Managers’ Urgent Report To The Partners

Meeting date: 3rd March 2017

Present: Alan Couper (“AC”), James Stewart (“JS”), Barry Anderson (“BA”), Gaynor
McIntyre (“GM”), Lynne Gemmell (“LG”), Scott Hallesy (“SH”), Richard Melville
(“RM”)

Purpose
We are aware that the firm is going through a period of change and development and with that
in mind, coupled with a degree of frustration that our opinions were not sought in advance of
last week’s partners strategy day, we got together to constructively work as a team of
managers to identify the issues across all departments to ensure that there is enough
connection from managers to partners to support the firm moving in the direction the Partners
wish.

As managers, to a varying degree among us, we believe that we have not been able to fulfil our
role as managers properly. This is partly to a lack of autonomy but primarily due to
inefficiencies in our respective departments, driven by a lack of capacity. This has been fed
back to the partners on a somewhat ad hoc basis with a varying degree of success from our
point of view up to this point, but having now met to share our concerns intra departmentally it
is apparent that the these issues are across the whole firm to the point that we verging on the
point of crisis.

We feel the only way to prevent this is to take an overall approach to addressing these issues
globally, across the firm as a whole.

In accordance with the briefing from Pauline Hogg (“PH”) last week, the Partners want us to
continue to focus on excellent client service. The reality, however, is that client service is not
excellent at the moment. Turnaround times have regressed to a worrying degree and the
quality of work is not always to the standard it should be, which will ultimately lead to the loss
of clients.

We feel the firm have some good staff members but it is clear that the main skill sets lie with
the managers.

The Partners appear to acknowledge this and want us to develop and train our teams, but the
current level of work for both of us as managers and the teams themselves are such that it is
very difficult to create the efficiencies required to free up the training time required without
this having a knock-on effect on the workload and exacerbating the problem.

As managers, we are all committed to moving forward with the Partnership’s plans and want
to ensure that the foundations (in the form of each department and its workforce) support this
strategy, hence the reason for our meeting and the following report.
 Business Services
Current position:
• Staffing capacity is fine to maintain the current way of operating
• Operates at maximum capacity from May to January and quieter from February to April
so can assist audit
• AC feels he has a dual role managing the department and assisting Pauline which
keeps him very busy to the extent he does not feel he is operating to the best of his
ability in either function at present.

Challenges in the near future:

• CCH Medical accounts are possibly to be done w.e.f March 2017 year ends. This will
add at least 5 hours onto the set-up time for each job as well as additional processing
time as staff get used to the new system. Conservative estimate of additional time
require re the March year-end jobs is 700-800 hours.
• Impending retirement of Ann and Christabel in the next couple of years.
• MTD will have a fundamental impact on the way VAT and accounts prep is done in BSG

Solution:
Appointment of at least two seniors from within current staff who can be given more
responsibilities in terms of higher-level work, as well as undertaking the reviews and
supervision of more junior staff members. This would require an additional staff member to
help cover the reduction in accounts prep time of the ‘seniors’.

This would free up AC’s time to manage the department, develop the staff within it and focus
more on assisting PH and possibly Jason Condie (“JC”) and Linda Nelson (“LN”) in the future.

Bring in a new graduate trainee this summer and another experienced staff member to fill the
void when Ann and Christabel leave

Personal Tax
Current position:
• Effectively running two teams. The medical team (4 staff) are kept busy but can cope,
while the non-medical staff (2) are, if anything, working below capacity and have scope
to do more.
• Currently 3 trainees within the team which takes up some of BA’s time, but this has
reduced markedly over the last year and will continue to do so. This will free up some
of BA’s time to allow him to focus on specialist areas such as Inheritance tax etc.
• Feels non-medical work is given less priority than the medical work and as a result
Vivien and Dagmara are relatively quiet in the middle of the year, having been busy
early on, making it unacceptably busy at the year end. AC confirmed that all jobs given
equal prioritisation, which is backed up by the fact that turnaround times are quicker on
non-medical jobs.

Challenges in the near future:

• Alexis likely to retire in the next 2 or 3 years. Judith should be in a position to step up at
that point and is showing a keen interest in more high level aspects of her role.
• Medical accounts on CCH will delay the preparation of draft accounts and have a knock-
on effect on the medical tax team, putting on even more pressure towards the end of
the year.
• MTD – difficult to know what impact it will have on the tax department until final details
have been published

Solution:
Nothing at present requires to be changed and no additional staff members required.
 Audit
Current position:
• Large backlog of work at all times, currently 35 jobs in to be started. Oldest was handed
in early December. This is March.
• Quality of work by staff is not up to scratch, in some instances requiring reviews to be
done 1,2 or even 3 times.
• Above is due to some staff not being of the standard expected, and/or the good quality
staff being stressed/overworked.
• The abilities of some qualified members of staff are not at the level expected
• There has been a huge increase in the volume and complexity of work over the past 5
years and yet staffing levels have not increased to meet this demand, and overall
capability of staff is lower than it was.
• Large reliance on BSG to assist with the workload (87 jobs done by BSG staff from
March 16 to Feb 17).
• Reliant on FFO (incl Linsey Melville) to meet deadlines. £8,380 (excl NIER) spent on FFO
in the last 2 months, Equivalent to £50k a year.

Challenges in the near future:

• Meeting the ever-increasing volume of Limited Co jobs – currently around 650.
• Improving staff productivity and level of work produced, to minimise review time and
duplication of work
• Coping with even more jobs if BSG are unable to maintain its current level of support.
• Finding the time to train staff.
• Replacing Craig, who it appears is looking for a new job.

Solution:
• Appointment of at least two new members of staff – 1 qualified and 1 part qualified.
• Current qualified staff members to take on work at their level, completed to a high
standard.
• Assistant managers to undertake more reviews rather than senioring engagements.
• Senior staff to review and mentor the junior staff. Gives them more responsibility and
reducing manager review time. Freeing up the manager and assistant manager to do
higher level work, implement efficiencies, train & develop staff etc

Corporate Tax
Current position:
• Under-staffed as Andrew was not replaced and that needs to be addressed
• Staff are unable to do the level of work they should be doing
• Double-handling of work as draft accounts passed over are invariably incorrect

Challenges in the near future:

• Meeting the ever-increasing volume of corporate clients
• Improve efficiencies of the department by cutting down on duplication of work
• More breadth of knowledge among staff on niche areas – capital allowances, R&D tax
credits etc., which is currently absent.

Solution:
• Look to promote Lauren to assistant manager in April 2018 with interim promotion this
April. Recruit a second assistant manager (now) to work two days per week and
balance of time with SH.
• Shared tax “apprentice” in August 2017. Time split between corporate and personal
tax.
• Focus on non-compliance opportunities, such as Capital allowances and R&D tax
credits. JS believes fees of £100k could be generated annually for each, more than
covering the cost of staffing this.
 • Only prepare CT computation once accounts have been reviewed by manager. Use a
provision for the purpose of the draft accounts.
• JS would like to be able to follow up client facing opportunities himself, and be able to
delegate some of the follow-up work to lower-level staff rather than doing so himself as
this is not efficient.

VAT Strategy

Current position:
• Unsustainably busy as LG is the only person that can do this work. There is nobody that
could step in, in her absence.
• There is a current backlog of work that LG is struggling to get through on her own.
• Much of the work – over 75% - is at a level that could be done by a qualified staff
member, rather than LG which would then free LG up to have thinking time (to create
opportunities) and to provide proper strategic advice (good fee earning work).
• Lesley assists with some strategy work and is doing a great job but does not yet have
anywhere near the level of skill required to assist on complex technical queries.
• Recent thinking was that an additional 7-10 hours of another member of Condies staff
would help LG get through the work. Given the discussion now has with other
managers as regards their capacity issues and the added pressure this would put on
the dept losing some of a staff member’s time and due to the level of training an
internal staff member would need, this idea is probably now a non-starter and the
bigger picture needs considered.
• There is a lot of high level work that needs the appropriate due care and attention,
otherwise costly mistakes can be made. Given the capacity issues, LG finds herself
either putting off other work, thus creating the backlog, or doing the work much quicker
than she should be, potentially affecting client service in terms of the advice given.

Challenges in the near future:

• Growing the high-level VAT strategy work
• Creating a VAT strategy team that can offer the highest level of advice and make
Condies to go-to place for VAT advice

Solution:
• Expand the team in terms of numbers and expertise to allow LG to focus on its growth.
• Creating capacity by bringing in a qualified/experienced VAT person to assist LG on
higher level work and oversee the lower-level strategy work

Tax Strategy

Current position:
• Unsustainably busy as SH is the only person that can do this work.
• There is a no capacity within the department to assist SH with any of his work and there
is nobody that could step in his absence.
• Feels that the level of client service he is giving, and indeed Condies as a whole are
giving, has significantly worsened in the past 1-2 years.
• No capacity to actively pursue work off of his own back

Challenges in the near future:

• How will work be generated if and when Cliff Fleming (“CF”) leaves? He generates a lot
of strategy work that isn’t matched by any other Partners.
• Creating a Tax strategy function within a Strategy Team which offers the highest level
of advice and customer service.
 • Exploit other tax strategy work that is latent within the client base e.g. restructuring for
growth and generational change.

Solution:
• Recruit a second assistant manager (now) to work three days per week and balance of
time with JS
• Dedicated support assistant

Conclusions

• There are immediate capacity issues to be addressed in all departments with the
exception of personal tax. We believe as a whole we are understaffed by 8-10 staff
members.
• LG and SH have the technical knowledge to offer the best possible tax strategy advice
but need the support staff to allow them to do this.
• Staff in all departments are doing a lower level of work than they should be doing. If
capacity issues can be addressed it will allow the structures in most departments to be
improved, offering opportunities to staff members to develop and free up the time of
management to do higher level work.
• We understand the reasoning behind the appointment of a Business Operation
Manager but the underlying business operations need attention first and as a matter of
urgency.
• Assumption by Partners that the status quo is acceptable when it is clear to all
managers that the wheels are coming off.