How The Structure of an Accounting Firm Changes through the Years: When to re-organize your firm’s management structure. by Marc Rosenberg CPA Firm Management & Governance Firms may operate for years without much structure, enjoying happiness and profitability. Then, seemingly overnight, the firm “hits the wall.” Growth slows or stops. Staff turn over. Systems become inefficient. Profits stagnate. For many firms, the “wall” is at the $6 million to $8 million annual revenue mark, while others don’t experience the slowdown until revenues approach $10 million. Roberto Goizueta, CEO of Coca Cola in the ‘80s and ‘90s, described this perfectly: “Challenging the status quo when you have been successful is difficult. If you think you will be successful running your business in the next 10 years the way you did the last 10 years, you’re out of your mind. To succeed, we have to disturb the present.” The cure for this malady is to get organized. In this report: * Five reasons no two firms are exactly alike. * Nine keys to strong CPA firm organizational structures. * How CPA firm governance structures change as firms grow larger. * Sample CPA firm org charts for three sizes of firm. * The 13 forces of departmentalization. CPA firm structures vary considerably from firm to firm because the firm is managed at the whim of the partners. For example: * All the partners are essentially officers of the firm. They don’t want to report to anyone or be accountable for their performance. * Each partner has unlimited freedom to operate, spawning the often-heard cliché “the firm is run like a group of sole practitioners practicing under one roof, sharing a firm name, staff and overhead.” * The managing partner has virtually no authority over other partners. * Department heads are mostly ceremonial and not expected to manage anything. * Administrators usually report to all the partners. For firms to cross the chasm and make the leap in size and scale successfully, they must embrace: * A strong leader (the managing partner) with authority and responsibility. * Stop requiring a vote every time a decision is needed. * A strategic plan with partner goals. * A cohesive, integrated marketing strategy. * A firm administrator to keep partners out of administration. * A proactive effort to recruit, retain, train and mentor staff. * Partner accountability. * Abandonment of the compensation formula. * Departmentalization. Each one of the areas above represents a departure from the way most local firms operate. Here, in a series of charts, are some of the characteristics that can be found as firms evolve: WHY CPA FIRMS DEPARTMENTALIZE 1. Often driven by partner preferences. Moving staff into the department then occurs because of the specializing partner’s need for support. 2. Creating departments makes it easier for the firm to be consistent in how work is performed. Result is higher quality of work. 3. At the higher levels of expertise in either audit or tax, it’s not feasible for one person to be an “expert” at both. 4. To reduce liability exposure. 5. CPE requirements in a certain area can be so heavy that it is not feasible to get the necessary training in more than one area. 6. Training becomes more effective because people focus in one area. 7. Technology is another driver; it’s hard to be proficient with both tax and audit software. 8. Departmentalization lends itself to working like a firm because partners are more interdependent on one another, which fosters teamwork. 9. It helps with scheduling staff 10. It enables firms to increase their billable utilization of staff. 11. By specializing, the firm is able to better position itself in marketing; cross-selling is easier. 12. It enables the firm to offer specific career paths to those that want them. 13. It helps the firm attract staff. cpaclick/1dglvjY
Posted on: Wed, 10 Jul 2013 01:29:11 +0000
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