The Wize Guys

Episode 29: How to Transition from Top-down to Bottom-Up Management

October 06, 2022 Wize Mentoring for Accountants and Bookkeepers Season 1 Episode 29
The Wize Guys
Episode 29: How to Transition from Top-down to Bottom-Up Management
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Episode 29: How to Transition from Top-down to Bottom-Up Management

In this episode of The Wize Guys Podcast, Brenton Ward, Ed Chan, and Jamie Johns talk about the difference between Top-Down Management versus Bottom-Up Management is similar to Command and Control versus Leadership by Empowerment.

Top-Down Management is about getting Control (Command & Control) whereas  Bottom-Up management is about Giving up Control (Leadership by Empowerment). 

Find out how you can start implementing Bottom-Up management in your Accounting practice so your team can run the business for you and prevent you from becoming a prisoner in your business. 

Timestamps:

0:35 - The importance of delegation
2:14 - Communication traffic vs production traffic
3:07 - How to allocate time with your people and clients
4:09 - Tips for handling A, B, C, and D types of clients
7:14 - How to manage difficult clients
10:15 - Ways to design bottom-up management
15:34 - What are the quad A & B activities

Quotations:

“The problem with delegation is that if you don't hire the right person and give them the right training and they'll make a mistake. You'll get discouraged by it and you'll feel like, ‘Oh, if you wanna do it right, you just gotta do it yourself.’” - Ed Chan

“We have an internal policy and procedure that any sensitive matters are not to be communicated with the clients via email.” - Jamie Johns

“It's really hard to differentiate between a client that's simply recalcitrant and a client that just needs more education and more training and changing their habits.” - Ed Chan 


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Download the full transcript here.

How to Transition from Top-down to Bottom-Up Management


Brenton Ward: It's not something that can be implemented overnight. So Ed, could you step us through when you are working hands-on with a particular firm and your mentoring capacity? Where do you start in terms of addressing this topic? What are the simple little things that you get firms to implement from the very beginning to start moving towards a sort of well-oiled top-bottom managed team?

Ed Chan: It really depends on the size of a firm because some of it's quite small and the partners are still client managers, so they're still quite hands-on with the clients. The first thing that I get them to do is to do no grinding work. Some of them still want to jump in there and do the grinding work. If you do that, you are taking time away from your clients and you should be spending time with your clients. The problem with delegation is that if you don't hire the right person and give them the right training and they'll make a mistake. You'll get discouraged by it and you'll feel like, ‘Oh, if you wanna do it right, you just gotta do it yourself.’ You have this tendency to just jump in and do it. That's the worst thing you can do because you are not investing in your balance sheet. If you just do it yourself, that's PLN, right? 

So, yes, it's quick if you did it, but when you're 65 years old, you're still doing it. If you don't invest in training somebody else to do that work. If the practice is small, then it'll take a little bit longer because they're still pretty much hands-on with the clients. But I emphasize the fact that there's when you're managing traffic, there are two types of traffic. The first type of traffic is communication meetings, advisory, that kind of phone calls, that kind of traffic. Then the second type of traffic is your productivity traffic, getting the work done. You need to hire somebody to start taking that off you. Spending the time with the clients, then you get to bigger clients, sort of bigger firms where they're doing a million dollars and that's where they hemorrhage. 

The second point of hemorrhage is about a million dollars per partner. At that point, they need to start really offloading the C and D class clients to somebody else and nurturing a client manager to come through, to handle a and B class clients. So it is a long-term investment. It is a long-term strategy, moving people across, and educating them. But if you spend a lot of your time educating your staff, then you are spending time on your balance sheet, not just your PNL. And then eventually you'll come around. The more time you spend training them, the quicker it will happen. The less time you get, you spend time with them. The more you get dragged in front of the client, the more you're taking time away from training them. Then the slower it's you, it's gonna take you to step away from being hands-on. 

But the first thing is to get rid of the C and D class clients on the communication side. So someone in the team gotta have the potential to be a client manager with good interpersonal skills. And you've gotta start training that person and start going into meetings with that person, with the C and D class clients, and start offloading them. Offloading the C and D class clients to this person, and then you could hang onto the A and B clients. Then as this person moves up, you introduce them to the A and B-class clients. And then you keep stepping back slowly, slowly. So you could take, it could take months. It could take years. Just depends on how determined you are. 

Like today, we've got nine around 9,000 paying clients and 17,000 all up on our database. And the other half of it is prospects. I don't see any clients at all. But initially when the practice was really small and they all saw me. Yes, it was hard to extract me out because they got so used to dealing with me. But what I found was that 80% of the clients just wanted you to show some leadership. Then they just basically wanted you to say, ‘Well, tell me who to deal with.’ And they'll deal with that person. 

So when I brought the client manager in with me or trained the client manager with me in the meetings, 80% of them would just gravitate toward the manager, and 20% of them wouldn't they just kept coming back to me. We talk about early adopters, middle adopters, and late adopters. So the ones that kept coming back to me were middle adopters. I had to introduce them to the client manager four or five or six times. Then eventually around 16% of them eventually went across. Then the last less than 4% just insisted on seeing me, right? 

Then had to make a decision and it's really just a handful, whether I just saw them or I persisted. Generally, those clients are really, high-maintenance clients. They're really D-class clients. They don't pay you. They whine and complain. They're just high-maintenance clients and they consume 80% of your time. They represent less than 4%, but they'll consume 80% of your time. So I got to a point where I delegated them to a client manager and whenever they called and left a message, I got the client manager to ring them back. They sent me an email and got the client manager to respond with an answer. Eventually, they either did one or two things. They either left, which was great because they were really high-maintenance clients. And the other thing was that they then started dealing with the, with the staff, and then you'll get one or two who are bad, right? Like, you've gotta make the effort to move them on.

The best thing you do is go down, get the business card of your worst competitor, the one that you hate the most, and give them that business card. Because they'll screw up your business. It's better that they screw up your competitor's business than they screw up your business. So you then gotta get up and actually do something about those ones. And they're generally just a handful, really, really recalcitrant. 

Brenton Ward: It's an interesting point actually, because Jamie, we've been talking about this in a little bit in the last week. Seeing accountants in particular forums, talking about how to manage difficult clients. I mean, we've all got one or more, but a lot of I found it interesting that a lot of the responses were immediate just, ‘Suck them!’ or ‘Get rid of them!’ second. 

I mean, a particular scenario yesterday as we've got a small business we're growing, but I've got a 30,000-a-year fee-paying client who I'm having trouble with. And 80% of the responses were ‘Just get rid of them straight away!’ What, how do you approach that? Because I mean, yes, it's the right answer in some cases where you've said where you've got the really bad ones, but how would you normally approach when you would get asked that question? Should I just suck the client? Or how do you manage the situation? 

Jamie Johns: In my case, it sort of depends on the size of the client, what value they're worth to the firm. If there's a longstanding history and what's changed, so there's any number of variables around it. But first of all, you wanna speak to the client's face to face or by email. 

We have an internal policy and procedure that any sensitive matters are not to be communicated with the clients via email, that's the first thing. So once you sort of does all the fact find, find out exactly what the issue is, whether it's within your business or fact find from the client, meet with a client and see if you can address the problem, and solve the problem. 

If it's scope, seep or creep, which some of the forms were talking about, you just go to the client and try and solve it, whether that's increasing the fee or not delivering service. Whatever it is. But the worst thing, you can do is shoot off an email. That's the worst thing you can do.

So, you wanna build that emotional bank account to see if it can resolve it. If it can't resolve and you try a few times then as Ed said that if it can't be resolved, sometimes it's worth it, perhaps that client doesn't have the same values as you, and then they're probably not a good fit for the firm.

But the other thing I wanted to say, Brenton. Just coming back to this bottom-up management was when I started working with Ed. One of the best things that I used to do was that I have a little, I printed off some words, ‘What am I working on?’ and I'd stick that on the wall. And so every day I'd have a self-awareness around a task I was doing from a practical sense.

The listeners are watching or hopefully get something outta this is that I'd say this task that I'm doing right now, ‘Should I be doing it?’ So every day, I think for two years, I still do it. Now, I would say, ‘Should I be doing this iReturn? Should I be doing these financial statements? Should I be doing my own bookkeeping?’ So with that pasted in front of me on the wall. A lot of the times I say ‘I've done this a thousand times.’ It's time that I stayed back tonight and built a system so that Joe over there knows how to do this and I don't have to do it. So as soon as I thought that I'd stop, I'd stop working in quad one. I'd go and start working in quad two and I'd type up a procedure or policy or do a video. Then, what I'd walk. I'd go home really happy because I knew tomorrow I'm gonna show Joe how to do that. And next time, I don't have to do that the thousand times that I've done that in the last five years. 

To get the bottom-up management working, you've gotta take the time out as busy as you are. Work in quad two, get the system going, get the video, work the SOP, or whatever it is. Develop it, train the person how to do it. The next time, when you come to the next month or the next week, that same person that I return that you've been doing for the last 10. You've done the introduction, whatever it is the quad two effort that you go to. Sure enough, you've just moved outta quad one and into quad two. 

Essentially that is designing bottom-up management, and that's in a real, everyday practical sense. One of the things Ed that we cover in the why is the vault, for example, and a lot of the subscribers may have seen it, is the list that you did for us said where we all listed what we did in a month. And some of us had 50 things that we did. There's a spreadsheet in there, guys that you can do. You can put, then we classified it, Ed. Remember between quad one and quad two. In every board meeting will bring this quad one and quad two lists out Brenton. ‘Okay, Jamie, what have you moved outta your quad?’ One area might be Craig or Darren. I'm looking at the names there. Next month, Kenneth, ‘What have you moved outta your quad one area, tell me what you've moved. And you might share that with a colleague or share it with yourself,’ for example, ‘Oh, you know what, this month I've moved, these five quads, one item they've gone and they're over here, cuz Joe's doing them and I'm working more in quad two.’ 

So in a practical sense, when you move outta quad one and move into quad two, you are designing the bottom-up management. Ed, you would agree with that comment. 

Ed Chan: Yeah. Hundred percent, Jamie.

Like you remember when the boys, ‘well, your client managers kept saying to me that they couldn't do any more than they were doing?’ They were handling, handling around 300 grand in fees. ‘Well, my team here handles around 900-950,000.’ So they were saying to me, they couldn't do anymore when not doing 300. When I knew that they could do 900, they were just drowning in quad activities. To give you some examples, they were doing the tax returns themselves, right? Even face-to-face tax returns. They were doing face-to-face tax returns. They were doing the grinding. They were doing the bank recs and one of them was even doing lodgement of tax returns. So you may record Jamie. 

I got to write everything that they were doing on a piece of paper. Then me including and put all those activities into either A, B, C, or D. We got rid of D and C. We got rid of the more that just don't do them. Then we looked at A and B. With A is to try and get out of doing A, so A is things like putting out fires. If someone drops their tax returns in the base return the night before it's due. Alright. So the quad A activities put the fire out. In other words, bust your backside to get it done, to lodge it on time. So it doesn't get a penalty. The quad B activity is to educate the client, not to do that again because you've got other clients that you need three, or two months. So two weeks to do it and put in a process so that, when it's come leading up to it, you're calling them and reminding them they've gotta get their work in. So that kind of activity's preventative activity. 

So training someone to do it, and managing the client's expectations, they're all quite B activities. They're important, but they're not urgent, but the more you do of the important, but not urgent activities like a month before it's due ring them and says, ‘You're ready to bring your work in there.’ If you've got it already, it's due on this day, right? All those kinds of activities will reduce having to work in quad A, which is putting fires out and training someone to do that. I return to training the start, the clients, not to come in to get the work done face to face, but to drop the work off right. That's all educational stuff. They're all quite B activities. And the more you do in quad B activities, the less you're doing in quad A.

Remember, they were struggling to do 300 and now they're doing a lot more. Same as our team, our teams do 9-50 a million and they do it hands down because they also educated their team to do the grinding work. So it goes down, that's called bottom-up management because you're working on quad B and not quad A.

Just wanted to touch on just the bad clients that we talked about. It's really hard to differentiate between a client that's simply recalcitrant and a client that just needs more education and more training and changing their habits. So if they're used to coming to see you and you say to them, look, ‘I'd like you to see, you know, this client manager.’ If they say ‘No’ to you, then they could just be a middle adopter. I'm a late adopter like I'm a middle adopter. I don't change very quickly. It takes me a while to change. 

But those people are worth investing in, they're worth persisting with, and they're worth putting up and continually training them and encouraging them they should use the client manager. And some of them will take you five or six or seven times. Others will take you eight or 10 or 15 or 20 times. They’re really, really late adopters who might take you 30 times, but when they do change right, then they're really, really good clients because they're very, very loyal. And then the ones that just won't change after 30 times of doing it, then they fall into the more the recalcitrant, the ones that you need to get rid of.



The importance of delegation
Communication traffic vs production traffic
How to allocate time with your people and clients
Tips for handling A, B, C, and D types of clients
How to manage difficult clients
Ways to design bottom-up management
What are the quad A & B activities