[IMGCAP(1)]A recent call on a CPA client firm in the Midwest led to this exchange with the managing partner of the firm: “Greg .we just don’t have time to plan strategically, primarily because our clients are starting to feel the start of the boom and we are running like crazy to keep up with them.”
My response: “Why? Are you providing any new services that can help them control themselves when a boom occurs? Are you helping them prepare a formal strategic plan for this growth?”
Managing partner: “No, we wouldn’t know where to start except on the financial side, but we are adding staff ourselves so that we can stay on top of their tax and audit requirements.”
So let me see if I understand that firm’s logic. The business climate is heating up for their clients, and ergo themselves. The firm does not have a formal strategic plan themselves to plan their own future during a business boom. Their clients probably do not have a formal strategic plan as well, since statistics show that over 80 percent of small and midsize companies do not. The firm is not providing any help to their clients in preparing a formal strategic plan except after the fact in audit and tax, and the firm’s managing partner says they just do not have “time” to plan strategically.
It is just this scenario that continually shows that the driving force of most CPA firms is “growth” when it should be their “services” they provide their clients.
We wrote about this in a previous article that identified the four quadrants of a company or firm’s life cycle (see Leadership Management: Are You Growing or Dying?). The quadrant position of most companies and firms mirrors their markets, products and services, and where these entities rest in one of the four quadrants: Emerging Quadrant #1, Growth Quadrant #2, Maturing Quadrant #3, and Aging Quadrant #4. What quadrants do you think tax, audit and wealth management reside?
Every company and firm starts out in Quadrant #1, Emerging, and eventually dies—yes, goes belly up—in Quadrant 4, Aging. Every company or firm will eventually die out. Once a managing partner or CEO allows the firm or company to move into the Aging Quadrant from Maturing I like to say, “Sayonara.” The only way to escape the death throes of an Aging Quadrant is not to allow the firm or company to leave the Maturing Quadrant, and that’s the accountability of the CEO or managing partner.
There is an axiom of management tenets in strategy that should be heeded by every company and firm who has not identified the proper driving force for their organization:
Axiom of Changing Company Quadrants: Except for a startup entity, a company or firm can only change or maintain the quadrant in which it resides by redefining its driving force with emerging products and services.
The quadrant life cycle of a company or firm is the same as that of its products and services, and reflects heavily upon how innovative the organization is in developing new products and services which relate to the driving force. Such is the case for most CPA firms. Their products and services approach (or are already in) the Aging Quadrant, which is pulling the firm into the death spiral.
When a company or firm finds itself moving to the aging quadrant of its life cycle it reflects the aging products and services within its driving force, and when that driving force stops generating new emerging products and services, then the company or firm must change its driving force to do so, or cease to exist.
A company or firm finding itself in a maturing or aging position of the quadrant can only change its quadrant position by redefining its driving force, and if its driving force is “growth” and not products and services, it can only grow by acquiring other CPA firms. During a “boom” it will be “racing to keep up” with its clients, like the Midwest firm above.
However, consider the CPA firm that can provide value-added services to its clients like strategic planning during this “boom” period versus a CPA firm that can only provide tax, audit, wealth management etc. That’s the CPA firm with longevity that will be around the marketplace for time to come, and which keeps moving new services to the Emerging Quadrant so that it stays vibrant and alive for years to come.
Our next article will address the “Doom” periods, and how to secure growth positions through them strategically.
Greg Weismantel is president of Epic Group, a management consulting firm and advisor on strategy for small and large firms and companies. It partners with clients to identify their primary driving force while recognizing strategic opportunities of their markets, products and services that will deliver the highest value for ongoing growth and sustainability.
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