r/Accounting • u/Stock-Vegetable7572 • 3d ago
How come some MDs cannot make Partner level despite having enough experience in Public Accounting?
Can someone explain to me the process? I see MDs at Big 4 go to smaller firms to become Partners. What is the process like?
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u/JohnHenryHoliday 3d ago
There’s a lot of reasons. This isn’t easy to answer because there can be an almost infinite number of reasons.
I’ll give you a few examples that I’ve seen before.
Technical MDs that don’t have a business case are pretty common. Lots of MDs get promoted because of a highly technical skillset, usually in a niche. This is me painting with extremely broad strokes, so take it with a grain of salt. Accountants generally emphasize and take pride in technical savvy. Life is very simple that way, do a good job, or in some cases, be the best at your job, and get promoted. There’s a ton of emphasis placed on knowledge and experience, very internally driven things, but partnerships are very much people and relationship driven. Let’s say you are a SALT, transfer price, R&D, controversy/resolution, or cost seg MD and run that practice. At a big firm, life should be simple right? You’re the technical savant for a really important need and you have dozens/hundreds of partners that are ready to cross sell for you. You just need to sit back and answer calls for internal referrals, right? I’ve seen a lot of technical savants with this kind of mindset and it never works out for them. I’ve seen quite a few in each of those roles come and go. Almost none stuck, unless they had a traditional practice/book.
The main thing was that they needed to put in a ton of effort to sell internally. And selling internally has about as many disadvantages as it has advantages. An advantage is that your name is familiar and you can likely get in the door for a meeting, lunch, introduction, but you are fighting against human nature and (sometimes) competing economics. Let’s say I’m a tax or audit partner and I have a client that has been with me for a decade. He calls me up and asks a very simple question asking about nexus exposure if setting up a new warehouse. The partner knows the client is looking for a quick and simple answer. A good partner may push back and say “it’s not so simple, I need to do some research.” It’s best to be thorough for both the client and the firm. But, if the client is expecting a “it’s fine” or “shouldn’t be an issue” and the partner knows this, he or she has to weigh something internally. If I ask John, our resident SALT guy, he’s going to want to get on a call for an introduction and turn it into a big production with an engagement letter for an intense study… it’ll be over engineered. The client wants a simple answer. Fuck that, I’ll do some research myself and give him a quick answer and if it becomes an issue, I can bring in John for a bigger SALT engagement. I keep my client happy, and in the case there is an issue, the firm gets a BIG project.
John, the SALT guy, needs to fight and o we come his partners’ urge to keep things simple with their client. In the case of a tax partner, some partners may even worry that they will lose credibility or esteem with their clients because their clients assume they are the specialist in all things tax.
Back when software integration/ERP implementation was an engagement that impaired independence (not sure if it’s still the case), you know how hard it is to convince an audit partner that their bullshit $70k/year fees with 45% realization was a worthy sacrifice for a $450k implementation with recurring technical support and the residuals on licensing fees? You think it’s easy for an MD to have that conversation? What are you going to do? Run and tell on the partner to the executive board that their interests are contrary to the interest of the firm? Good luck getting any other partners to agree to that. You have to sell and figure out that PEOPLE problem. This isn’t a formula error on a spreadsheet, or research/interpretation on FASB, this is real world problem solving. How do you pull that partner into your interests? How do you sell to the rest of the partners? It’s not easy. Maybe you offer a consulting arrangement with the partner and his team for part of the billings for a few years? Maybe you do burn him with the executive board and make an example? The point is, a lot of technical savants that have technical problem solving skills don’t know how to manage the people and personality side. Actually, that’s an unfair statement. Whether you are technical or not, that’s is a very hard thing to overcome and not a lot of people can pull it off.
As to your question, going to a smaller firm sometimes commands a bit more prestige so they can leverage that into a partnership.
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u/Stock-Vegetable7572 3d ago
Read everything. Extremely helpful I kind of get it now. Thank you king
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u/erod1223 3d ago
As someone kind of experiencing this right/ had to go through something similar (the infer firm cannibalism), the people the get ahead are def those that can lead well and bring good resolution to others. What I’ve found is many are okay burning others because their fiefdom get and extra year of harvest. It’s frustrating and makes you wonder how better big business would be run if people weren’t so greedy.
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u/DrProfessor95 3d ago
Just to add onto your example of not bringing or consulting the expert…with AI tools a lot of generalist think they’re an expert and can get more than halfway decent answers from their bots. So the hurdle to talk to the technical person is now even higher.
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u/JohnHenryHoliday 3d ago
Damn. I can absolutely see that happening. I was always torn on whether that was more indicative of bad partner culture or if it was deficiency in ability of the specialist MDs/partners.
Especially with AI, it seems more like bad culture/overall shortsightedness. Talk about eating your own tail… when clients find out that their questions are just fed through AI, why wouldn’t they think AI can replace CPAs?
Still, it’s a people driven business. If you can’t sell internally to partners it’ll probably be just as difficult to sell externally to clients. My observation was more that it seemed a lot of specialist MDs and partners that were brought in had the expectation that the firm would do the cross selling for them and that it would be relatively easier than selling to clients/prospects. BUT, now that I think about it, I can totally see some of the senior partners/executive board SELLING that idea to them to recruit them.
As annoying as it is, everything is sales… Even with my 2 person practice, I constantly have to sell to my partner why we should do xyz and vice versa. Selling to existing clients on what needs to be done, selling to prospects on why they should engage with us, selling to vendors on why we need things a bit different than their typical customers, selling to recruits why we’re a good practice, selling to employees why they should change xyz, selling to COIs, future partners or Sellers. Everything is sales. It definitely gets exhausting.
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u/iamauserhere123 3d ago
Kinda facing this right now. Need a simple answer but firm is over engineering it
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u/cacatromanesc1989 2d ago
I am at a regional firm in tax and firm set up a wealth department. Some folks in the wealth department said to me the reason they left the banks and joined a cpa firm is because they expect us the CPAs to refer them to our clients. While in the bank you have to go out and network and find prospects. So it is supposed to be way easier for them in a Cpa firm. But I noticed the tax partners do not refer to the internal wealth department, because they got referrals from outside wealth advisors and they have to refer back to them.
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u/mingchun Controller 2d ago
Great answer that helps provide several points of view, particularly from the client POV. The client facing portion is the most nuanced aspect and it rings pretty true for me now that I’m on the other side. When talking to internal stakeholders, one of the worst things you can do is give a full technical breakdown to non-accountants, they’ll just glaze their eyes over and wait for you to sum it up in simple sentences for what’s needed.
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u/A_D_T_R CPA (US) 3d ago
I spent 10 years at EY and I was 5+ years away from partner at a minimum. The waitlist is extremely long.
I left and became a non-equity partner at a $200M firm. That I still had a 4 year wait for equity. I felt like they kept stringing me and everyone else along. I spent 2 years there and no one became equity partner in those 2 years. They kept saying revenue was increasing but so was expenses, so they couldn’t afford to bring us on.
Now I’m a partner at a 20 person firm.
Wild ride. Also partner isn’t instant $$$$$$. I have to pay back a massive loan for my equity. My take home pay stays stagnate for 5 years until I pay the loan back.
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u/j4schum1 Human Verified 3d ago
I love non-equity partners. We always called it "fake partner"
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u/Independent_Inside23 2d ago
It kills me when some on LinkedIn lists "Managing Director (Partner)" in their profile.
No, you are not.
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u/InsecurityAnalysis 3d ago
Curious, what are the revenue expectations at the different sizes of forms you worked at?
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u/A_D_T_R CPA (US) 3d ago edited 3d ago
Unfortunately I can’t really say lol. Not because it’s top secret, but because I don’t know.
EY did have a requirement, but I don’t know what because I never got that far.
The $200M firm no partner had a “book”. It was a collective pot. Never broken out anywhere I saw or heard of by revenue per partner. This is mostly due to the vast size difference in clients we had. I was the “partner” on 2 clients that had $3B+ in revenue. But we also had a shit ton of clients with $5-10M in revenue. Same with wealth. We had billionaires and we had people who maybe were worth $5M. So some of the partners who were 1040 only had very little revenue linked to their name compared to partners who had the audits of these massive household name companies. But once again that was just a common sense thing. It was never reported like Lauren has $X and Michael has $Y. All partners pretty much made the same amount of money except the senior partners.
The 20 people firm I’m currently at has no requirements. We have one partner who is the rainmaker. He will bring in clients and then give them to the other partners or managers to run. I’ve personally brought in $300k ish of work this year, mostly in transactions (my expertise) so unfortunately not a lot of repeat work. And none from my old firm as the agreement I had to sign was a killer. Next week will be 1 year at the firm. But I was honestly not expected to bring in any work as the one partner brings in so much. We have a pipeline of clients we could get tomorrow if we had capacity. We are a bit odd in hours. Anyone below a manager works maybe 1,300 chargeable/billable hours. Managers and partners are about the same, but have a lot more non-billable hours like… billing lol. I’ve never seen charge hours so low for staff and seniors but that’s the culture. Outside of the managing partner who is retiring soon at 68 and one other person, everyone else is under 45. I’m 36.
My job was to bring in transaction expertise and efficiency to the firm. I ran the $200M firm’s scheduling department and oversaw Ai / tax product implementation, and offshoring.
Happy to answer any other questions people have. I’m also not a superstar accountant btw. I failed the first accounting class twice and had to take it at a community college to pass it. Quite a few Ws in college too. Now I was featured in a 40 under 40 magazine for my tax transaction work. 😂
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u/FunRoyal8888 3d ago
Many thanks, very insightful! I suppose you already build equity with the loan repayments (as long as the firm value does not decline), only the free cash flow is limited at the start.
How would you compare the opportunity cost of staying as a high paid employee (Director / NEP) compared to making partner, including the increased business development pressure and efforts required (not the prestige and authority)? In particular between staying employee at a larger firm versus making partner at a smaller one as you did.
I suppose the monetary benefits of partnership are fairly outweighing the additional stress in the long run?
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u/Haunting_Bag_9712 2d ago
At EY, MDs on the tax side had book of business expectations of 2.5-3M, and parters were 6-7M.
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u/exactlythere 3d ago
Lately, its been because the waiting list for partner is too long. Why wait another 4-5 years if you can get it now at a mid-tier (i.e., BDO is doing this left and right with B4 MDs lately).
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u/Stock-Vegetable7572 3d ago
Yes I see this on LinkedIn. One of the main reasons why I made this post
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u/exactlythere 3d ago
I disagree and speak from experience.
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u/exactlythere 3d ago edited 3d ago
OK, sure you’re like the rare exception but that’s not what we’re talking about here. Generally, the way it works is the partners will make sure the next person in line has the clients and revenue, and they will take them away from people who were lower in line and give them to someone who is higher in line to make sure they can get promoted that year.
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u/asyouwish-buttercup 3d ago
It no longer works this way at most top 20 firms. You have to bring in revenue now, particularly at PE backed firms
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u/The_Listen 3d ago
Once you make MD you either choose partner route or non partner route.
So already, you have a good chunk that just want to stay in their bubble and not take on partner responsibilities.
Of the MD class, you set a target year. Usually 5-6 years out. Might get pushed back, and you are working harder than you ever have that whole time.
Then, you go in front of a board of partners, who must unanimously approve you.
In the last 5 years, it’s gotten ridiculously hard to clear that last barrier. To become a partner now, it seems you pretty much have to either A. Effectively lead a practice, B. Be a literally perfect mixture of technicals, sales, firm initiatives, etc. C. Be a sales guru, or D. Have such a massive book of business you manage that it’s hard to justify not admitting
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u/Independent_Inside23 2d ago
There are so many things WRONG with this post!
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u/PrimemevalTitan 2d ago
Would be genuinely interested to see a point-by-point breakdown of what you think is wrong. I'm just starting out in PA and this whole thread has been super informative from a business perspective
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u/Massive_Ear4948 3d ago
Former B4 partner here in advisory. Getting promoted is not based on tenure but is based on sales/book of business. Some people are simply better at selling and it is those of us who get promoted to partner.
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u/munchyz74 3d ago
I was a director at big4; many of us are happy staying there. We are typically asked if we want partner track or not.
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u/LifePlusTax Tax (US) 2d ago
Was your practice ok with you staying there? I have no desire to be partner, my goal has always been director and chill (currently manager). Feedback has always been mixed. Sometimes it seems like permanent director is an option, and sometimes it seems like up or out
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u/Erratic_Goldfish Tax (Other) 2d ago
At least some of it is business need. I work with someone who went from Director at a Big 4 directly to equity partner at a smaller firm simply because he had a skillset that the firm really needed. By contrast not all Big 4 firms need the same skillset at partner level at the same time.
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u/Section1245Jaws 3d ago
Some experienced MDs make more than newer partners - it’s also a way to bring in talent from outside like retired IRS dep directors or chief tax counsel for the ways and means committee etc - Big 4 MDs are a lot like never equity partners at some other firms - the job usually comes with a few extra perks such as higher retirement contributions or special equipment allowance etc - also seems like a place to park older XY straight people of European heritage
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u/Long_Jackfruit_7928 1d ago
Promotions are based on your ability to do the work and keep clients happy up until SM/D.
The promotion to MD and Partner after that is almost entirely based on your ability to bring in clients. If you can’t bring in clients you won’t make partner. And yes it’s a catch 22, as no one wants to hand a senior manager $500k for an audit. So you work with partners and demonstrate your ability to sell as part of a team. The workload of you and the partners you work with gets so high that there is enough room for 2 partners in that amount of revenue, and then you get a shot at being partner too. So if you hitch your senior manager wagon to a stinker you will never become partner.
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u/Zeyn1 Audit & Assurance 3d ago
A doctor of medicine?
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u/MuhammadsPowerTop 3d ago
Well yeah doesn't your accountant give you complimentary colonoscopies???
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u/VioletSalamander Human Verified 2d ago
Why would anyone want to be a partner is this field. Get out and go find a better paying field like finance or law. Accounting sucks
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u/Stock-Vegetable7572 2d ago
I guess some people already have too much experience and breaking into finance/law would mean starting from scratch. Also it's pretty hard to break into a good finance role, interviews require a lot more preparation
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u/SpellingIsAhful 8h ago
Equity partner is not about being good at your job. It's about developing and growing the firm long term. Capability, consistency, drive, and vision are all considered.
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u/ilikebigbutts 3d ago
They probably can’t bring in enough business for B4, but smaller firms have a lower bar