retention strategy.” George said that in the past some firms have kept net income private because they feared clients would find out and complain about their rates, “but I don’t think that really happens.”

Matt Rampe

Most firms above $20 million in net revenue use closed compensation systems, so individual partner compensation is kept private. That’s appropriate, consultant Matt Rampe said. “I wouldn’t say open up your QuickBooks file and send everyone the link.”

Like many firms, Hogan Taylor presents high-level information to staff, with PICs explaining the details at the department level. Nail shares utilization and realization figures, but he’s not a big fan of “terms our profession has been in love with for a long time.” He says he wants staff to understand the concepts, but he is focused more on cash metrics, such as net fees, fees per person, collected rates per hour and fees per partner. “We at Hogan Taylor try to de-emphasize value based on an hour worked.” Even though the firm tracks client hours, “it’s not what we talk about.”

The Plus Side of Transparency

Rampe, of Rosenberg Associates, and George, CEO of Carl George Advisory, see numerous advantages to transparency:

  • Increasing engagement – Staff need to know how they connect to the bigger picture, Rampe says. “People want to help you achieve your goals. People also want to be on a winning team. And I think if we take away the scoreboard people don’t know if we’re winning and they can’t get motivated – even if they really want to help. They don’t know – are we ahead in the game, are we late in the game, do we need to rally, do we need to put our foot on the gas or not?”
  • Setting Expectations – Staff are held accountable for their KPIs but sometimes are not given the information to manage them, George said. Some firms distribute lists of billable hour requirements, noting which staff are over or under their goals. (“I think the optics on that are just awful.”) The idea that peer pressure works to improve performance is misguided and a waste of time, George said. “If this tactic was successful, then why is utilization going down in so many firms? The key today is individual coaching and supervision, not broad-brush peer pressure.”
  • Developing Trust – “Sometimes the coverup is worse than the crime,” Rampe said. “If leadership is not telling their staff something, the staff might reasonably wonder why not.” Staff should feel that they are trusted enough with financial information to use it well.
  • Keeping Partners on Track – Presenting financial data is one way to keep partners accountable to firm goals. “I think it’s a challenge as a leader to say, where are we going to go and what are the numbers we care about,” Rampe said.
  • Talking About What Matters – Discussing financials also presents an opportunity to tell staff about the non-financial metrics that make a difference, such as retention or culture, Rampe said. “It becomes a way to take a stand on what matters at the firm.”

Teaching Professionals to Be Business Owners

Nail, George and Rampe believe that disclosing financial information should be part of a larger effort to educate staff about the business of running an accounting firm.

“I think a lot of firms are assuming staff know more than they do, and that’s not a slam on staff. They’ve never had the opportunity to learn the business,” said George, who notes that training should be held at least yearly with growing sophistication as time goes on.

“I want our leaders to be people of good business acumen,” said Nail, “and I want them to understand the economics of our business so that as I ask them to be business advisors to our clients, they at least know how our business works.”

Nail believes that the firm is sharing enough information, but not too much. “We don’t have drama around financial disclosures at Hogan Taylor so we must be striking the right balance somewhere.”

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