A Finance Chief Among the Partners

What it’s like to be the CFO of partnerships like Grant Thornton, Rothstein Kass, and Goodwin Procter.
David KatzApril 1, 2015

When corporate finance people think about accounting or law firms, they tend to think of them as the groups of professionals who provide them with services. Structured as private partnerships, they operate in ways that may be mysterious to CFOs who haven’t lived previous lives as accountants or lawyers. Indeed, the notion that such firms might have finance chiefs themselves might never have occurred to them.

Michael Barton

Michael Barton

Yet Michael Barton has spent 15 years in the finance function of such firms, the bulk of them at Grant Thornton, a top-ten accountancy, and just shy of two years as the finance chief at Rothstein Kass, a smaller audit firm that was gobbled up by KPMG last July. In January 2015, Barton became finance chief at Goodwin Procter, a Boston-based global law firm.

Unlike CFOs of public and private companies, who often retain a great deal of decision-making power in their organizations, Barton relishes being a trusted adviser to the partners of a firm. In making his career moves within the professional services arena, he’s come to value firms that can provide him with the opportunity to collaborate with those around him, rather than those who might force a finance person into a rigid specialty.

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In a wide-ranging interview at Goodwin Procter’s New York offices, Barton spoke of his career, the auditing and legal sectors, and the unique aspects of a CFO’s job in professional services. Following is an edited version of a portion of that discussion. (This is the first of two articles based on that interview.)

Did KPMG’s acquisition of Rothstein Kass have anything to do with your leaving Rothstein?
About a year and a half after I moved [to Rothstein Kass], I was brought in and reviewed the memorandum of understanding with KPMG. I did a wind-down through the end of the year, working on negotiations, due diligence, the transition. My entire team and everyone else went over to KPMG. I did have the opportunity to take a role at KPMG, but it was doing something that was going to be focused purely on M&A. And I really liked having my hands on helping a business grow and become more efficient and doing it inside a very collaborative environment.

As I started taking a look around, I came across and met with the COO [at Goodwin Procter], Mike Caplan. And as I met people here I just loved the environment. It appeared to be and still appears to be at least as collaborative as the environment was at Grant Thornton.

And you retained the CFO role in your move to Goodwin Procter.
Yes. But I don’t get hung up on titles. I view myself as a very collaborative person, and everything I’ve accomplished in the past has been because of the people I’ve been able to work with. I don’t view it as a singular effort. And what I didn’t like about the opportunity that was presented to me at KPMG was that it was going to be all about wearing one hat on M&A. And I’ve been involved in M&A. I don’t mind being involved in M&A, but living on a diet of it is something that is very unappealing to me.

Do you, as part of the executive management of a partnership, feel a bit like an outsider — or, on the positive side, like an objective observer?
I do have some friends that work in publicly traded companies where the CFO probably has a larger ownership stake and voice as the arbiter of what can and can’t happen. I don’t view it as a takeaway. What I like about the role I’ve played in professional service partnerships is that it’s what I really enjoy. Maybe, being raised by two college professors as I was, I view my role as being a trusted adviser, advising management of here’s where we are right now. Here are the options going forward. Here are the pros and cons of each option. Here’s what I would recommend. What do you all want to do?

But at the end of the day it’s their firm, and not in the sense that it’s not my firm. I’m not a decision maker. If the management team is doing its jobs, fulfilling its obligation to the partners who elected them, they’re making the decision of what they think is best for the partners.

Based on your short experience at Goodwin Procter, what’s different about being the CFO of a prominent law firm versus holding that post in a prominent accounting firm?
I wish I had a few more months under my belt to answer that question. A lot of what I’ve seen so far has been similar to the firms I came from. There is, for example, the need to understand the nuances of each business. In the accounting industry, it was the differences among audit, tax, and advisory services — even the differences within each line of business itself. Take tax. What are the differences among international tax, state tax, and local tax? They all have different market-facing and business drivers, different net rates, and different mixes of people.

In my first two months here, the obvious difference is just that it’s a different industry. One of the reasons I decided to make the move is that, having spent 13 years at one accounting firm and another two years at another, I had tapped a lot of the interesting challenges in the accounting industry. That isn’t to say there weren’t any left. But I was looking for a way to apply my same skill set to a different arena where I can challenge myself more.

What differences do you see between the two industries?
The accounting side probably has a lot more regulations around it. During my time there, we often looked at the processes that we had to set up as a firm, particularly those governed by the Public Company Accounting Oversight Board. So if we had an audit client that became a public company, we had to make sure we weren’t providing advisory services to them. We didn’t want to be in the situation of giving an unfair audit opinion because we were getting services business from the client — a situation, for example, where you’re getting millions of dollars of advisory services from a client and you’re giving it a clean bill of health on the audit side to get the back-end piece.

The accounting industry had increased focus and pressure from the PCAOB, which was formed under the Sarbanes-Oxley Act. And we had regular reporting that we had to do for them and guidelines we had to follow. Goodwin Procter and the other law firms are not governed by Sarbanes-Oxley. But we still have to make sure that we’re aware of and minimizing any potential conflict-of-interest situations so we don’t find ourselves sitting on both sides of the table in a given legal matter. How could we be serving a client effectively in a piece of litigation if we’re representing both sides on a case? We can’t. There are conflict-of-interest issues in both industries.

What cultural similarities do you see between accounting firms and law firms?
I’ve been very pleasantly surprised at how similar the cultures are, and not just because they are partnerships. I’ve been in places where it’s not as collaborative. One of the things I liked about Goodwin Procter from the moment I walked in the door for the first interview – and it really came across in every partner I met – is that it’s a genuinely collaborative firm. And that just makes going to work every day that much nicer. Life’s too short to not enjoy going to work.

When you say collaborative what do you mean? What’s the opposite of collaborative?
The opposite of collaborative is siloed and self-interested. Collaborative is where there is appreciation that what’s best for the firm is best for everyone.

I saw examples in my past where an opportunity would come up to bid for work for a major client in the Chicago area. And the client needed x, y, and z services. They may have been looking at mostly federal tax services, but they also had a need for some very unique international tax services that come at a premium. There are challenges in some partnerships, particularly where you have P&L responsibility. You want to make sure you structure things so that people are doing what’s best for the firm. That was a very big focus at both accounting firms I was at before I was here and that appears to be a very big focus here – doing what’s best for the firm, not for any one given partner or one given business unit or department.

What business differences do you see between accounting and law firms?
One thing that I haven’t seen play out here as yet, but that I know to be a difference, is that in accounting firms, the firm owns the client relationships. If a partner leaves and goes to another firm, there’s usually a non-compete agreement for two years under which he or she can’t service particular clients.

In the legal industry the partners and the lawyers own the client relationships. In the best-case scenario, that doesn’t really impact anything. I haven’t seen any negative consequences of it yet in my first two months. But I imagine that there could be some differences involving a situation where the firm owns a client and one where the individual owns the client. But no two firms are alike. So another firm that is less collaborative might see a lot more challenges in cases where the lawyer says this is my client, I don’t want someone else going in and selling into them — even if it’s better for the firm overall.

What’s your been your biggest challenge as the finance chief working for partnerships?
Part of it is the the day-to-day challenge of making sure, particularly in a cash-based business like a partnership, that we’re getting the bills out the door and getting the cash in. I’ve been in plenty of conversations with partners in the past that suggest they think that the clients just automatically pay bills. They feel there shouldn’t be any effort to follow up with clients, and at the same time they don’t want anyone else talking to their clients. Each day, the challenge is to minimize the risk exposure on the business side of billing and collecting while still effectively managing the clients and not rubbing them the wrong way.

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