What Smaller Firms Need to Do to Become Firms of the Future – Part 2 of 2
If you want your firm to be a firm of the future, these are seven more things your firm should be brainstorming at your upcoming partner retreats. Visit the previous post on this topic, What Smaller Firms Need to Do to Become Firms of the Future – Part 1 of 2, to see the other five.
Outsourcing. Similar to wealth management, there was a time at the turn of the century when outsourcing tax and accounting was all the rage. But it never happened to any serious extent at smaller firms. But with the increasing commoditization and revenue shrinkage of compliance services, outsourcing is a natural tactic for firms to adopt.
Specialization and niches. Long the focal point of large firm marketing, specialties and niches have largely been eschewed by small firms, mainly because smaller firms didn’t need to adapt. Their compliance revenue from generalist practices has been so strong for decades that they have been reluctant to fix something that isn’t broken. But again, the golden goose of compliance is going to dramatically change in the next ten years or so, so firms will have to specialize more. Many extraordinary changes throughout civilization occurred simply because there was no choice.
Beyond geographic boundaries for clients and staffing. The long-term impact of Covid-19 will amaze us all. It’s already started. Running our practices remotely before the virus was kind of a luxury, an outside-the-box tactic used sparingly and only when necessary. But due to Covid-19, firms have rapidly learned that they can run their firms quite effectively when virtually 100% of the firm is working remotely. If there ever is a time when the virus is over, few think that the world, let alone CPA firms, will ever go back to working mostly face-to-face in an office. This will inevitably expand the geographic boundaries of firms’ markets for clients, referral sources and staff.
Our book, Strategic Planning and Goal Setting for Results is a “Cliffs Notes” guide to strategic planning and partner goal setting for CPA firms. It addresses ►the three main phases of strategic planning ►overall management philosophy of a CPA firm ►steps to creating the strategic plan ►the all-important vision statement ►stimulating productive brainstorming sessions, ►best practices for goal setting programs ►core values ►keys to implementation ►pitfalls of strategic planning ►why strategic planning will fail without partner accountability and other issues.
Higher bar for equity partner. The bar for making equity partner in most of the world is considerably higher than it is for the U.S. and Canada. This is an area that has already been changing in a meaningful way at smaller firms. The Rosenberg MAP Survey shows that the ratio of professional staff to equity partner has been increasing steadily for the past 6-7 years or so as firms have realized that they don’t have to promote every decent manager to equity partner as a staff retention tactic.
More attention to staff development. When asked, most partners agree with the notion that the firm’s staff are just as important as its clients. But they don’t walk the talk. Partners at many firms are “allowed” to be mediocre at staff development as long as their production numbers meet expectations. This will and must change.
More sophisticated performance-based compensation for partners. In the past 20 years, most multi-partners have migrated to performance-based systems, away from non-performance-based methods such as ownership percentage, seniority and pay-equal. But more change is needed. Firms need to recognize important performance attributes in areas other than traditional performance measure like Finding, Minding and Grinding. These other factors include mentoring staff, firm management, teamwork and adherence to the firm’s core values.
More remote work. Before the Covid-19 virus, working remotely was kind of a luxury, done on an as-needed basis. Our proprietary research shows that 15% of all billable hours worked prior to the virus has been worked remotely by CPA firms. Post virus, we expect this figure to at least double. This will require changes in the way CPA firms manage people and work. Some of the bigger challenges will be (a) getting over the need to physically see staff at their desks to ensure that they are actually working, (b) measuring staff’s performance and (c) finding substitutes for the short, informal, impactful face-to-face mentoring/training talks that for decades, has been the backbone of developing staff.
If you want your firm to become a Firm of the Future, these topics should be on your partner group meeting agendas, and action plans established.