The CPA firm growth challenge.

AuthorMalherbe, Jacques

Strategist Sun Tzu: "Victorious warriors win first and then go to war, while defeated warriors go to war first and then seek to win".

CPA Firms, like most professional service firms, challenge traditional management methods because they have to continuously deliver a high degree of customization. Management's drive for standardization, routinization, and supervision remains difficult to apply, Service firms also require a high level of customer face-to-face interaction. To satisfy this requirement, firms generally consist of strong independent professionals with concrete opinions about what they want to do, and what their clients want. They seldom have the inclination to work together to achieve an overarching firm purpose.

Although management is essential to the firm's success, partners generally do not want others to have authority over their decisions. Thus the control over the most critical resources for value creation resides with the professional rather than the owners of a firm's equity or management. This causes a reversed power structure. Partners fulfill a dual role in the firm. The first role is that of manager over a practice domain and the second is the delivery of value to his or her clients. The net result of the dual roles of these senior professionals is the under-appreciation of hierarchy. Partners see management responsibilities as an unwanted burden. They see internally focused activities as having low value.

Corporate hierarchies reward people who develop managerial skills by giving them higher-level managerial positions with more status and higher salaries. Partners, on the other hand, who spend most of their time managing, are prevented from maintaining their professional development and as a result, their expertise deteriorates. Status resides with professional expertise linked to billable hours. Being a manager undermines both these symbols. To quote a senior partner or a mid-sized firm:

"The result is that we end up being only second-rate professionals, as we do not have time to keep up to date on new developments, and at the same time we are only half-good managers."

Firms face two challenges when the issue of management presents itself: How to persuade good professionals to take on the responsibilities of management and how to develop good professionals into good managers. It is also typically very difficult for professional firms to invest partnership money in intangibles.

The Solution

Managements challenge is...

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