What’s the first thing to know when considering membership in a professional services firm association?It’s not just about writing a check.
“We want firms that want to participate,” said Maureen Schwartz, executive director of BKR International, a New York-based association of independent accounting firms. “Please just don’t come in and pay your dues, although you have to do that, and then expect to just get anything out of it. You really have to get involved. You have to get your people involved.”
Schwartz isn’t alone in her sentiments. Doug Thompson, president of CPAmerica International, an Alachua, Fla.-based association with a mission of “improving through sharing,” agreed. “If someone is in an association only to ‘get,’ then they ought not to join because they won’t be happy very long,” he said. Thompson began CPAConnect, an association for smaller firms and sole practitioners with revenues under $2 million. “To be a really good association member, a person needs to have a philosophy of willingness to share and to give, and in doing that, they get a hundred-fold in return.”
“All associations have one thing in common and that is that, whether it is accounting or plumber associations, they get people with similar backgrounds and interests to talk to each other to exchange information,” added Rudy Beilfuss, president of Associated Regional Accounting Firms d.b.a. PKF North American Network, based in Duluth, Ga.
The trick, however, is to find the right match.
“Firms should pick that association that fits their needs best,” Beilfuss continued, comparing the process to purchasing a car. “You might go out and say, ‘I need four wheels, an engine and a transmission and that’s it.’ Then it’s like, ‘Well, what about air conditioning and maybe I want navigation equipment.’ Until you’ve looked at what’s available out there, you don’t know that that’s something that might really be handy and helpful to you. They need to find out what’s offered in the marketplace, because they might find that for a little bit more money, air conditioning is worth it, particularly if you’re driving in the South.”
More than one association representative suggested that in searching for the right fit, firms might want to draw up a spreadsheet comparing the services and resources of each.
“A firm needs to know what it is that they want or expect from an association,” said LeRoy Gaintner, a partner at Gaintner Bandler Reed & Peters PLC in Phoenix. Gaintner is chairman of the Western Association of Accounting Firms, an organization that is a focus group for the managing partners of 10 firms located in the western U.S.
Gaintner pointed out that different associations offer different services. His association, which doesn’t have a staff or a central office, exists as a cost-sharing biannual meeting of member firms, where they share partnership agreements, income formulas for partners and best practices.
“Certainly we’re on one end of things,” he said. “Some associations provide reference materials, some don’t. Some associations are primarily referral networks, a lot aren’t. Some associations provide continuing education at a variety of levels and some don’t. Some provide statistical information on the various firms, some have annual conferences that are run by and coordinated by staff and some don’t. The biggest thing is a firm really needs to say, ‘What is it that we think we want?’”
NETWORK OR ALLIANCE?
The first key decision a CPA firm needs to make is whether they would be more suited to a network or an association, according to Giles Brake, marketing manager at MSI Global Alliance, a London-based international multi-disciplinary alliance of independent professional firms.
“They’re different animals, and both have their advantages and disadvantages in terms of brand cohesiveness, quality control procedures, but also potential liability, increased regulatory pressures, and, of course, cost,” Brake said. “Firms need to look carefully at their practices and decide first and foremost what their clients need.”
It currently is an important distinction because the American Institute of CPAs’ Professional Ethics Executive Committee is proposing a new standard under Rule 101 on independence of the AICPA Code on “networks and network firms.” According to the AICPA, the proposal specifies that when firms in associations share one or more of certain characteristics, such as the use of a common brand name in the firm name; common control among firms; profits or costs with some exclusions; common business strategies that involve ongoing collaboration whereby the firms are responsible for implementing the association’s strategy; a significant part of professional resources; and common quality-control policies and procedures designed by the association that firms are required to implement, they are considered to be a network and must be independent of the audit and review clients of the other network firms. The PEEC proposal, according to the AICPA, is consistent with the guidance set forth in the International Federation of Accountants’ code.
“Firms that are members of a network need to be independent not only with respect to their own audit clients, but with respect to the audit clients of all member firms in the network,” Schwartz said. This requires the network to maintain a comprehensive independence database that their members would need to consult before they accept any new audit engagement.
KNOW THYSELF (AND THEM)
Karen Kehl-Rose, president of the Leading Edge Alliance, a St. Charles, Ill.-based organization that focuses on accounting and consulting firms, suggested that, when researching a prospective association, it’s important to look at who the members are and their locations, and to meet the members and attend a meeting — which, depending on whether a firm qualified, could be paid for by LEA.
“Most of the time when we’re approached, the firms are looking for something that they don’t have, it’s just a matter of what they are looking for and what our association — or any association — has to offer,” said Jennings Hastings, managing partner at Faw, Casson & Co. in Dover, Del., and president of the executive committee at AGN International-North America Inc., an association based in Aurora, Colo.
Hastings said that when a potential member is interested in joining the association, representatives from the firm will be invited to their annual meeting for a meet-and-greet.
“We’ll invite them as guests, let them come in and talk to us, kick the tires, talk to the partners and see if this is something they want to be a part of,” he said. “We don’t want them to come in and then leave six months or a year later. We want them to realize this is a benefit.”
Restrictions on membership vary between associations, as most — but not all — practice geographic exclusivity.
“Generally speaking, we are looking for one member in a market,” Beilfuss said. “That’s not 100 percent true; it’s changing. Last time I counted, we had about 12 cities in which we had more than one member, and we will look for members in cities, particularly cities that have large populations. What we are trying to do today is fill dots on a map. We don’t have a firm in Milwaukee, so we’re more inclined to try to recruit a firm in Milwaukee than to try to recruit another firm in Atlanta, because we have two firms [there].”
At BKR International, if a firm is interested in joining but there already is a member from that geographic area, Schwartz said that she calls the member firm to ask if there would be a competitive conflict.
Schwartz said that her association has always maintained a policy of hosting one firm per each major market area.
“The reason for that is because this way you can go to a meeting or have a conference call and you are talking to your peer and not your competition,” she explained. “That’s anywhere around the world. Especially if someone were to call me and say, ‘Gee, my client’s expanding into Hamburg, who should I call? If I have five firms there, how do I know?’ It gets very subjective.”
For firms looking to join an association, expect the application processes to vary among organizations and don’t just assume you’ll get accepted or gain new work when you join. Be prepared to invest your time in investigating the association, as well as providing materials to help the organization get to know your firm. Thompson said that nine times out of 10 when he meets with a prospective firm, he knows instantly whether it would be a good fit by the feeling of the partner group, the appearance of the offices, the pride in how the firm represents itself, its peer review and its overall financial success.
“I think the right association, whether it’s us or somebody else, for the right firm can be an invaluable thing to help them improve, to raise their high-jump bar,” Thompson said. “I am a firm believer in membership because I’ve seen how it’s helped our firms.”
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