Episode 117: Bottom-up VS Top-down Management

In this week's episode of The Wize Guys Podcast, Brenton Ward with Ed Chan and Jamie Johns will deep dive into the difference between bottom-up and top-down management.

The discussion moves to practical steps for implementing bottom-up management, such as creating a balanced team structure with an appropriate ratio of minders to grinders. Jamie shares his personal experience of transitioning to this management style, highlighting its positive impact on workload and efficiency. Both Ed and Jamie discuss the importance of client managers in maintaining smooth operations and strong client relationships. They also address staff recruitment and retention challenges, providing insights into how a well-structured team can alleviate these issues.

Which is better and how do you implement it in your firm? Remember, your management style can dictate the process and growth of your business. Tune in to find out which management style better fit for your accounting or bookkeeping firm!

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Chapters

• 0:00 Intro
• 0:23 The concept of having a management strategy for your business
• 3:38 Practical Implementation of Bottom-Up Management
• 5:35 What are the common challenges in staff recruitment?
• 6:57 How important is the role of client managers for the firm
• 8:00 How to transition from top-down to bottom-up management
• 12:06 Practical tips for small firms
• 18:02 How to manage difficult clients
• 23:05 Practical Steps for Bottom-Up Management
• 30:48 The impact of change management on client relationships and staff
• 38:26 How to develop your staff's leadership skills
• 47:31 Understanding the P&L vs. balance sheet activities
• 50:43 How SOPs and videos help to systematising and streamlining processes

Transcript

Brenton Ward: 0:02

From Wize Mentoring is The Wize Guys Podcast, a show about accounting and bookkeeping practice owners and the many stories, lessons, and tips from their experience of transitioning from a time- poor practice to a business that runs without them. I hope you enjoy and subscribe!

Brenton Ward: 0:23

So we'll jump straight in. We've got an interesting topic this month because, Ed, you sent out one of your Friday tip a couple of weeks ago and the topic was bottom-up versus top-down management and it got quite a bit of response and quite a bit of intrigue from people who had read through it. And it makes sense because it's a very interesting topic and it's one that we all struggle with in our firms in some way, shape, or form. So I thought, if you don't mind, ed, we might start with yourself and just give everyone a little bit of context as to the background of where this management strategy has come from, and what it is, because some of the people watching may have not have read that email. So can you tell us a little bit about this whole topic of bottom-up versus top-down management?

Ed Chan: 1:10

Sure, Brenton, as you probably know by now, I grew the practice from home and I never had any leadership training or management training, and I just, you know, sort of fumbled along. And if you don't manage your business properly, that's where it's going to hold you back. It's not how well you prepare a tax return, it's just how well you manage the people, the systems, and the leadership you put into your organization. That's going to be the difference between success and failure. And failure I define also, as you know, working very, very long hours with no return on the time that you've put in. And I discovered that, and at about $600,000, I really hemorrhaged. And the next point is about a million dollars.

Ed Chan: 1:55

And when I look at the two points, it all comes down to top-down management or bottom-up management. Management or bottom-up management. What I mean by that is that if you don't have processes and systems and training and have a mindset of training your staff, then you can only control it by the top-down management. You're watching over everything and you're making sure there's no mistakes and you're covering everything off and all that. And the problem with it is that you run out of bandwidth. There are just not enough hours in a day to keep an eye on everything. So I tried that and you get away with it up to about $600,000. And that's in Australian dollars. For those who are overseas, you can ensure nothing falls through the cracks by brute force, and that only lasts to about 600 grand and then you'd be working very, very long hours. That's not sensible to do that and it's much more effective to do it from bottom-up management.

Ed Chan: 2:56

What I mean by that is that typically what happens with a practitioner is they hit about $1.2 million in fees on their hemorrhage. If it's a five- million- dollar firm, there are five partners. If it's a two- million- dollar firm, there are two partners. P art of the reason why they hemorrhage is because they're doing it by top-down management and typically what happens is they see all the clients and all the traffic we talked about. Traffic flow comes to them and then they delegate it down to the staff and we all know that. You know 80 percent of the traffic that comes into your organization can be handled by the team. But we want to handle all that first and then we pass it and we delegate and pass it down to the staff.

Ed Chan: 3:38

Now bottom-up management is flipping that on its head. It's going well if 80 percent of the traffic is going to end up with a staff anyway. Just let the client managers direct all the traffic to the client managers and then you get called in for the last 20% so that, if you do it that way, you can go beyond your million dollars per partner. You can go to about five million dollars per partner and not get hemorrhaged at a million. But in order to do that, the people that are working with you, they've got to know systems and processes, and you know they've got to have an organisation chart. They've got to know policies, they've got to know boundaries upon which they've got to work with. Typically, when I see, top-down management as where the partners spend 80% of their time with the clients and only 20% of their time with the staff.

Ed Chan: 4:29

Okay, so bottom-up management means that you spend 80% of your time with your staff, making sure that they know how to talk to the clients, and how to do the work, and then the staff, the client managers, go and see the clients. And if each client manager runs a narrow and deep team like we've talked about in the programs to date, then each team should be able to run about a million dollars in fees, and if you have a $3 million firm. That's three client managers and each client manager should have around five grinders. So then you've got three teams. So the ratio between minders and grinders is one to five, approximately it's not an exact science, but approximately. So if you had three teams you've got three minders to 15 grinders. So 15 grinders. Grinders are, with all due respect, so much easier to find. Okay, so you can outsource it. You can. Most accountants that come out of uni more than 80 of them are grinders but the minders, the managers, and the ones are really hard to find.

Ed Chan: 5:35

But if then if you have a practice that's got three managers to 15 grinders, then all of a sudden that problem that you have of recruiting staff, you know I always get partners to say a firm say to me oh, it's really hard to find staff, it's because they've got the team structure very shallow and wide, meaning that they're looking for this person who is really quick, doing the work, makes no mistakes, great interpersonal skills, can talk, looking for, and you can't find a superstar and if you do they're very expensive.

Ed Chan: 6:07

And then if you've got a team full of those people and if one leaves, then you've got lots of trouble. But if you've got a team that's made out of five grinders and one who are minders, then that ratio allows you to not only make it easier to find staff but you keep them in their flow and they're happier and they stay a lot longer. So it removes the churn in the staff because they're doing what they enjoy doing. I guess not all of us are minders or client managers, not all of us have these great interpersonal skills and communication skills.

Ed Chan: 6:41

And then not all of us, like me, can do the work really quickly. I'm too slow when I try to do the work, so I shouldn't be doing the work, I should let somebody else do the work. But I've got really good interpersonal skills and I should stay in my flow. So if you set the whole thing up, then you can manage from the bottom up.

Ed Chan: 6:57

It manages itself okay so you know my practice here in pinball does close to three new orders, three client managers who run about a million each and they run the practice. We pay them well, we treat them well and we just spend time with those three client managers and then we make sure that there is. You know, they're really really good at what they do. And then they go and deal with the clients and they bring the partner, the senior partner, in for 20% of the time and it works really well and the traffic flow moves through the organization really really smoothly, so much so that you know all works done on time, everyone's, you know five o'clock, they've all gone home, nobody works overtime and that kind of thing it's only pretty much.

Ed Chan: 7:41

You're not getting the work done that you should between nine and five, so you have to hang back and you know put the overtime. But if you organise your business with bottom-up management then you know it should work by itself without you having to do it by brute force that makes a whole lot of sense, Ed.

Brenton Ward: 8:00

Jamie, you've been living and breathing this with Ed for the last couple of years, so if you don't mind, I want you to take us back to before you started working more hands-on with Ed and kind of just sum up your experience as to how you were managing your team. Was it more so a top-down rather than bottom-up strategy, and where were you finding yourself as a result?

Jamie Johns: 8:23

Yeah, definitely top-down. And where were you finding yourself as a result? Yeah, definitely top- down. As Ed said, I was looking after all the clients, so all the traffic in the firm would come to me. And once you get to 600,000 in fees, then you move towards a million.

Jamie Johns: 8:41

Unless you put senior client managers in place and all the things that we talked about that achieve bottom-up management, then will start to hemorrhage. You know hemorrhage can be in, you can't service the clients or you work 100 hours a week. So something's got to give. And the game changer for me was getting the senior client managers in and then also the assistant client managers, where you give them a portfolio of your C&D class clients. But even more so nowadays as we keep growing, is to really clone the senior client managers around the concept of leadership, but leadership in terms of the systems procedures, but leadership in terms of the systems procedures. And you know you get to the point where you have to educate the senior client managers that they have to spend 80% of their time with their team and 20%, you know, with their clients. And so the challenge is, with your senior client managers, everyone will have different personalities, but your role as the leader is to manage those personalities and remind them that you know their leaders in their own right. So you know, I was only talking about it with our guys at work and Ed, I think, literally this week, and we said to have a look at what Jamie's developed. You know, Jamie's taken himself and developed you know three leaders, if you like, but then each one of those leaders in their own right needs to develop that team and that team needs to be close-knit. So it's almost like a tree and a branch and you know, if you want to grow, as Ed says, you keep adding on the team. So you know your role.

Jamie Johns: 10:18

Once you sort of probably get to the co point is to really really get in the trenches 20% of the time and remind the senior client managers that there are systems, there are procedures, there are policies that need to be followed, even in the seven steps of moving clients to the cloud, where you can schedule the work, collecting the information upfront, just the basic things. Because what can happen is and I think Ed's explained this before you know, an airplane will fly along and it'll be on autopilot, but every now and then the autopilot sort of drifts off and you know if you've got five client managers or three. There's that 10 or 20 percent that you'll still need to step in and you'll just oversee it with your dashboard. You'll see things going on where you'll need to step in and just get that autopilot and bring it back online so that everyone's focused on you know, so that this business does run with bottom-up management and that you know the senior client manager has a growing fee base and it's not done by brute force, because brute force will only last so long.

Jamie Johns: 11:21

So my emphasis probably on the discussion is around the leadership and then cloning the leader. So you know, it's almost a religion we were talking about this weekend, this week. It's almost like a religion of how the firm works and then how the firm works, the smoothness that develops the culture, then Brenton, and you know it becomes just, uh, you, we sort of call it, you know, within our practice, Sky. You know Sky, so you can have a name, whatever it is, but it's important that the leader steps back in and keeps that plane on target with the senior leaders in the business, like the senior management group.

Brenton Ward: 11:58

Yeah, okay so it sounds like there are quite a few moving parts in all of this. I mean, it's not something that can be implemented overnight. So, Ed, could you step us through when you're working hands-on with a particular firm and your mentoring capacity? Where do you start in terms of addressing this topic and what are the simple little things that you get firms to implement from the very beginning to start moving towards a sort of well-ed top bottom up manage team?

Ed Chan: 12:29

it really depends on the size of a firm. If it's quite small and the partners are still a client manager, 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 and do the grinding work. Okay, and if you do that, you're 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, if you want to do it right, you just got to do it yourself and you have this tendency to just jump in and do it and that's the worst thing you can do because you're not investing into your balance sheet if you just do it yourself. I call it the P and L play. 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 when you're managing traffic, there are two types of traffic. The first type of traffic is communication, meetings, advisory phone calls, that kind of traffic. And then the second type of traffic is your productivity traffic. You know, getting the work done. You need to hire somebody to start taking that off you and spending the time you know with the clients. And then you get to bigger clients, the sort you get to bigger firms where they're doing a million dollars and that's where they hemorrhage. The second point. The second point of hemorrhage is about a million dollars per partner and 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 the A and B class clients. So it is a long-term investment. It is a long-term strategy of moving people across and educating them. But if you spend a lot of your time educating your staff, then you're spending time on your balance sheet, not just your P&L, and then eventually you'll come around. The more time you spend training them, the quicker it will happen. The less time you spend time with them and the more you get dragged in front of the client, then you're taking time away from training them and then the slower it's going to take you to step away from you know 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's got to have the potential to be a client manager with good interpersonal skills, and you've got to start training that person, start coming into meetings with that person, with the C and D class clients, and start offloading the C and D class clients to this person and then you can hang on to the A and Bs and then, as this person moves up, then you introduce them to the A and B class clients and then you keep stepping back, slowly, slowly, slowly. It could take months or it could take years, just depends on how determined you are.

Ed Chan: 15:38

Today we've got around 9,000 paying clients and 17,000 all up on our database, and the other half of it are prospects and 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 myself out because they got so used to dealing with me. What I found was that 80% of the clients just wanted you to show some leadership and they just basically wanted you to say well, tell me who to deal with and they deal with that person. So, when I brought the client manager or the trainee client manager with me into the meetings, 80% of them would just gravitate to the client manager, and 20% of them wouldn't. They just kept coming back to me. We talk about early adopters, middle adopters, and later doctors. So the ones that kept coming back to me were middle adopters and I had to introduce them to the client managers, now four or five or six times, and then eventually around. You know, 16% of them eventually went across and then the last less than 4% just insisted on seeing me right, and then I had to make a decision. And it's really just a handful, and then I had to make a decision. Whether you know, I just saw them or I persisted.

Ed Chan: 16:51

Generally, those clients are really, you know, high- maintenance clients and they're really D-class clients.

Ed Chan: 16:56

They don't pay you, they whinge, they complain, they're just high- maintenance clients and they consume 80% of your time and they represent less than 4%, but they'll consume 80% of your time.

Ed Chan: 17:07

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 and they sent me an email. I got the client manager to respond with an answer and eventually they either did one or two things. They either left, which was great because you know they were really high maintenance clients and the other things was that they then started dealing with, with the staff, and then you'll get one or two who are really really bad all right and you then got to make an effort to move them on, like you've got to make the effort to move them on, and the best thing you do is go down and get the 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 to screw up your business. So you then got to get up and actually do something about those ones and they're generally just a handful. They're really, really recalcitrant.

Brenton Ward: 18:09

It's an interesting point actually because, Jamie, we've been talking about this a little bit in the last week and seeing accountants in particular forums talking about how to manage difficult clients. I mean, we've all got one or more. But I found it interesting that a lot of the responses were immediate just sack them, get rid of them, sack, sack them. And I was in a particular scenario yesterday as I've got an I'm 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 was, you know, just get rid of them straight away. How do you approach that? Because I mean, yes, it's the right answer in some cases where you've said we but the really bad ones. But how would you normally approach when you get asked that question? Should I just sack the client or how do you manage the situation?

Jamie Johns: 18:56

In my case, it sort of depends on the size of the client, and what value they're worth to the firm. You know if there's a longstanding history and what's changed. You want to speak to the client face-to-face Emails. 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 do 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 you know, see if you can address the problem, solve the problem. If it's scope, seep, or creep, which some of the formers 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 know you can do is shoot off an email. That's the worst thing, you can do.

Jamie Johns: 19:47

So you want to build that emotional bank account to see if you can resolve it. If it can't resolve and you try a few times, then, as Ed said, if it can't be resolved, sometimes it's worth it. Perhaps that client doesn't have the same values as you and 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'd 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 and you know the listeners will hopefully get something out of this is that I'd say this task that I'm doing right now, you know, 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 high return? Should I be doing these financial statements? No-transcript. A lot of the time it's like you know what? 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. And so as soon as I thought that I'd stop working in quad one and I'd go and start working in quad two and I'd type up a procedure, a policy or do a video, and then you know what I'd go home really happy because I knew you know what, tomorrow I'm going to 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. So that bottom-up management to get the bottom-up management working and I think Ed will agree, you've got to take the time out as busy as you are working in the Quad 2, get the system going, get the video working, the SOP or whatever it is, develop it, train the person how to do it. And next time, when you come to the next month or the next week or that same person that I return, that you've been doing for the last 10 years or you've done the introduction, whatever it is that the quad two effort that you go to. Sure enough, you've just moved out of quad one and into quad two and essentially that is designing bottom-up management and that's in a real, everyday, practical sense.

Jamie Johns: 22:11

You know, one of the things, Ed, that we cover in the Y is the vault, for example, and a lot of the subscribers may have seen it. But is the list that you did for us, Ed, where we all listed what we did in a month and some of us had, you know, 50 things that we did. There's a spreadsheet in there, guys, that you can do. Then we classified it, Ed, remember, between quad one and quad two, and you know, every broad meeting we'll bring this quad one and quad two, and you know, every broad meeting we'll bring this quad one and quad two.

Jamie Johns: 22:38

List out Brenton and, okay, Jamie, what have you moved out of your quad one area? You know it might be Craig or Darren, I'm looking at the names there. You know, next month, Kenneth, what have you moved out of your quad one area? Tell me what you've moved and you might share that with a colleague or, you know, know, share it with yourself, for example. Oh, you know what, this month I've moved these five quad one items. They've gone and they're over here because Joe's

Jamie Johns: 23:07

Jamie, them as and I'm working more in quad two. So, in a practical sense, when you move out of quad one and into quad two. You are designing the bottom- up management and ed you would agree with that comment yeah, yeah, 100.

Ed Chan: 23:17

Jeremy. Like you remember, when the boys were your client managers kept saying to me that they couldn't do any more than they they were doing and they were handling around 300 grand in fees. Well, my team here handles 950 000. So they were saying to me they couldn't do any more when they were doing $300,000, when I knew that they could do $900,000. But they were just drowning in Quad A activities and give you some examples, they were doing the tax returns themselves, right?

Jamie Johns: 23:47

Yeah, even face-to-face tax returns. a

Ed Chan: 23:49

Yeah, yeah, they were doing face-to-face tax returns. They were doing the grinding. They were doing the grinding, they were doing the bank wrecks that one of them was even doing lodgment of tax returns. So you may recall, jamie, I got them to write everything that they were doing on a piece of paper and then me, yeah, and then we put all those activities into either quad a, b, c or d we got or D we got rid of D and C, got rid of them all, just don't do them.

Ed Chan: 24:17

And then we then looked at A and B, and with A is to try and get out of doing A, so A are things to put, you know, putting out fires. and but B A

Ed Chan: 24:27

If someone drops their tax returns in, like a BAS return, the night before it's due, all right. So the quad A activity is put the fire out. In other words, you know, 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, two months to two weeks' time to do it and put in a process so that you know doesn't it's come leading up to it. You're calling them and reminding them they've got to get their work in. So that kind of activity is preventative activity. So training someone to do it encouraging managing the client's expectations, they're all quad 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 say you know you're ready to bring your work in now. Have you got it all ready Now it's due on this day, loyal, right right? all those kind of activities will reduce having to work in quite A, which is putting fires out, training someone to do that, I return Training 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 quad b activities and the more you do in quad b activities, the less you're doing quad a. You know they were struggling to do 300, now they're doing a lot more. And, uh, same as our team. Our teams do 950 a million dollars and they do it hands down because they've 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.

Ed Chan: 26:06

Just wanted to touch on the bad clients that we talked about. It's yeah, 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 you know in a their habits. So if they're what to coming to see eventually, you and you say to them look, I'd like you to , and more you know this client manager, if they say no to you, then they could just be a middle adopter, you know, and more adopter, like I'm. A middle adopter, 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 to train them and encourage that 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 and the really really late adopters might take you 30 times. But when they do change right, then they're really really good clients because they're very, very loyal Right. And then the ones that just won't change after 30 times of doing it, they fall into the you know more the recalcitrant, the ones that you need to get rid of. I might just delegate them down to somebody else, all right, and unless they're really really bad you know a handful they're really really bad, they're just really bad and you really need to move those on. But in the main, you know there's not that many that were that bad, but most of them have eventually, you know, dealt with somebody else or they've moved on.

Ed Chan: 27:38

Just don't pay them attention. But more attention you pay them, the more oxygen you give them, the more they play up. So what you do is it's just like children. If your children are playing up the particular area, just ignore, that you know, and eventually they stop doing it. But if you give them more attention, more oxygen, they just continue to be bad. But then if you delegate it, it. But if you give them more attention, more oxygen, they just continue to be bad. But then if you delegate it to somebody else, if you delegate it to an assistant client manager, what a great training ground that is. You know like you can get through dealing with every counselor and D-class client.

Brenton Ward: 28:11

It's a good point to raise there, because I think this whole strategy is a journey rather than a task that you just implement. Because I look at your journey, Jamie, and you know it would be nice to think that we could all say, okay, we're going to remove ourselves from the grinding work and pull back from the client interaction overnight. That would be great if we could do it, but it just doesn't happen that way.

Jamie Johns: 28:32

It takes a couple of years, you know.

Jamie Johns: 28:34

Yeah, it just doesn't happen that way. It takes a couple of years. It really does take a couple of years. But you have to be persistent and you have to be consistent and follow the mythology that we're talking about within the WISE network. But it will take the guys and the subscribers a couple of years, depending on the size of your practice, to achieve the outcomes and go on that WISE journey.

Jamie Johns: 28:54

Like one of our largest clients that I had since day one. and be He took two years. So every month I would bring up my Ed, called it Quad A or just say, you know, quad Joe, quad B or Quad 1, quad 2. So I would bring up my quad list and this particular client would always be in my Quad A Right and he sat there for two years, their largest client. So finally I got him across to a client manager that he was happy with and comfortable with and then I finally I withdrew from that client then because literally visited that client twice a month for over 10 years. You know, finance meeting, board meeting, and so that just gives an idea of the one percenters I'd have to say to the, to everyone. You know that's probably one percent of the more difficult transition.

Jamie Johns: 29:40

But be very tactful with your client, use your interpersonal skills, be genuine. This is what I said. I said I'm growing the business, I'm stepping back. I've now got managers because you know, joe, I'm you know, I've known you for five, ten years, whatever it, I'm sick of working 100 hours a week. So just find the right approach with each client, because every client, every person, is a little bit different. Find the right approach. Always. Try and do it face-to-face. I changed that a little bit.

Jamie Johns: 30:08

You've got to sell it with what's in it as them. I had that question.

Ed Chan: 30:12

Not what's in it for you. You know, like you say, what's in it for them and what's in it for them is that they can get access to Joe client manager much quicker. They know 80% of the work anyway. They can always call me back in for the last 20%. So you've got to position it from a point of view of what's in it for them, not what's in it for me.

Jamie Johns: 30:37

Ed, I used to often say, oh, such and such is smarter than me, and this is why exactly I'd always use that line. Odd, Ed you know, joe is smarter than me.

Brenton Ward: 30:43

Because of this, you know, and they're probably true but I think I think it's important to remember from the context of what you're talking about, ed is there is going to be this lagged process I mean, we're not all the same. So some clients are going to take those extra touch points and could take one year, could take two years, as Jamie's outlined. But I think it's having the knowledge that that's the case and that they don't need to be switched off as a client. They just need to be educated a little bit more and persisted with a little bit more. Yeah, correct.

Ed Chan: 31:18

And also, sometimes you know the client manager you chose may not be appropriate for that particular client and you might have made a mistake there. So you should try somebody else. I mean, we've got the luxury because of our size to have a choice of different client managers to offer the clients. But you know, if you're very small then while, you're not going to have that choice. But it is about leadership. So you need to lead, because if you let them lead you, you're not going to change right? So if a client says to you, oh no, I only want you to deal with me, jamie, and then you go oh okay, well, you're letting them lead you and you're not showing the leadership I to always say to the clients look, you and I, we do the architecture, we design where you're going to go. That's the builder. They'll come in and build the thing that we've designed C and D But most of the time you'll be dealing with the builder and you only need to days, call the architect in every now and then and the builder will call me in. So the client manager will call me in for the last 20 percent and you know we'll do the architectural kind of work and then you're back to the client manager who then implement it and build it right. But most of the time you'll be dealing with the builder.

Ed Chan: 32:28

Now most of the businesses run teams as well. They've got their own staff. They understand that and they You know they've got teams. When we come to the implementation, our team will work with relationships their team to implement it. But that leaves you know, him and me, to just do the architectural work. And then after a while the client manager does all the architectural work anyway. But you just got to do it slowly, slowly, slowly, slowly. So you know if you, when you, when you step back slowly from it, working not saying your client, I'm disappearing completely, and no, I'm not. I'm just making sure that you know that you're getting really good service because the team that I've set up, they can do that better than I can do it right. So then it leaves me to just do the really high-end strategy work with you and, as I said, you know most of the cnd class clients end up doing the strategy work by managing anyway. But in the early days I'd still do the strategy work with the clients, I'd still go in there and do the pr work.

Brenton Ward: 33:23

So you've got to move yourself back to just strategy work and the pr work yeah, I've had a comment from craig and I wouldn't mind getting your feedback on it, because you both are natural finders and relationship. You know great interpersonal skills, good with clients and I'd say over your journey, just like most of the people on the line here, have built quite close relationships with clients to the extent that some of them, you know, are probably friends, a good few of them are probably friends. So, in terms of removing yourself from that work relationship, how have you found that to be with clients who you have a friendship with? A

Ed Chan: 34:00

It's really easy. I mean, had my biggest client still pays us around $70,000 or $80,000 a year and I still go walking with him every and you know I say to him mate, you can ask me anything you want, but the team is so good that not he doesn't need to ask me anything. Sometimes he asks me things more about the business, like strategy and that kind of thing, not tax, because the team is really good on persistent, tax side. They're better than I am and he knows that. He knows they're better than me. So when he asks me tax questions I don't know the answer. He goes it's all right, I'll go ask the client manager, but it's a slow process. You know they've got to get confidence in the client manager that they're dealing with. And don't forget, when you're very small, this is the only person that that client's ever seen. Is you Right? And often they think that you know they're your only client Right Because you've actually never introduced them to anybody else in your practice. So if you see it from their point of view, they've only ever dealt with you and in their mind's eye you've only got one client. That's them All right. So all of a sudden, if you introduce them to somebody else, then those things that I talked about, like 80% of them will just go to the person you introduced. You know like 16% of them will take longer to introduce. You might have to introduce them four or five or six times and then you know a handful you'll take 20 times before you go right across.

Ed Chan: 35:21

Now, this largest. client Jamie, anything. He was my very first client and I used to go out there every month a couple of times and whenever he rang me up I dropped everything and I drove out there. So I went from doing that right to just don't deal with him at all from a tax technical point of view. So it can be done, but you need to build a team around you, get confidence, be patient, be persistent and lead. You cannot do this unless you lead. You've got to be patient and understand that when someone says, no, I only want to deal with you, they're just saying give me a bit more time. Give me a bit more time to get used to the client manager that you've introduced me to and give me a little bit more time to change my habits. That's all they're saying.

Brenton Ward: 36:08

Okay, perfect sense, jamie. Anything to add to that?

Jamie Johns: 36:12

Just a couple of practical things. When I was in the transition of handing over the clients to the senior client managers, a couple of things that I would do was you know, often we've all got mobile phones and many, many times the client would ring me and Ed Martin had done this. I don't know, but I did this Paul the technology. I'd just say, oh, hang on a minute, I'll merge the call, you know, with Paul. He'll actually know this answer better than me. So so we Merge the call with Paul. He'll actually know this answer sense, better than me. So we'd often have a three-way conversation and Paul would answer it for me. With a client We'd have a discussion so gripping on the client.

Jamie Johns: 36:43

So a lot of the a leap, once they met the senior client manager, I'd often merge the calls and the same with emails. You get emails from the client and I would reply to the client and CC one of the guys, because they'd met them and say, look, I think this is what you do, what do you think, paul? And then all of a sudden you've got three or four or five emails. The senior client managers look better than you. So it's just dripping, it's just educating, it's just educating, educating, educating. And just from a practical sense it happens. And because people are people and you build rapport, people just want answers, they want service and if they're responsive and we sort of spoke about responsive in the last couple of weeks they just get to know the senior client manager and doesn't mean you don't need to be friends with them I've still got the first clients ever have and I don't even look after them and but I call them up and say you know how's life, how'd you go for holidays? And it's just not an issue, it just happens.

Ed Chan: 37:38

It's a little bit of leap of faith in there too great, yeah, and the really big clients you know like if you're still working in your practice, you should do the pr work with them and I go to lunch with them, you know.

Jamie Johns: 37:49

Yeah do all. A P L

Ed Chan: 37:50

That's what I often do. That's what I call balance sheet stuff. You know, do the balance sheet stuff and get the P&L stuff done by the team. But you do the balance sheet stuff and then that will refer more clients to you because people are people and they like relationships and they'll like you. They won't refer work to you unless they like you and so do the PR work with them. Don't get in the quad a activities or what I call the p l How activities. Get stuck in the balance sheet activities, which are all the quad two activities yeah, we covered this topic actually because the response from it was so engaging.

Brenton Ward: 38:31

I mean, there's quite a few people responding back to that email saying that they really connected with it and I think at the end of the day, it comes back to used people issue and this topic of leadership. We've been speaking about it between the three of us the last week. I mean, we are all quite interested in the topic of leadership. But I've got a question which I'll kick it off with is how do you get your people interested in becoming better leaders? Is how do you get your people interested in becoming better There are? We will actively engage on a personal level because we're interested in it and we know we need to become better leaders to be better business owners. But how do we get our teams to recognize that they need to be better leaders?

Ed Chan: 39:10

Knowing your people right, and sometimes the opposite happens they want to be a leader, but they're not. You've got to be a leader of leaders and help them. And I use this example when I was straight out of uni, in my apprenticeship if you like with a and I won't mention the name, but I'm not a grinder, I'm stayed minder, I'm more of a manager and a finder and I was really unhappy because, you know, like all graduates, me to do the grinding right, you've got to learn this stuff. There's no unfortunately,. But I was really unhappy because, not that I struggled with the work, but I just did not enjoy the work. So I ended up leaving after a year and then I'd go to another firm and then a year later I'd leave, and I did that three or four times and I thought something's wrong with me, because everybody stays there for well, at my age, they stay there for a long, long time. I'm talking about 10, 15, 20 years. That's just, you know, standard. But what was happening was that if the partner of the first firm understood or was a better leader, he would have sat me down and said Ed, ed, you're a manager, you're not a grinder, but you've got to do four or five years of this to get the knowledge then to be able to manage somebody, because you've got to know what you're talking about if you're managing somebody else. You really need to be patient here and mapped it out for me, help me understand where I am in this thing and he would have got the management, the leadership, out of me. He should have recognized that I was a leader and he would have kept me.

Ed Chan: 40:43

Instead, you know, he didn't help, he didn't understand it himself, like his own practice was out of control, like he was just working stupid hours, enormous hours, trying to do it by brute force, and he didn't understand this either, so he couldn't help me. So so I left, so he lost me, who you know. If I'd stay there and he nurtured me to be a leader, I could have done so much for that practice, but he lost me and unfortunately. You know, leaders have to be leaders and help other leaders and unfortunately we don't have that in a lot of firms. And that's my answer to you like, like I'm constantly helping Cindy here to lead because she's a practice manager here for her to understand her team and, as I said, work 80% of the time with her team and 20% of the time with the clients, and most practices work. What my boss did as well. He worked 80% of his time with the clients and I hardly ever saw him. How is he going to help me? He wasn't showing any leadership to me, so that's my answer, okay.

Brenton Ward: 41:44

Makes perfect sense. one, We're looking at the wise model Philippines team, with most bookkeepers eventually wanting to be accountants. Or do most bookkeepers want to be accountants in your experience, or are they just happy staying as bookkeepers and being promoted to Filipino bookkeeping manager? a

Jamie Johns: 42:02

So with that one we've had exactly that experience, ken, and there's a couple of answers to that and it sort of partly falls on what Ed said. First of all, you should really do your performance reviews. So if you build the Filipinas team for close it's like absolutely now,, one-on-one, you treat them just like any other team or individual and have performance appraisal and obviously ask them what their aspirations are. So if you're a bookkeeper, now do you see yourself being an accountant, like, what are your aspirations? So obviously ask them and you will find Ken in the Wise Vault. A

Jamie Johns: 42:41

There's a journey that we've designed for people in the Philippines. So there's a journey that we built that goes from a junior bookkeeper, if you like, right through team leader. Now we have a team leader in the Philippines and she's been Jamie us close to five years now and she made the team leader, but purely because she is a leader as well. So she wanted to be a leader. But her KPIs, her interpersonal skills, the way that she the other staff, you know, came across to us that she is a team leader, sort of two things. A bit, like Ed said, some people might want to be a finder Hopefully, or a minder, but you know, perhaps they're just a grinder. You know you almost have to if I say it understand they're more than they understand themselves. A bit like a good sports coach will know who to play it full forward and who to play it full back. But the second point is they want to be able to do it because if they don't have the passion to do it there's no point in them putting in a seat that you know you're promoting them to something that obviously they don't want to do.

Jamie Johns: 43:45

But we Ed actually have had that case where we've had a couple of bookkeepers who started out as bookkeepers and then, after we got to know them, talking to him and having the performance appraisal, to my surprise I said you know what, jamie? I've seen what the other accountants do, doing all the and the tax. You know I'd love to be a night, tax accountant with the accountants and not bookkeeping, so, but that's come later on. But that's only become because we did the performance appraisal and we actually asked them. But then you know, obviously they've got to tick all the boxes to get to that point. So you certainly will. Hopefully that answers the question.

Ed Chan: 44:20

Anyway, ed might have something to add, leadership is a bit like parenting. Okay, so you've got to know your children pretty well. And sometimes you know they say I don't want to go to sleep. And you know that they need to go to sleep. You've got to just, you know, lead, because if you let them lead they'll stay up all night and then the next day they're a rotten little thing. They haven't had any sleep. So it's a bit like that, you know. So it's a bit like that, you know.

Ed Chan: 44:45

So often someone draw say to you I want to be, I'm a bookkeeper, but I want to be an accountant. You've got to drill into why they say that. And sometimes they might say because they want to earn more money yeah, that's right. They may say it because they want to. It's prestigious. Or sometimes they say it because they think that that's what you want to hear. You know you want to hear. You know, you want to hear that.

Ed Chan: 45:07

You've got to drew right into why they say what they say, because if you put somebody into a position that they're not naturally good at, you're setting them up for a fall. I mean, there's not that much difference between a bookkeeper and an accountant, but there's a huge difference between a grinder and a minder. All right, and often you know, grinders tell me they want to be a minder, a manager, and a manager has to have really good interpersonal skills, very good communication skills, and the managers earn more money. So if a grinder says they want to be a manager, you've got to find out why they do that, and we've had a case here where that's what happened and we had to sit the person down and say to them in very nice terms and lead them that they're not a manager and that you know, if we did put them into that role of a manager, that you know they will fail and then they'll leave, because once you promote someone to a level, you can't come back because it's all you know losing face and all the rest of it, and it's pretty horrendous. So you set them up for a fall and then they'll leave, they'll work for somebody else and apply for a client manager role and they'll fail there and then they'll leave a wake of failure behind them and you haven't helped that person and the thing that you should do, which is what we did, was to explain to this person that they're really, really, really, really good in their job. They're not a good client manager.

Ed Chan: 46:27

We identified it because they wanted to earn more money. So we put a bonus scheme in place. So there, the more productivity they says produce, the more money they can earn. So if you identify what the real thing is right, then you can address it.

Ed Chan: 46:41

But if you don't and you just do what they tell you that they want, then you put them there and generally someone say you know, I want more money and you give them more money, but that doesn't address the problem, and then that might mask it for a few months and then you know they're back to the problem that they're feeling. You know, if you don't address that problem, you just pay them more money. You put a band-aid on it. Eventually, if you don't fix the problem, that comes out again and then they'll end up leaving anyway and you've paid them more money and they've left because you haven't addressed the problem and so you've got to get down to the problem and then that takes leadership, all right. So you can't just ask them what they want. Obviously you have to ask them what they want, but you have to drill into what really is the problem, and that's not easy, that's very difficult.

Brenton Ward: 47:29

Great advice and, Ed, you've been talking in your language in this session around P&L activities versus balance sheet activities and also working in Quad 1 and Quad 2. Would you be able to just reiterate what you mean by working in P&L versus working in balance sheet activities?

Ed Chan: 47:49

Sure.

Ed Chan: 47:50

So someone who works A in P&L and quad 1 to it's quicker if I just did it myself, it's more efficient if I just jump in the there and the highway it myself. Someone who works in a balance sheet activity. He says if I spend the time to train this person, then eventually they're going to be able to do it for me. All right. So working in a balance sheet is an investment in your balance sheet. If won't prepared to invest in your balance sheet and in your balance sheet, assets are your staff. So the person who works in a balance sheet is prepared to spend the time training their staff. The person who works in the P&L just does the work themselves. So when a client comes through the door, like doing an iReturn, they say to me oh, it's quicker if I just do it, if I just do it, it's quicker. By the time I train somebody else to do the iReturn I could have just done it. And you know this person. I'll use his example. He said to me see, ed, see ed, I've earned one thousand dollars in one hour. And I said oh, how did you? And he was really, really happy about that. And I said how did you do that? And he says well, I did five I returns at two hundred dollars each and it took me an hour. Isn't that great? And I said no, that's terrible. Because this guy was he's 63 years old and he's still working his p and l, and because he's never invested into this balance sheet so he's never trained somebody else to do it. So now he's still working his P&L. And because he's never invested into this balance sheet, so he's never trained somebody else to do it. So now 63 and he's still working in a P&L. All right.

Ed Chan: 49:14

Now also, quad a activities, quad one activities which are important and urgent. But important and urgent is like if your car breaks down the middle of highway, it's important and urgent to get rid of, to move it on. But if you work in Quad B, which is important but not urgent, important and not urgent is if you service your car, it's important but it's not urgent. So if you service your car, it wouldn't break down, if that makes sense. So Quad B, which is important and not urgent, is your balance sheet activity. So often it's important but it's not urgent to invest. So whether you invest in the super fund or invest into shares or property or invest into your business, which is technology systems and training people right.

Ed Chan: 50:05

That's investing into your balance sheet and often people don't do that and that's quad b, which is important but not urgent. So we don't do that. Same as exercising is important but it's not urgent. That's a quad b activity and if we don't exercise we get bad health, which is a quad a which is important and urgent. So if you get a sickness, it's important and urgent to deal with it. But if you work in quite B, which is do some exercise, which is not urgent, so nobody does it but you'd avoid getting sick or staying healthy, if that makes sense.

Brenton Ward: 50:42

Absolutely it does. Jamie, you mentioned before videos and standard operating procedures. Could you provide an example of a SOP that you would do a video on? So is it more in relation to technical so how to do a BAS or is it more so on the business, operational side of things example process on how a job will flow through the business from start to finish?

Jamie Johns: 51:05

Pretty much everything. So, to give you a good answer, if you look at divisions of the org chart, the seventh division is the first division that you remove yourself from. You can start with the standard operating procedures, which are just videos, in a nutshell, around division seven. So division seven might be the administration. For an example, and a classic example on our internet is a series of videos for the practice manager or the receptionist on how to do the net promoter score with a system called client heartbeat. That's an entire system that we have as soon as the jobs or the tax returns are finished, the senior client managers, you know they complete their bit. The team completes their bit. It flows through to our jobs list and simply comes off the computer to all the jobs that are completed, and then there's a series of steps, a series of videos that I videoed and they just get followed. So that's just an absolute classic example.

Jamie Johns: 52:09

Absolutely more literally endless. It's endless. And the beauty of the SOPs is, if you're talking to your clients, we've got our own clients doing SOPs and it helps them. So it's pretty much endless, isn't it, ed, you've got to say to yourself if I wasn't here, how would you do this run?

Brenton Ward: 52:33

absolutely. And if I do this task have more than once,, absolutely a couple of tips Snag there It a

Jamie Johns: 52:39

To do that because you might not got the videos yet is use a little system called snag it. That's a fairly basic recording system and a higher end one is Camtasia. You can use that as well. There's different ones out there that you can use. And as soon as you do the videos, you put them on your intranet. Because if you hire a new receptionist, new practice manager or a new accountant got a particular just you know, the first day, the induction, the induction day. a

Jamie Johns: 53:06

So look, there's a series of videos here I'd like you to watch. If you watch the whole lot they probably go for three hours. But the system watch that section manages soon as, sure enough, the system they'll pick up a manages job or that job they've got to do and they'll ask a question and you can say, well, just watch that video and if you still don't know how to do it, come back and see me. And it, if you still don't know how to do it, come back and see me. And it's the 80 20 rule. 80 percent of the time they won't ask a question. They'll get the answer from the video. The other 20 percent is where you'll have to step in. So this 80 20 rule that ed first introduced to me long time ago now.

Ed Chan: 53:37

It literally sort of deeds your life, yeah if you um systematize 80 of it, then it's a lot easier to the last 20. So system ties 80 and manage the last 20%. So system ties 80% and manage the last 20%. just give you is where, like when we rent, set up deeds and we comes were selling like 160 a month. There are It was just madness.

Ed Chan: 53:57

And people buy trust deed and it's like a thousand questions that are. So you spend two it, hours on the phone explaining and how to set it is, how to set up the bank account, where to put the ranch, Wize you know where does the bank account, where to put the rent and where does the money come from to pay the loan. There's a thousand questions. Whose name should I put on the contract sale? Anyway, you could do it by brute force and answer all those questions. Or Quad A activities. Or you spend some time in Quad B in your balance sheet, which activities are important but not urgent, and put an instruction manual down. So that's what we did.

Ed Chan: 54:32

So whenever someone bought a trust deed, we'd send out this instruction manual, systematize 80% of it and then you then manage the last 20%, which are a lot easier to manage. So everything that you do and everything about WISE is around this 80-20. So every time we talk about what we're doing, it's systematized 80% there are so you can humanize the last 20%. In fact, you can't even be human on the 20% if you're trying to do it by brute force with 100%, because you're just burnt out and you can't even be human to someone if you're burnt out. So you've got to systematise 80% of it to allow you to be human. Because often people say to me oh, we're just like robots if we systematise everything. But no, it's actually to allow you to be human. If you try to do it by brute force, you won't be available to the clients. So it's very important.

Brenton Ward: 55:21

And just to add a couple of little practical things to that as well. I think this really comes down to success, not perfection. I think we get a little bit afraid when we start talking about having to record ourselves on video and use technology to capture this stuff. Now, you know, as Jamie mentioned, there's a number of different tools that you can use to do this.

Brenton Ward: 55:41

But keep it really simple to start with and create yourself a little system for creating the systems and the SOPs. So you know, in its simplest form and easy to use Jess and screen capture with your video and your microphone and your computer is as simple as you need. And then, if you don't have an intranet yet, just start a little file management system in your document management with you know, certain steps or certain processes that you can just plonk the video in there for now. And you'll find, as you start doing them more regularly and you ingrain this into your culture so really getting your team on board, with them identifying as well tasks that they're doing over and over again, and if they can start to do their own videos, which is where you really want to be, because then your entire business starts to get captured and recorded. So don't try to have something really polished from the start, because it won't happen. You're better to just start doing it in some way, shape or form, and then you can build on it and improve it from there.

Jamie Johns: 56:42

I ask our staff to do videos all Wize time. So get that leverage, because you shouldn't be just the

Brenton Ward: 56:47

only one doing the video. You know, our practice manager, jess, will come to me and say, oh, we're doing this Wize And I'll say, look, can you do a video of that? And then wizementoring. com/podcast so you just build so much leverage when you get everyone doing videos and all of a sudden everyone's removed more from quad one in again. !

Brenton Ward: 57:04

Absolutely. We absolutely love running these sessions. Wise guys, thank you so much for your time, as always. Thanks for tuning in. If you liked this episode, please remember to subscribe and leave us a five-star review. For more practical, wise tips on how to build a business that runs without you, head over to wisementoringcom forward slash podcast to download a free copy of the Accountant's 20-Hour Workweek Playbook. We've included a link in the show notes below. See you on the next episode.