Faced with the confluence of a still uncertain economy, ongoing fee and margin pressures, torrid competition for clients, and new business and the continual challenge to sustain growth, running some of the nation's top accounting firms has undoubtedly caused a number of sleepless nights for more than one managing partner.
Adding to that litany of worries is the yet-to-be-felt impact of pending legislation such as healthcare reform, new preparer registration mandates and the continual battle to recruit and retain top talent.
As such, Accounting Today assembled a roundtable of some of the top firm managing partners, shareholders and directors in the profession in an effort to gauge what they feel are the critical issues facing their respective practices and what they are doing to meet those challenges in 2012 and beyond.
Larry G. Autrey, Whitley Penn: The aging of partner ranks. Older partners want to continue when they're in good health, while younger staff sees that as preventing their career progression. The economy has taken the volume of large transactions from many of the bigger firms. As such, these firms are coming down to markets they have previously left behind or never served. The CFOs are taking bids at below what they are current paying to get the name on their audit even if for just a few years.
Also, the average partner age in many firms is climbing rapidly. Some of the firms doing mergers for succession reasons have average partner age of over 55 post-merger. We are using our industry group knowledge and our partners' experience to challenge the larger competitors. We don't play games with our rates, so we charge fair rates all the time and can explain how an upfront discount puts pressure on the firm to require the client to do more and/or try to get the billing up.
The average age or our partner group is 45 and we have the ability to merge in a group with an average age of over 60 and have sufficient talent to manage the new business as the partners retire.
Bill Hagaman, WithumSmith+Brown: We see the top challenges as retaining talent, pricing and partner accountability. We've worked hard at creating a culture that our professionals want to work in. This starts with our philosophy that no jerks are allowed at any level and while we will work with partners and staff to mentor them regarding the proper behavior in the office we will not tolerate any unprofessional conduct toward our staff.
With regard to pricing, we have been constantly working with our partners to improve pricing on our existing clients with a current year target of 5 percent. When bidding on new engagements we ask partners to not discount fees to just obtain the client; if fees are the only differentiating point we haven't sold our firm to the potential client effectively.
As for partner accountability I meet with each equity partner to discuss their various metrics that we measure annually. Their compensation is skewed to metric performance.
In addition we meet and counsel partners who are on the low end of our firm- wide metrics to allow them time to improve. If poor performance persists we will ask them to separate from the firm.
Charles Postal, Santos Postal & Co.: We see a shrinking market share of small and medium-sized businesses with the need for premium accounting services caused by increased competition from larger firms with greater resources. Also, diminishing profit margins caused by a) increased regulation, legal liability, business risk; b) lack of confidence in the economy by clients, coupled with their low cash reserves and lack of access to credit to pay for all but the minimum level of services. And finally, a scarcity of skilled people to fuel our growth, especially 30- to 40-year-olds. To address those challenges we're developing niches that differentiate us from our competition and allow us to avoid having to compete against stronger competitors for low margin commodity-type projects. We're investing in people, training and provide our staff with a comfortable work environment with soft skills as well as technical training. We also regularly seek out strategic mergers and acquisitions.
Tom Bonadio, The Bonadio Group: The top issues facing our firm at this time are, maintaining growth, improving profitability and firmwide succession planning. To meet those issues we've taken a number of strategic actions. We're keeping our clients happy with appreciation events, all hands-on meetings with larger clients to discuss what else we can do to assist them and, of course, give great and responsive client service.
If you lose business, it's very hard to grow so, first secure your client base. We are focused on improving our relationships and other referral sources to push for more project work, including cross-selling our other services, and to make it mandatory to ask for new work referrals from our clients and referral sources. We are also working to free up our best-selling partners so that they have more time to sell. Removing them from some of their clients service requirements and giving them larger new work goals.
Competitive pricing is fierce and in some cases absolutely ridiculous. Our strategy is to find more work that is not "hard bid", that is, special projects that fit our skill sets and more new work in industries where we have a dominant position. Our goal this year is to grow our top line by 5-7 percent with the same payroll as last year and find ways to be more efficient.
Dave Sibits, CBIZ Financial Services: Accounting firms are facing an aging of leadership at the partner level. Second, firms are facing a continued erosion of pricing in service areas, which is mostly a result of a challenging business and economic climate. The last concern is the competition for the best and brightest talent, especially among top firms seeking to add specialty expertise or employees to groom for the future.
Some steps we have taken to meet those issues include the development of a robust training curriculum for our managers and a continued expansion of our Emerging Managing Director Academy - a multifaceted training program that readies our most talented people for the move to the managing director role, and the changes and responsibilities associated with it. Additionally, we continue to improve our process for the transition of client relationships as managing directors reach the end of their professional careers.
Also, our firm has moved toward greater specialization. This led us to the formation of five national niche practices - construction and real estate, not-for-profit, ERISA, forensic and financial services, and specialty tax consulting.
Ed Guttenplan, Wilkin & Guttenplan: We see the top challenges as being leadership development, and building your "bench" and practice growth profitability. Also, remaining efficient in light of new standards and, of course, preparing for the future. For those firms committed to continuity and remaining independent, staff development and leadership development will be required for success.
In our firm, every staff person has a developmental coach consisting of a partner or manager (who demonstrate great coaching skills). The managing partner has lunch with every accounting staff member and certain support staff several times a year. There are also upward 360 evaluations and candid downward evaluations provided during the year. The strategies in which we promote marketing and development are having an in-house performance system that requires staff to develop marketing/relationship, building skills as part of their annual goal setting and a "marketing map," a personal marketing plan that is in sync with the long-term direction of the staff's growth and is built around both their strengths. We have created three committees that meet periodically - efficiency, innovation and staff input committees. For certain niches/"practice groups", we have sent partner/senior manager to an out-of-state practitioner/firm in the same niche for best practices and efficiency ideas
We must always be looking 10 years out, positioning our firms to be relevant and to survive and thrive. I am continually looking at what our landscape will be like at that time.
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