Ron Baker 0:32
Welcome to the soul of enterprise business in the knowledge economy, sponsored by Sage energizing Business Builders around the world to the imagination of our people and the power of technology. I'm Ron Baker, along with my good friend and various agents, attitude colleague, Ed Kless. On today's show, folks, we're honored to interview my former boss and Andy Armanino. Andy, welcome to the soul of enterprise.
Andy Armanino 0:56
Thanks, Ron. Nice to be with you, too.
Ron Baker 1:00
You started your career with Arthur Young and then joined Armanino in 1989, the firm that your dad built [in 1969] becoming the youngest partner and then in 2005, you took over as managing partner. But before we get to you Andy, I'd love to learn more about your dad because this is the fiftieth year anniversary of the founding of the firm and that's a milestone. And I read somewhere that you describe your dad as a “strong but kind leader.” Tell us about your dad.
Andy Armanino 1:31
I'm not sure as a kid growing up I would have described him as a strong but kind dad. You know how things go as people age they become mellower and mellower. My kids and all my dad's grandkids would say he is the kindest, gentlest man you could ever imagine. My recollection as a kid was yeah, he was kind but he wasn't always as gentle. But he definitely installed a number of things in his kids. And that was do right. Do good, work hard, and what you do matters. And for him, he actually was a guy that went to work for the big eight back in time after graduating with an accounting degree. He spent about five years at the big firm becoming a manager. And like a lot of people, he got to the point where it was painful to be at the bigger firm because he couldn't serve clients the way he felt like he wanted to. He wanted to have a unique relationship with clients where he felt like what he did mattered to their business and their lives. And so he left the big eight with his best friend Tom Jones, and they started a little teeny firm with the two of them. They set out some simple goals to do things right. Like I talked about how you have a unique relationship with the client and be good to their people at first that was very simple because their people was the two of them. They set a goal of growing one person per year. And I actually joined them about 20 years after their start, exactly 20 years after their start, and there were 22 people when I joined. So they checked the box, they grew 20 people in 20 years and they hit their goal.
Ron Baker 3:28
Wow, that's great. Your dad he’s still alive isn't he?
Andy Armanino 3:33
He is. He lives in a little beach community of Capitola. And I actually really appreciate the chance to talk about him because he is now just a wonderful example of a human being after he retired at a relatively young age of 54. He's given back to his community. He shows up and feeds the homeless in his community two days a week and he basically has been a one-man crew at his church holding it together the last number of years. But he's tried to give back and do good basically every day since he's retired from this line of work. So he's been a great example not only in business, but how to live your life.
Ron Baker 4:15
He must be incredibly proud of what you did. And what Matt continues to do with the firm.
Andy Armanino 4:23
Yeah, he is, we're, we're lucky we have a unique relationship while he's dad, he's also a great friend. And for me, he happened to be, when people ask the question who influenced your business life, and there's a lot of people over the years, but by far and away the number one person who influenced how I kind of approach business, my thoughts about how we were going to do things, was my father, I was lucky we got to have a relationship that from a work standpoint could have gone one of two ways, my friends when I came to work, said, two camps, you're crazy, it's going to be miserable. You have a great relationship with your dad, you're going to ruin it. Or the other camp was, hey, you and your dad do have a great relationship and this is going to be the best thing that ever happened. And for me, it ended up being the best thing that ever happened. He was a wonderful, wonderful mentor from the business standpoint.
Ron Baker 5:22
And I don't mean to jump ahead, but you brought it up that he retired at the age of 54. And you retired at the end of last year, 2018, and you're around the same age, was that the inspiration, you were following in your dad's footsteps?
Andy Armanino 5:42
So I wouldn't necessarily say it was his footsteps. We were about the same age, I beat him to retirement by a few months is what I tell him. But what I've always believed in, what he believed in, and what I learned from him because he did it really well is I believe in youth, I believe in supporting the up-and-coming leaders in our practice. I believe that people, when unleashed can do far more than we ever think they can do. I got that opportunity at a young age. And was I ready to do some of the things the firm asked me to do. At the time, I said, Yes. In hindsight, with a little more wisdom, I'd say, No, I wasn't ready. But you know what, I figured it out. And I believe our people are the same. They are unbelievable. Their potential is unbelievable. And for me, I tried to stay very relevant and very innovative. Even up till the end, and there's a lot of people that said, God, you could keep going, you're an innovator. And what I realized is if I kept going, it doesn't allow the space and room for others to expand where they could. And I think that's what the firm's experiencing. So I always knew I would leave at a relatively young age because of my belief in in youth and supporting that upward flow of ideas and energy.
Ron Baker 7:10
And Andy, just so our listeners know, I know you would expect the managing partner, the son of the founder, to say those things. But I've been with Armanino since April of last year. And one of the reasons I joined is you do have an innovative and a young partner culture, and they are entrepreneurial. And they are incredibly innovative, and they are wickedly smart. It's just unbelievable how you're able to develop this talent. And I've just been so impressed. And you know, Andy, you and I have had really frank discussions and we've had our debates and our disagreements. So I hope you know, I'm not blowing smoke up your skirt, I truly mean that.
Andy Armanino 7:52
I appreciate that. And I think you have a unique perspective, at least for this interview, because you've seen some of what we've done. And for me, I know I get the most excited, I think about all the different things that we've done at Armanino and all the things that we've accomplished and the growth and some of the rewards we received and some of the comments that peers make. And the thing I get the most excited about is when I get a chance to work with our young people. It's one of the reasons that we formed something called the SAB [Staff Advisory Board], which I don't know if we'll touch on at all, but the staff advisory board way back in time, which is an interesting story on how that happened. And then a manager advisory board [MAB] and those two boards have real voice for young people, both the staff level and manager level to have impact on the direction of our business. And when I'm working with them, it's good days. Very good days. As you’ve seen Ron, you know, partners are, you know, some days are wonderful to work with partners, some days, it's not wonderful. So, you know, I like working with our young people and some of those days working with partners, I don't miss.
Ron Baker 8:58
I totally get that and because I've had some interaction with both of those groups, the SAB and the MAB. And what really impresses me is the firm the partners give authority to these people to lead initiatives. I'm working on one right now, with members of the management team. And it's phenomenal because it's a big initiative, and it would have a big impact on the firm. And to be able to have that type of autonomy at that level I think is fairly unique.
Andy Armanino 9:29
Well, I don't know if we'll have time or not, and you let me know, the story of the SAB and the concept behind it, how it was formed. I think your listeners would find it interesting.
Ron Baker 9:41
Go ahead and talk about that Andy, we have a few minutes before the break.
Andy Armanino 9:45
Okay, just let me know when to cut me off here. So I heard a speaker back in time years ago, her name was Rebecca Ryan, very interesting person. At the time, she was a young person that was about six foot with red hair on stage and right away told everyone that she was a lesbian. And this is an audience of a bunch of managing partners. And when she looked out, she said, you guys, I see a lot of wrinkles, gray and white. And so she really endeared herself to her audience from the get go. I thought she was wonderful. She brought up a concept of empowerment. And one idea that she touched on is she asked a question, how many of you have a board of your young people, your staff, people or your managers, where you actually listen to them and hear their ideas, and not a single hand in the room went up. And it was a large meeting of managing partners. After the session, I went up to Rebecca and introduced myself and said, Rebecca, we're going to do it at Armanino, and she looked at me and she said, Andy, it's nice to meet you, but you won't because I’ve spoken to this group in your profession a long time, and you know, people shake their heads, but they don't put some of the things in action. This accounting profession is amazing at the lack of change that happens. And I said, Rebecca, we're going to do it. And we did, we went back and we actually had a process that we put in place where you had to raise your hand if you were a staff person if you wanted to participate. And then you had to be elected by your peers. And the first group was a group of about 12 people that got elected from all of our different disciplines, and offices at the time. And I actually was their executive sponsor. And in the very first meeting, I asked the group, what's wrong with our firm? And at first, they were very shy, managing partners and CEO in front of them and they don't want to tell me what's wrong. And pretty soon someone said something and then the juices started flowing. And I had a bunch of whiteboards in the room and my hand got tired of writing the things that were wrong. Then I said, Guys, this isn't going to end up as a session that we're just going to complain. Now it's your job to prioritize, pick the three items that you want to work on changing, and you're going to be empowered to change them. And that's how we started 10 plus years ago, and it's evolved since then. But it is an amazing group of people and a powerful lesson for them in early leadership. And you get to watch these people solve problems that most partners would say they can't solve, but guess what, they can.
Ron Baker 12:31
Yeah, there's a great book, you've probably read it. It's from the Dean of Oracle University, and it's called Rookie Smarts. And the argument is to put rookies in charge of initiatives, and they tend to be on the young side because they bring fresh thinking, they do look at things from a different angle, but they'll still consult the experts as. And I think that's what's so powerful about this. It's just a great initiative. Well Andy, this is great, unfortunately we're up against our first break and folks we'd like to remind you if you want to get ahold of Ed or myself, send us an email to asktsoe@eraSage.com. We will post full show notes at thesoulofenterprise.com of our interview with Andy and where you can learn more about him, in the meantime, we want to hear from our sponsors.
Ed Kless 15:35
Our guest today is Andy Armanino now the retired managing partner of the Armanino firm. And Andy, first of all nice to officially meet you sort of on the radio here and I'm glad to get a chance to talk to you today. But my first question is all that stuff you were talking about with Ron, why did you make this hiring mistake?
Andy Armanino 16:00
I mean, I get a good chuckle because you obviously know Ron. You know, I actually can't remember, Ron might, but I can't remember the first time I heard Ron speak but one thing my brother [who's the current CEO at Armanino] always says about me is I love hearing from and working with really intelligent people. So I'll compliment Ron a little bit. And you know, his presentation made me think, and clearly Ron was a very bright guy and had some different ideas. I have never been afraid of different ideas. Matter of fact, I love being challenged on things and so Ron and I have had some great debates about a variety of topics and certainly it wasn't a mistake because I think Ron's helped move our practice forward.
Ed Kless 17:00
Well, to steal a line, I think Ron knows the actual author of this, but if you think it's difficult arguing with Ron, try agreeing with him.
Andy Armanino 17:10
I've experienced both.
Ed Kless 17:15
But to that, and I did want to ask you about this and just pick up a little bit on the story that where you became the 22nd employee, and that was right on target with what your dad was trying to do with the firm. Obviously, there were some significant changes, and you went through a period of pretty explosive growth. And I wanted to talk to you about that, from the people side of things. What were some of the things that you put in place to make sure that you did get the right people, the right hires? And clearly you have because you talk so highly of them in this interview, so I want to know what is it about your hiring process or culture that makes you able to stick to that and get those great people?
Andy Armanino 17:54
Yeah, and I think you hit a key word there is culture and I'll come back to that. But for me, it was when I got to the firm, the firm had a really wonderful culture for a small firm, very hands on. My dad and his partner, founding partner, Tom Jones, did exactly what they said they would do, they created an environment where they were having impact on clients lives. In fact, when my dad retired, we threw a party and the speakers were mainly clients, and it almost put tears in your eyes in what an impact that he had had on their business. So right in line with what they want, and the other piece of that was having a great place for people to work at. And at the time, it was a family environment as we grew, and I learned a lot, those initial years coming from the big eight, where that feel was not the same feel. It was very much you know, if you're good, you're going to keep moving, if not get out of the way. So I learned a lot about our culture and what it meant to be part of our Armanino. I think that culture continued to evolve as we grew.
We stressed the idea of people having voice, of being innovative and to be innovative, you have to hear different things. And you have to be willing to challenge your different beliefs to make yourself better. And so we've done that. And I think what happened is, not only were we growing rapidly doing good things, but we're also good marketers, and I'll be very honest about that. I hired back in time one of the first marketing directors in an accounting firm, most accounting firms didn't do it. Marketing was a bad word. It wasn't to us and we hired a marketing director who at the time was a rare breed in the profession. She was very good at what she did. And she helped us to advance to be one of the best if not the best marketing in our profession, and so not only were we doing good things and creating a culture, but we were getting the word out there, and it allowed us to attract a talent base that firms our size just could not do.
Ed Kless 20:13
And so what it from a hiring standpoint, though, was there any type of process that you guys put in place to make sure that you are getting the right hires? Did you take a while for hiring, just described that for me?
Andy Armanino 20:28
Yeah. And if I'm real honest, it is. At first it was very haphazard. If you look at our process today, it's very formalized. One of the things we did back in time as we were growing, and we had this concept that we were going to be more than a core accounting firm, meaning we were going to do more than the compliance audit work which is important in our profession and, and it's something today that's still important at Armanino but we're going to be more than that. We're going to be more than a compliance tax firm. And so as we branch out into other areas what we didn't try to do is hire accountants or CPA is to do jobs that they weren't really trained to do. What we did is as we built our consulting practice is we hired really good consultants. And we were fortunate again to have this culture in this growth engine. And we were doing really well. So people wanted to be part of it. So we had a lot of diversity. In our hiring practices, we look for diverse ways of thinking. The other thing I will say that we did, fairly early on, from a not really a formal standpoint, but something that was very important to us is that most accounting firms kind of look at grades, especially for their young people. How well did the people do in terms of GPA at their college? Well, that's important. I mean, it shows that people are intelligent and they're willing to work hard, but it doesn't tell the whole story. One of the things that we did is we focused on communication skills, can this person talk in an interview? Do they have a personality? do their eyes light up with a spark when you're talking to them that clients are going to see? And will they be a good teammate? Things like that. So we did that from a very early stage. And it's certainly become more formalized over the years.
Ed Kless 22:22
And then, of course, you started to become one of my favorite word's: acquisitive, and to take on other firms and bring them in under the Armanino name. What did you look for when acquiring firms, because that's a whole other ball of wax. And oftentimes, they don't quite go as well as there's not a great track record in the accounting profession for mergers and acquisitions to be long term successful.
Andy Armanino 22:48
Yeah, I agree with you there. I mean, there's a bumpy road out there in the merger & acquisition, past and future in our profession. It still continues at a rapid pace. I think for us, we were very disciplined, meaning that we knew culturally what we wanted to be, and what we were and what we wanted to be going forward. And so we looked at kind of concentric circles, we looked at a firm that was in a great geography, we wanted to be in very strong economies. So that was one factor, Hey, is the firm that we're looking at in a location that is a very strong economy, and what are their people like in every deal that we did every deal that I did, we required the other firm to let us get beyond the partner group into their managers, and sometimes below to talk to people to see what their people are like, are they inquisitive? Are they people who are going to have the same mindset about growth that we did? That was the other circle. And then the last circle that was hugely important, was the cultural circle and did the firm have a cultural mindset like we did. And if we could find one that had an intersection of those three circles, then it was a yeah, let's go. And let's go and let's go fast. If we found a firm that was in two of those three, you know, it was a possibility for us. If we found one that was one or less it was we're not looking at this. And one of the things that happened for us was that there are many firms out there that spend a lot of time seeking out acquisition targets. We really didn't, we actually got approached by firms that knew about what we were doing and asked, you know, if we would consider having them join us, so that was an interesting dynamic as well.
Ed Kless 24:43
So you did say no to people then?
Andy Armanino 24:46
Yes. We said no. So several times over the years, and continue to do so today.
Ed Kless 24:53
Yeah, if you can't, if you're not going to say no, your yes means nothing, right? Agreed. And what about now, despite all that, despite all of the great work that you did on being careful, and due diligence and making sure that there was a culture fit, there's still going to be things that are going to be challenging when you have a merger or acquisition type situation come in. What are some of the things that you try to do to make that go as smoothly as possible even on those ones that were like, hey, let's move fast on this.
Andy Armanino 25:22
Yeah. And, and I'm not going to tell any stories have we had bumps in our process? And the answer’s yes. One deal that I worked on, years and years and years ago, we probably weren't as disciplined as when we had our circles. And you know what, sometimes I was younger. Sometimes you fall in love with a deal. And I've heard this from many M&A people, is never fall in love with a deal. And I think I fell in love with the concept of doing this deal. And it wasn't a good a fit. And what we found is it takes a long time to fix those mistakes. And we did. And we put a lot of energy and effort in, but it's not simple. I can tell you another quick story when we did a significant size deal in Los Angeles, and the concentric circles were all there. But it was outside of our area. It was the first kind of big leap outside of the immediate Bay Area. And so what we did is we rented an apartment down there, a three bedroom apartment, and four of us and our C suite made a commitment that we would be there. One of us would be there all the time for the first six months, that we were together with this firm. So each one of us lived in in the apartment for part of that six months. But it had a huge impact having one of our leaders working with them day to day, through some of their struggles and in hearing the concerns that people had and there were lots but it allowed us to handle them and address them on a real time basis. That that is a learning game. That I think that the firm would repeat again if it did a substantial deal.
Ed Kless 27:04
Sure, that's great stuff. Well, we're up against our next break. We want to remind you that you can get in touch with Ron or me by sending an email to asktoe@verasage.com. Of course, the website is thesoulofenterprise.com where you can go and listen to all of our previous 260 shows as well as previews to upcoming shows. But right now, a word from our sponsor.
Ron Baker 29:26
Well, Welcome back, everybody. We're here with Andy Armanino, one of the top 100 Most Influential People in the profession, and a whole lot of other accolades. Andy, I want to go to a 30,000 foot level with you and ask you, What do you think is the most important issue that's currently facing the profession?
Andy Armanino 29:48
So I would say two things right now, and one's going to be very obvious. It's what most people would say, but the rapid change right now in technology and the impact that's having on our clients’ businesses and our businesses. Hand in hand with my second item, which is my fear at times for the profession is we tend to have a fixed mindset about things that we've done things a certain way and they've been successful. The professions have had a lot of success, which sometimes is an anchor, instead of this growth mindset, and I'm reading an interesting book right now on the next stage of the growth mindset. But I think the profession needs to adopt a growth mindset, and it needs to embrace technology instead of fighting it.
Ron Baker 30:47
And on the tech, Andy, are you optimistic or pessimistic? We did an interview with Daniel Susskind, who's one of the co-authors of The Future of the Professions and he's kind of fatalistic about the number of jobs it's going to knock out of even the professions, including CPAs, do you see it being a compliment or a substitute?
Andy Armanino 31:08
So I know Daniel, and he and I have had that discussion. I'm the opposite of Daniel. I'm very optimistic about the potential again, if this profession, and it won't be all, there will be some firms that don't adapt and don't have a growth mindset, and they will go the way of the dodo bird, they won't exist. The firm's that do adopt the growth mindset, I think what will happen is, they will view these changes in technology with some excitement. They'll look at it on what it can do for their clients. They'll have a new tool, a number of tools, a number of new tools in the tool belt to serve their client, and they'll adapt their internal practices to take advantage of technology as well. So I think there will be firms out there that are doing this. And I think they're going to evolve to a place where they're driving more value than they ever could have imagined to their client base. And I think it raises another question that you and I have talked about is making sure then that they capture that value that they're providing their client base.
Ron Baker 32:22
Right, I think some of this change to technology, and you know, technology is just sucking hours out of the system. And it's really driving the move to value pricing, largely because you can't have a business model that says we sell hours if those hours are decreasing.
Andy Armanino 32:39
So just real quick, I know it's a side note, but I was just in Rome at a world meeting for Moore Global and I got to talk to managing partners from across the world. And one of the sessions we did was on value pricing. And one of the partners came up to me afterwards and said, Hey, we're adopting some of this, but the problem is we're making changes to technology today. And what's happening is we're doing some of our compliance work faster and faster. And all it's doing is driving the amount I bill lower. And I just almost want to shake him and say, Come on. You've got to be smarter than that. We have to now capture that value that we're providing with the use of technology. We spend an awful lot of money investing in technology in this profession. I know our Armanino spends a huge dollar amount on technology and we need to capture that value that that we're investing in as a firm and make sure that our clients appreciate it.
Ron Baker 33:45
Absolutely. And I'm like you, I'm on the opposite side of Daniel on this, I've got future glee as Ed likes to say, because I think all this technology takes away that predictable and rote work and allows us to move up the value curve with our clients.
Andy Armanino 34:02
I agree, I do think there will be, I hate using the term, but there'll be roadkill along the way. Because, again, I get a chance to get out and talk to an awful lot of people in firms in this profession. And I'm excited about the number of firms that are now listening to some of the new ideas, embracing some of the new ways of thinking and really wanting to change. But I'm also disappointed at the number of firms that, that have this fixed mindset that they say, hey, we've been successful. We've heard all this change-up for years and years. And you know what, it hasn't happened and I can keep doing what I'm doing for the next X number of years. And that's all I want to do. Well those firms will not be successful in the future.
Ron Baker 34:50
Yeah, I agree. One thing I do love that Daniel wrote in the book is what kills you doesn't look like you. And we do have threats facing us from outside the profession. And that's where major disruption can happen.
Andy Armanino 35:06
Yeah, I absolutely agree. And I think one great exercise that every firm out there could do and not just every firm but every business. And we've done it at Armanino and it's something that needs to be updated, not on an infrequent basis. But if you get some smart people around the table, and I would encourage people to have a diverse, smart group of people around the table. And I might come back to that because the book I'm reading deals exactly with that topic, but a diverse group of smart people and think about how would we disrupt this business? How would we kill ourselves? And if you'll come up with some interesting ways that you can disrupt this profession in your own firm, it's got to cause you to think on how to address some of those issues that you raise. And certainly some of those issues that you raise will not be from traditional competitors.
Ron Baker 36:01
I do love that exercise. And a corollary to that is the old Peter Drucker question of, if you weren't in this line of business, would you enter it today? And if not, what are you going to do about it? It seems, Andy, that once we get into something will never exit it, will never abandon it. And Drucker thought that you needed a corporate abandonment policy. So you could move on to other things. What's your take on that?
Andy Armanino 36:31
Yeah. And, man, I love the concept. I was fortunate enough to go to a program at Harvard three times, I must have flunked a couple of times, but a leadership program I've gone to three different times and I'll probably go a fourth in a bit because I enjoy it so much. But one of the cases that we studied is the Netflix case. And it's a wonderful case study, all of you who haven't read that it'd be worth ordering from Harvard. About how Netflix, a successful company who had disrupted their industry, primarily blockbuster, decided to disrupt themselves for the future. And they've been wildly successful, but it takes guts to disrupt yourself when you have something that's working because you recognize that we need to be different in the future. And it's something I know when I get a chance to talk to leaders here at Armanino, I stress it and I know current leadership here stresses it, is we can't fall in love with what we're doing today. Because it's working. We have to still say, will this work in the future? And do we need to do some things differently in the future that will add more value to our client base?
Ron Baker 37:43
Yeah, I've been saying this ever since I've had the chance. Every time I have the chance to talk to somebody in the firm, I say the old Andy Grove line. If you're going to be cannibalized, it's better to dine with friends. And I love that because if we don't obsolete ourselves, there's somebody out there who will do it for us and it’s better to control our own destiny, create our own future.
Andy Armanino 38:05
And I very much believe in that.
Ron Baker 38:08
Yeah, it was announced a little while ago that you're going to become the chairman of Moore Global as of January 1. And I think that's great because it gives you a worldwide perch to view the profession. Do you see similar challenges in the global firms that we have here in the US?
Andy Armanino 38:29
Yeah. So just for background real quick, Moore Global is a network slash association that allows firms to collaborate, share ideas, create a platform and a marketplace for some of the unique ideas that are being created today, and serve their clients on an international basis. And Moore Global is one of the larger organizations in the world that does this, about $3 billion, over $3 billion in firm revenue, and I've been involved for a number of years. Leading North America, the North American board recently agreed to lead the global board. And your question is an absolute Yes. As much as I get frustrated at times with some of the lack of speed and the change of North American firms around the rest of the world, we are rabbits and they're the tortoise. Yeah, it could be a significant issue.
Ron Baker 39:32
Yeah. Well, I'm glad that you're stepping in as chairman because maybe you'll bring the same innovative spirit and entrepreneurial spirit that you brought here in the US so that's fantastic. And congratulations on that.
Unknown Speaker 39:44
Thank you. I promise change for them.
Ron Baker 39:47
Oh good. Andy, what are you most proud of during your time as chairman of Armanino?
Andy Armanino 39:55
So I get that question a lot in. It's almost you know, I think of so many different things here. It is I think of faces, I think of clients that I got to work with over the years and have impact on their business. I think for me, my largest client that I kept as managing partner and CEO was the Catholic Church that I got a chance to do so many different things to help an organization that needs a lot of help. And I think the, the faces of those people, I think of internally, some of the young people here that I've just had an opportunity to sit and talk to share, share ideas, share stories, and you know, you can call that mentoring, you can call it whatever you want, but I've had the opportunity to work with so many of them that later became partners in this firm or went on to great success at other places, which is great, too. So I think about all that. And then the last one I think about is my dad and Tom when they founded the firm kind of had these two pillars, by having this unique relationship with clients that I've mentioned, and have a firm that is really good to its people. I got a chance to add a third leg to that stool and that's through the Armanino Foundation. And that's being good to your community. And what I'm most proud about in the Armanino foundation is the amount of people here that support the foundation, typical charitable foundations, corporate foundations, if you get 25% participation out of your employee base, it's really good. We set the goal to do that in year one. And we did and we far surpassed that now. And so it's meaningful to our people to do good things in our community. And that's great to see.
Ron Baker 41:50
That's awesome. Andy, real quick, I have to ask you, because I know you are an inveterate reader and you and I used to talk about books all the time, but what's your favorite non- business book.
Andy Armanino 42:04
Non business just for fun. Oh man, I love the Lord of the Rings series.
Ron Baker 42:13
Well, that's awesome. Well, Andy Ed’s going to take you home in the next segment, but I just wanted to take the opportunity to thank you so much for coming on The Soul of Enterprise. It's way overdue. And congratulations on chairman of Moore Global and best of luck, and I hope you come back on.
Andy Armanino 42:29
Thanks, Ron.
Ron Baker 42:31
Alright, well, folks I'd like to remind you, if you want to contact Ed or myself, send us an email to asktsoe@verasage.com. And now we want to hear from our sponsor, Sage.
Ed Kless 44:45
Well, once again, we are back with Andy Armanino and Ron this hour goes by quick especially we have such great guests like Andy on I can't believe that we're 45 minutes in already. But Andy, I wanted to ask you a little bit about the implementation of value pricing at Armanino. I know I joked about the hiring mistake but in all seriousness what led you to say, hey listen, we really have got to do this and we’ve got to start doing this now.
Andy Armanino 45:11
So as I mentioned I listened to Ron some years ago and we developed a relationship after that first time I heard him and we had him back to one of our rallies (we don't call them retreats, we call them rallies, I didn't like the term retreat because it implies going backwards now forward). But we had Ron at our rally and you know, it was one of the most popular subjects that we had ever talked about at our rally. And what it told me is it was the right time to start thinking about doing this on a firm-wide basis. And what we thought is we were going to really struggle to do it. What we bought in for the most part in there are always hurdles and I can talk about some of those hurdles, but in general because we have had this firm that is used to change and used to doing some things different. And I told Ron this, we are the right firm for Ron to come and help us put in place some of the ideas that he's had for years and years in this profession. And so that's why we brought him in to help with this. I think it is so logical to say, how do we go have a different kind of discussion with our client about our relationship and the value they perceive in that relationship? And then for us, how do we capture that value the right way? It is very logical to me. Unfortunately, it's not as logical to some of our partners and there are hurdles along the way. It's a massive education campaign. And you have to get people good at doing this because they're not by their nature. They haven't been trained to do this.
Ed Kless 46:56
Yeah, and let's talk about those hurdles. What were some of the ones that may have surprised you, ones that you didn't anticipate?
Andy Armanino 47:04
Well, some of them yeah, I think that's a very good question because some of them you do anticipate, some of the partners, I probably could have listed out some of our resistance and who they'd be for Ron. And they were. And they continue to be a battle at times. But I think some of the hurdles that maybe we didn't anticipate is those people who really embraced it. The amount of kind of practice that you need, the ability to go out there, have those discussions and then get good at, you can have a great discussion with a client but then coming back and pricing it correctly. I was surprised that the people probably weren't better from the get go. And I also think that this is, I have great stories on this if we had time, but when you leave pricing to the partners hands that are untrained they will underestimate the value that they bring over and over again, even if the client has told them the value that we bring is great. And so I'm pushing the envelope on pricing. I was surprised that partners weren't better at that.
Ed Kless 48:21
That they weren't more aggressive in their prices
Andy Armanino 48:24
Yes, that they didn't perceive. One of the hurdles is they don't perceive themselves the value that they bring to their clients at times, or they perceive it, but not in a big enough way.
Ed Kless 48:39
Yeah, well, I think, and one of the things that Ron and I talked about is, that that's why actors and sports people have agents, because it's extraordinarily difficult to price yourself. And in this, in a way, what you're doing is that in a partner and CPA firm is your pricing the work that others are going to do but it's really about your relationship with that. That customer at the time, and you're pricing yourself and you're just not as good as when you're pricing somebody else's stuff.
Andy Armanino 49:07
I totally agree. And that's why I think Ron talks a lot about, I know both you do, about making sure you have experts, that you have a true skill set in pricing. And we've developed that now at Armanino, you know, and I think it's incredible. I know a couple of Ron's disciples here, and I read some of the information they put out and, you know, I'm like, wow, it's good. So you need those people, but it doesn't happen in mass, and what you have to recognize is it's, again, very logical. We have partners that have all kinds of different personality types. Some people are very comfortable in those discussions. Some people will value themselves and can value themselves, and others are just far less comfortable. And I don't think Armanino, and Ron I'd be curious to get your voice on this, I don't think at times we've made the decision to say you know what people just should not be involved in this process at all, period.
Ron Baker 50:04
I wish we would. But that's very difficult to do in a partnership model.
Andy Armanino 50:09
It is. It is.
Ed Kless 50:11
Yeah. It doesn't make them bad people, right? It's just that that's just not a competency and just like you wouldn't put somebody who's a tax expert on an audit, do you just not give them the pricing authority?
Andy Armanino 50:25
Well, and I think this goes back to this whole thing about having a fixed mindset, is a I've always done it a certain way. I'm successful enough. I have a relationship. That's enough with my clients. There are partners here that over the years I looked in their eyes and said, You know what, if you make a mistake on this client, we're fired. If another partner down the hall makes a mistake on their client, they get a get out of jail free because they have a relationship that is an open, deep relationship with our client. And needless to say that carries over into pricing.
Ed Kless 51:01
And turning to what do you think went a little bit better than expected?
Andy Armanino 51:06
Well, I told Ron that the tax group would be impossible. And at first there, and I think it continues, you know, you always have to get over some resistance. But I think we had a partner in particular, Jerry Clancy, who initially kind of threw up his hands and said, I don't buy in. He went and met with Ron for a couple hours, and they spent some time really digging into it. And Jerry came back and said, I'm in, I will be one of the champions in the tax practice, in some of the kind of more compliance related things on the tax practice, I thought would be really difficult. But we've had better buying than I would have would have expected there.
Ed Kless 51:50
That was actually the voodoo doll that Ron built to that guy. So I want to ask you, we got about a minute or two minutes left. What advice do you have for young people entering the profession?
Andy Armanino 52:09
I mean, again, I love speaking to young people, what I try to do is give them an inspiring message about what's possible in this profession. Don't come in and think that, and Ron might have been at the partner rally where I pounded the tables one time when people said, I'm a tax person, or I'm an auditor, and I slammed the table and said, You're more than that. You are a client advisor, you are a counselor, you are someone that your client depends on, you can make a difference. And so that's the message I try to bring to young people today is you can do a ton in this profession, clients need help. The world is crazy out there for them. And they need people who will sit with them, listen to them, and then try to drive value. And it's exciting. It's amazing today, what's possible.
Ed Kless 53:01
Yeah, and I think that goes back to what you were looking for in your hires, as well as the people who can effectively communicate. And it's funny, the more we get technology, the more that the ability to communicate effectively one-to-one becomes more important, because the touches are just less frequent sometimes because of the technology.
Andy Armanino 53:20
I think marrying technology with the human touch is success in the future. And I totally agree with what you just said, it's going to be more important than ever, that we touch humans. That's something that machine can't do, we can emotionally affect our clients. And it's important to do so.
Ed Kless 53:40
Yeah. So even though Watson is diagnosing disease, you don't want to hear it from Watson that you have cancer.
Andy Armanino 53:46
Yeah, absolutely.
Ed Kless 53:50
Well, this has just been absolutely fantastic. And we really appreciate you coming on and spending some time with us today and sharing your wisdom and knowledge to our audience. And as Ron said earlier, we do hope you come back.
Andy Armanino 54:04
I appreciate it, guys. It was fun and I'd be happy to come back. Keep doing what you're doing.
Ed Kless 54:08
Alright. Well, Ron, what do we got coming up next week?
Ron Baker 54:14
Free-Rider Friday, Ed, for October. I can't believe it's the end of the month,
Ed Kless 54:16
Unbelievable. Well, I'll see you in hundred 67 hours.
Ron Baker 54:32
This is from the Soul of Enterprise: Business in the Knowledge Economy, sponsored by sage, energizing business builders around the world through the imagination of our people and the power of technology. Join us next week folks on Friday at 1pm Pacific time. In the meantime, check out the thesoulofenterprise.com. We'll post our show notes with Andy and we're to learn more about him. And also you can contact Ed and myself at asktsoe@verasage.com. Thanks for listening folks. Have a great weekend.
