Platt’s Perspective: Moving From Accountant To Advisor Doesn’t Need To Be The Equivalent Of Jumping Across The Grand Canyon

Mike Platt - Cropped for IPA INSIDER

Mike Platt

For years, firms around the country have embraced the need to shift from trusted accountant to trusted advisor. Some individuals in some firms have made the transition very successfully, having the skills, experience and business acumen to get the job done. But for many, the leap from historian to advisor may as well be a jump across a chasm the size of the Grand Canyon.

The perception of a successful accountant is a learned professional with deep, specialized knowledge about financial and operational activities of business. The idea of moving from “the person with all the answers” to “the person with all the questions” – as many consultants see themselves – not only is a difficult mindset to embrace, but also fundamentally challenges the perception of what many accountants think is the key to their success. It requires professionals to embrace a completely different belief system to define success in a career. Frankly, it’s too much for many to wrap their heads around, so they end up staying within their comfort zone.

I recently had a chance to have lunch with John Schweisberger, a consultant-turned-accounting-firm-CEO-turned-practice-group-leader with Armanino in California, who explained in the clearest terms I’ve heard to date what consultants do. “There are three reasons companies hire consultants,” explains Schweisberger.

  • 1) They know that things are not right, but cannot identify the root problem.
  • 2) They have identified the problem, but have difficulty coming up with a workable solution.
  • 3) They know the solution, but need help implementing it.

To help identify a problem, you need to be a good diagnostician. To help identify a solution, you need to be a creative problem solver. To help implement the solution, you either need to be an expert in your specialized field, or be a good executive coach to help the company leaders get it done.

To accountants of any age wrestling with how to tackle the daunting idea of moving from accountant to trusted advisor, take heart. All three roles are needed, and all three roles require different skill sets. You do not need to be all things to everyone, and you can specialize in any of the roles.

Peeking behind the curtain of “secrets of successful consultants” in this way makes it clear that successful accountants can comfortably take on any one of these roles to become successful consultants. The trick is to think of these roles as stepping stones across a river, allowing you to grow in the role of trusted advisor without feeling like you have to jump across the entire canyon at once.

TBT Platt’s Perspective: An Open Letter to CPA Firms From Small Businesses Everywhere

Mike Platt - Cropped for IPA INSIDERI was looking through our files the other day and stumbled across a Platt’s Perspective I wrote almost 15 years ago. The sentiments expressed in that Open Letter To CPA Firms still ring true today. As you engage in a busy and successful tax season this year, and go on to strengthen your prospecting muscle in the coming months, take note of this reminder on behalf of small businesses everywhere, and enjoy this #TBT Platt’s Perspective!

In my role, I am in the fortunate position of working with CPA firms and small business owners on a daily basis. As you can imagine, both sides would describe their relationship differently. On behalf of all those business owners who are looking for help, but seem frustrated with how accounting professionals are courting them, I write this letter. Listen up accounting professionals.

Dear Accounting Professional:

Why won’t you make it easy for me to do business with you?

I own a small business and I’d like it to grow bigger. I work 12 hours a day. I need someone who can step in and help me get control of my life again and steer my business in the right direction.

Please understand that I really WANT to do business with you. I’m looking for reasons to say “YES” to you, not “no.” I don’t want to spend my time selecting a CPA. But you’re not making it easy.

  • You sell accounting services every day. I buy accounting services once in a blue moon. Help guide me through the process. Is my business too small for your firm? Do you have the staff to assist me with the day-to-day accounting functions? Tell me what I should be looking for. Tell me how you have helped others like me.
  • I know which questions I want to ask. You know which questions I should be asking. Share them with me.
  • I don’t know what my budget is for your services. That’s because I don’t know what it will take to get me where I want to be. Based on what you know about me, tell me the low, median and high range of what it could cost, and show me what benefits I would derive at each level.
  • My customers buy my product for a fixed price, not my time based on how efficient I am. I can budget and forget my worries with a fixed price from you. Can you accommodate that?
  • I expect you to be technically competent – that’s not really a selling point. I expect you to be ethical and work with integrity. That’s a given.
  • The issue is how you can customize your knowledge to fit my needs, not how can I change my needs to fit what you have to sell.
  • Your firm has been around for 40 years? Congratulations, good for you. What’s important to me is ‘What can you do for my business?’
  • I know my business and my problems are not unique. You’ve seen dozens of companies like mine and know that many of the problems are similar. Share with me how you’ve helped other small business owners get control of their businesses.
  • As a prospect, I know that you really want my business because you are spending hours trying to close the sale. Why is it that when I become a client the billable clock starts ticking immediately?
  • I really do understand that in your business, you may not be the one doing the work. That’s OK. Then let me talk to the person who WILL be doing the work so I can feel good about them.
  • I desperately want to end my search for a CPA and firm in order to get on with improving my business. Make me feel like you heard and understood what my concerns are so I can feel good about making a decision to hire you.
  • My business is my life, it’s all consuming. Show me that you care about me and my business too. If you really do care, then my search is almost over. If you really don’t care, respect my time enough to diplomatically point me elsewhere.
  • And by the way, I know it’s tax season. I know you’re busy. I know you have just a couple of weeks left of working 60+ hours a week. But I don’t want to hear about it. I do that 50 weeks a year.

Keep in mind, I’m looking for reasons to say “YES,” not “NO,” but you don’t make it easy. Honor your promises, do what you say you’re going to do, show me that you understand, and above all else show me that you care. It’s not that hard. Amazingly most of your competitors aren’t doing it, so a little effort on your part will go a long way and will really make you stand out in my mind.

Make it easy for me to do business with you, and this can be the start of a beautiful relationship.


Most Small Business Owners Across America

Platt’s Perspective: Merger Musings As We Move Into 2016

I admit to feeling a bit nostalgic this time of year, and it’s not just because of the holidays. It’s because my email inbox is stuffed with news about mergers as firms rush to finalize their deals before Dec. 31.

Mike Platt

Mike Platt

There is a strong sense of loss that IPA feels, as part of the accounting community, when good, independent, local firms that have been around for many decades announce that they are merging up – regardless of whether the reason is a good strategic one, or simply because partners want to retire and no one is ready to take the reins when they do.

Now there are excellent reasons for many of these unions: succession for firm owners, a bigger, more talented staff, new marketplaces, new niches, the ability to expand existing services and more promotion opportunities for staff.

But the downsides are real too. The first year, at the very least, has the potential to be extremely disruptive for everyone involved. New systems, technologies and processes have to be integrated and learned; offices may need to be moved; partners and staff can both take an “us versus them” approach to the merged entity; redundant staff may be laid off and concerns about future layoffs may remain; accounting associations lose members; clients may not want to work with a much larger firm; and small local business serving the acquired firms may lose that firm’s business. Increased communication – which is needed to set and manage expectations on all sides – may not get the attention it needs.

While mergers are here to stay, and are becoming more common within professional services firms (and, not surprisingly, within client organizations too), it makes me wonder: Should firms be built to sell, or built to last? Should both options constantly be on the table? And how many firms have truly chosen their path?

Firms continue to be courted with offers. Many tell us that their partners have determined to remain independent and have therefore not seriously entertained acquisition offers. Others choose the fast-track toward merging. Still others revisit their options constantly to read, and re-read the tea leaves of the current environment to see which way to go.

Now don’t get me wrong, it’s perfectly OK to keep an open mind about the future of the firm, but I believe that a concrete decision – either a strong Declaration of Independence or a decision to ultimately sell – will take the firm down two separate roads. Those that have made their decision – regardless of what it is – will find it easier to have all partners pulling in the same direction and reaching their goals faster and with less friction. Those that haven’t may find that time and energy is wasted while aiming for a fuzzy target that not everyone understands, agrees to or even favors.

My take on all of this? Bigger isn’t always better. The grass isn’t always greener. Reality doesn’t always live up to the promise. IPA would not be sad at all to see the volume of merger announcements slow down to a trickle.

As we roll into 2016 with more mergers on the way, my plea to both the acquirer and the acquired is to do everything you can to ensure that one plus one is significantly greater than two (or three, or four or five). Only then will the continued merger mania deliver the value-added hype that has gripped the profession. You owe that much to your partners, staff, clients and the profession.

Benchmarking Numbers to Watch Related to Succession

By: Michael Platt, publisher, INSIDE Public Accounting

Mike Platt

Mike Platt

The 100 largest firms in the nation, the IPA 100, are telling us that succession is not their top concern. In fact, only 15% of the IPA 100 said it was one of the three biggest challenges facing the firms. While on the surface this may appear as a victory, other issues – staffing, growth and profitability – have nudged out succession as the top three sources of concern.

All those issues affect succession, of course. IPA has been able to analyze data from hundreds of CPA firms over the past 25 years through the IPA annual Survey & Analysis of Firms and the IPA National Benchmarking Report, one of the longest-running and largest MAP surveys in the accounting profession.

Numbers to Watch Among the IPA 100

Data tells us there are several metrics related to succession that accounting firm leaders need to watch closely:

  • Equity Partner Retirements: Of the 75 IPA 100 firms that provided information on retiring partners, 77% experienced equity partner retirements either last year or this year. That represents a total of 136 partners retiring in 2014 and more than 110 expected to retire in 2015. These firms include 2,840 partners, with retiring partners representing 8.7% of the total.
  • Newly Admitted Partners: Those same firms admitted 230 equity partners in 2014 – 70% more than retired. Expansion in the partner ranks is coming from both internal staff and lateral hires, which accounted for 42% of admitted partners.
  • Retirement Obligations: Retirement payouts, which reflect the annual financial commitment by the firm to retired partners, averages 1.5% of a firm’s total net revenue. Based on IPA data, retirement obligations as a percentage of net revenue are actually down over the last few years due to renewed growth in top-line revenues.
  • Average Partner Age: The average age of the partner group, at 52.2, is increasing, despite the naming of new (presumably younger) equity partners, and mandatory retirement clauses in effect for 75% of the IPA 100.

How IPA Can Help

Compare your firm to firms of similar size, to those within your region or to the Best of the Best firms, using the 2015 IPA National Benchmarking Report. It offers detailed information on more than 500 firms with over 80 pages of tables, graphs and analysis, along with in-depth analysis of the IPA 100, IPA 200 and Best of the Best firms. Order the full report today or read the executive summary. Survey participants can also order the one-page customized Financial & Operational Report Card, an extremely valuable tool to help firm leaders get laser-focused on what’s working, what’s not working and where the firm needs to improve. Consider inviting IPA to your next partner retreat for a customized presentation based on your firm’s survey results in the context of a global view of what’s happening around the profession.

How Does Your CPA Firm Measure Profitability?

By: Michael Platt, publisher, INSIDE Public Accounting

FrontPageImageAs we wind down the 25th annual INSIDE Public Accounting National Benchmarking season, we wanted to dig a little deeper into the questions on everyone’s mind: How profitable is my firm? How do I compare against my peers? Seems like a pretty basic question, and given the fact that we are part of a community of CPAs, you would think that it would be a pretty simple answer.

But you would be wrong. After reviewing over 500 surveys, talking with managing partners around the country, and fielding questions on this for months, it is quite clear that “profit margin” means different things to different people.

If profit margin (net income as a percentage of net revenue) is the gold standard of measuring profitability, the fact remains that there are many variables that firms consider when coming up with their “number.”

View the 2015 Best of the Best

View the 2015 Best of the Best

The biggest variable comes in defining what net income consists of. Traditional measurements of net income assume that net income is measured before any compensation, draw, bonus or salary is paid to equity partners. INSIDE Public Accounting has used this measurement in its National Benchmarking Report for years. Why? Because there is little consistency among firms. Consider these various compensation strategies:

  • Pay a small livable wage as a draw and motivate partners by splitting up a larger piece of the profits at the end.
  • Assume that the firm will be doing well and pay partners a higher wage during the year.
  • Take profits and fund a deferred compensation program.
  • Reinvest in the firm by taking some profits off the table.
  • Distribute all profits to equity partners each year.

The flaw in the traditional measurement of net income is that it assumes the cost of partner labor is zero.

Leverage, therefore, plays a big role in defining profitability based on this approach. In firms with lower leverage, where partners are responsible for a larger share of the billable time, profitability will be significantly higher than in firms with greater leverage. Does that mean a low-leveraged firm is “doing better?” Maybe not.

By promoting a manager (where cost of labor is counted as an expense) to an equity partner (where cost of labor is not counted as an expense), profit margin will increase, and net income per equity partner will decrease (everything else being equal). Is the firm doing better or worse as a result? We need to find a way to level the playing field so that leverage does not skew comparisons inside firms and between firms.

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Many Ways To Calculate The Cost of Partner Labor

If partner labor is included as part of “cost of goods sold” in an accounting firm, it should give a clearer picture of true profitability. IPA’s National Benchmarking Report has used the traditional measurement of net income in determining profitability for years, but recently we began looking at this critical number in different ways.

Consider these three ways to measure a truer cost of partner labor:

Method 1 – Assign a flat rate per equity partner for a cost of their labor. If a senior manager costs the firm $150,000 a year, assign a flat rate for partner time of $200,000 per year as a cost of their labor. This is a simple, straightforward approach that approximates the cost of labor quickly and easily.

Method 2 – Calculate a cost to the firm of partner charge hours: For every charge hour billed by a partner, divide the billing rate by the selected billing multiple of the firm to determine the cost of labor for those billable hours, and only count the cost of billable time. For a partner charging $400 per hour, this would likely be around $100. The average equity partner may charge 1,000 hours, so the cost of that labor would be $100,000 per equity partner.

Method 3 – Calculate the cost to the firm of all partner hours: Presumably, non-charge hours are being spent productively and are of value to the firm, whether it is in relationship building, client acquisition, referral relationships, staff development and mentoring, etc. Take that same $100 and multiply it by total work hours of equity partners. For a firm with average partner work hours of 2,400, that would represent a cost of labor of $240,000 per equity partner. (Note: Often, partners wear their total work hours as a badge of honor, with some working 2,800 to 3,000 hours per year. The cost to the firm should reflect that total time commitment for a truer picture of partner labor, so $300,000 for those partners is not unreasonable.)

In my opinion, Method 1 is the simplest, and Method 3 is the most accurate. Method 2 discounts the value of non-charge hours and is not reflective of the value of labor provided by partners.

Adding this extra calculation to compare profitability from one year to the next internally, and in comparison to other peer firms, gives you a much clearer view of how well you are doing. It is well worth the extra time to get a much more accurate view of how profitable your firm is.

How IPA Can Help

The 2015 IPA National Benchmarking Report offers detailed information on CPA firm profitability, including a look at traditional profit margins as well as a measurement that includes a flat $200,000 labor cost to the firm per equity partner. The data comes from more than 500 firms across the nation and is presented by revenue band and by geographic region. Order the full report today or read the executive summary.




Platt’s Perspective: Shifting The Power Of Billing To Clients In Real Time

“Disruptive innovations.” It’s a phrase we continue to hear more and more often, as new approaches to old ways of doing things continue to be developed. One interesting innovation recently entered the legal profession, and is sure to have an impact in the near future on accounting firms as well.

For as long as the profession has been around, the billing process has been managed and controlled by the service providers themselves. Law firms (and accounting firms) enter hours worked in the time and billing system, review reports, write off time as they feel appropriate, issue discounts (or premiums) as they feel appropriate, and send the invoice out the door. Occasionally, especially in the legal world, clients are surprised by the size of the bill, object to the cost, and the firm adjusts the bill based on the client’s pushback. Sound familiar?

Mike Platt

Mike Platt

Enter a new generation of apps designed to shift the control to the client, removing some of the secrecy inherent in the traditional billing process. In the last 18 months, new disruptive products such as ViewABill, LeGuard and Apperio have  appeared, allowing law firm clients not only transparent access to the billing process, but also the power to “throttle back” the amount of work being delivered by the firm based on real-time access to hours in the online system. This collaborative approach between client and attorney is intended to help clients budget better and eliminate surprises when the bill arrives.

According to ViewABill, the first of these companies in the market, the initial response by law firms was fear that the software would drive a wedge between them and their clients. In an article earlier this year in Bloomberg Business, ViewABill reports that half the top law firms in the country are now using their software, helping the firms to promote a culture of collaboration with their clients. A marketing video for LeGuard  touts the “revolutionary way to control legal billing by holding lawyers accountable for the number of hours they bill to a client.” Apperio provides customizable dashboards to track time, provide real-time alerts based on spending thresholds the clients set, and compares performance to other law firms, encouraging the firm’s clients to “keep your eye on the ball.”

Based on the annual IPA National Benchmarking Report, more than 95% of the revenue generated in firms still comes from the traditional “dollars times hours” formula. It’s just a matter of time before this same technology innovation permeates the accounting profession.

  • Could this promote a culture of greater collaboration between firms and their clients?
  • Could it drive the profession to issue invoices in a timelier manner?
  • Could it eliminate those awkward after-the-fact billing questions from clients?
  • Could your clients demand that YOUR firm provide this type of access?

Whether this specific disruptive innovation is met with defensiveness or eagerness, the fact remains that it is here now, and is part of the growing trend empowering clients. Firms that embrace collaborative billing, prepare for it, create processes to maximize its potential, and appropriately communicate to clients, in my opinion, will win.

High-Value Ways To Deploy Idle Staff During The Summer

As leaders are taking time to recharge and plan for annual retreats, partners are discussing the future in meeting rooms across the country.

Mike Platt

Mike Platt

To help stimulate some ideas, I offer my list of ways to deploy staff this summer:

  1.  Work with your international network to send select staff on a once-in-a-lifetime overseas internship.
  2. Focus staff on day-long reviews of each of your top 25 clients to gather business intelligence and uncover opportunities.
  3. Embed staff in key clients’ operations for a “free” week to review systems and processes. This will inevitably result in a list of chargeable projects for the future.
  4. Assign staff teams to review your firm’s most utilized processes and recommend improvements.
  5. Ask staff to document case studies highlighting client problems and how your firm helped resolve them. Capture these case studies and compile them for a marketing effort later this fall.
  6. Encourage staff to participate in community service events. Volunteer service is a much-needed, deeply rewarding experience for your staff and an image-booster for your firm.
  7. Assign key staff with a new service or skill to make a presentation at a firmwide staff meeting. Have all staff weigh in on how to utilize those new skills to help the firm succeed.
  8. Upgrade your CRM intelligence. Your staff knows a lot about your clients’ wants, needs and preferences, as well as their quirks. Focus on capturing that information so the next time the CEO of your favorite client comes in, she is impressed when she is automatically offered the frozen iced vanilla latte she loves.
  9. Give your referral sources a fresh perspective of how your firm handles similar challenges. Have key staff spend a week at a law firm to “shadow” their counterparts in other professions. Direct them to share how your firm handles certain issues, and encourage a reciprocal “peer review” by inviting your referral firm’s employee to spend a week at your firm.
  10. Review staff and partners. Not all will end up as superstars. If they are a drag on the firm, counsel them out and find someone else who will be a stronger asset.

There are plenty of ways to deploy staff during summer that will bring significant value to your firm. Get creative with your ideas and you will have a stronger staff and a stronger firm, better positioned to take advantage of opportunities.

Platt’s Perspective: Connecting The Dots – Because Perspective Matters

It’s amazing how perspective changes a landscape.

At one time or another, all of us have gone up a glass elevator, looking out at the entire landscape unfolding before us. What looked like a cluttered mess on ground level reveals itself to be a manicured, well laid-out design that makes sense only when seen from above. The trees, the landscaping, the water features, the roads, the sidewalks – everything is in order and all the pieces come together to form a harmonious landscape.

seeing-the-bigger-pictureAs a partner, you most likely enjoy this higher-altitude view of your firm. The “cluttered mess” makes sense when you rise above it. Your “landscape” includes the long-term vision, strategy, values, the various departments, services, niches, technology, staff, referral sources, client approaches, compensation, community activity, training, marketing, leadership development and all the other components that together create a harmonious landscape.

But staff rarely get a chance to ride that elevator to catch a glimpse of the total landscape. They are hacking through the weeds on the ground, not always sure of where they are going or how close they may be to getting there.

Remember that scene toward the end of the movie “The African Queen” when Humphrey Bogart and Katherine Hepburn all but give up on their long journey down the Ulanga – stuck in the reeds unaware that open waters are just yards away? The camera pans up and the audience can see that they are so close – but the main characters at water level despair and lose hope.

That’s not dissimilar to what may be happening in your firm. Staff may not know that they are contributing to the success of the firm and its clients. They may not recognize that they are on the right track and moving toward “success.” They may not see the open waters just beyond the reeds and they bail out – looking for other opportunities, even though they were “so close” to getting there in your firm.

Your responsibility as a leader is to help your staff see the well-manicured landscape. Take them for a ride in the elevator every now and then and show them the view. Connect the dots for them so they can see the well thought-out design behind the seeming chaos at ground level. Show them how close they are to achieving their objectives so they stay motivated to break through the reeds and get to the open waters ahead.

What’s the risk? Yes, they may find out they are afraid of heights. But they may discover that they get very excited about the view.

Mike Platt

Mike Platt

Mike Platt, managing principal of The Platt Group, has been working with firms since 1985. As a past executive of two accounting firm associations and co-founder of, Mike has helped large local and regional firms across North America grow and thrive. Mike continues to bring fresh ideas, approaches and information to firms across the globe. A frequent speaker, Mike specializes in benchmarking trends and analysis, and dispute resolution services. Mike’s 30-plus years of hands-on experience and interaction with firms gives him a unique perspective on what works and what doesn’t inside firms.

The Platt Group’s Perspective

We all snicker this time of year. Don’t get us wrong, we respect the profession we choose to work in and with. It’s just that every conversation over the past three months with accounting professionals – young, old, in person or by phone – always starts with them taking a deep breath and saying, “I’m so busy right now, call me after April 15,” or “Yup, I survived another busy season.”

businessman-buried-in-paper_645x400We get it. Workload compression, procrastinating clients, long hours, being away from family, unique problems popping up, cranky staff, technology challenges, and no time to deal with everything else weigh heavily on the profession and you’ve earned the right to be a little punchy after April 15.

We know you have business clients who work 50-70 hours a week 52 weeks of the year, year in and year out. For them, there’s no “finish line” of April 15, glowing on the calendar like a siren calling your name in the fog, beckoning you to get to the final destination.

Many clients work long hours, are away from their families, encounter problems with staff, technology, and have little time to deal with everything else. They’re worried about making payroll, growth, succession, training, hiring the right staff, finding time for R&D, investments, retirement planning, marketing, business development, competition, governmental regulations, taxes – and the list goes on.

TAx Stress

How many times have you seen images like these, titled like, “You’ll Make It,” “Hang In There,” or “How to Survive Tax Season?”

Rather than complaining about the long hours during the 100-year tradition of a three-month tax season, shift your firm’s focus to the problems and challenges you share with your clients.

Make it a firmwide goal to ease your clients’ challenges of long hours, 12 months a year; make it your goal to help them with the issues that challenge them. Don’t wait for them to reach out to you next year. Do they know you can provide guidance at any other time of the year? Sit down with them, talk about all the issues, and find one that you can help them solve. Surprise them. Make a difference in their lives.

Are you your clients most trusted advisor? All of us at IPA have an incredible amount of respect for the profession, and know most people in the profession have the capacity to step up and truly “walk the talk.” Only by jumping in, proactively identifying a pain point, and bringing a valuable solution to the table will you become the go-to person for all issues, truly earning you the right to claim the title “most trusted.” You’ve got time. Pick your clients, identify a challenge and change their lives.

Platt’s Perspective: What We Can All Learn From The Donald Sterling Debacle

By: Mike Platt

As I write this, the reaction to L.A. Clippers owner Donald Sterling’s clearly outrageous remarks is less than a week old. For the record, I had never heard of Sterling before this week. I have come to know of him only from the collective outcry over his outlandish, absurd comments that were caught on tape for the world to hear.

While I agree with the majority of the criticism over Sterling’s actions and ignorance, it made me stop and think: Is someone guilty if they simply think racist thoughts or acknowledge internal biases against others? Or are they guilty only when they say what they think out loud? Or are they guilty only if they act on their prejudices?

Mike Platt

Mike Platt

Or are they guilty only if what they say is recorded for all to hear.

We all have biases and make quick judgments about other people – it’s been hard-wired into our brains for 100,000 years to help quickly identify friend from foe. Whether stirred by race, ethnic backgrounds, perceptions of age, gender, weight, whether someone is vegetarian or drives a certain kind of car, where someone went to school, or where someone comes from – all of these drive internal judgments, thoughts and biases that most of us in a civilized society try not to act on. So where in the spectrum do we cross over from “being human” to being the subject of intense disdain? In Sterling’s case, it seems obvious that he crossed the line. But where is that line?

If, as a leader of your firm, you can look in the mirror and see someone with absolutely no biases or prejudices staring back, congratulations – you’re one in 10 million. But chances are, most of us make judgments about people based on something other than the facts of a situation.

Is it acceptable to think bad things toward the person who cuts you off on the freeway? Most of us would say that our thoughts are our own. But when it comes to actions, a line between right and wrong comes into focus. Some of us may yell at the bad driver, but would you start chasing the car? What if you caused an accident? At what point is the line crossed?

Think about your role as a leader. Do you recognize any internal biases against any of your team members based on something other than performance? Do you look at that short guy with Coke-bottle glasses differently than his taller, less optically challenged peer? Do you think people who think like you are naturally better at what they do than others who may think differently? Does the mere act of thinking these thoughts make you guilty of unfair biases or prejudices?

Now think about how these biases or prejudices affect your actions. Would you hesitate to bring someone to a client because of the way they look? Are you more eager to encourage, promote and develop a superstar who shares your hobbies or religious beliefs or pedigree over someone who comes from a different background? Do you find yourself not bringing that short guy with the Coke-bottle glasses to your best clients because of the “message” it might send?

We can all agree that if you made some stupid Sterling-like comments at a firmwide meeting you’ve crossed the line. People would have a legitimate reason to judge you and question your leadership authority. But what about just thinking these thoughts? What about subconsciously acting on these thoughts?

Unconscious biases are complicated. For the most part, as 21st century successful business men and women, we have evolved a lot over the last 50 years when prejudices were more common in the workplace. But as human beings we still make internal judgments about the people we work with and either consciously or unconsciously may still act on those biases.

It takes a consistent effort and a fully aware leader to acknowledge his or her own biases, and once you recognize they exist, you are capable of pushing against them and ensuring that they do not influence your actions. Let’s all learn from the Sterling affair. Let’s look in the mirror and figure out what we need to do to become better leaders because of it.