In this Generational Viewpoints, RLB LLP (www.rlb.ca), a Guelph, Ont.-based accounting firm with over 60 employees, shares views on firm specialization from the perspective of Gen X partner Jason Gibbons, born in 1974, and Baby Boomer partner, Michael Manera, born in 1959.
We asked them to consider the following question: "How important is specialization by service line or industry to the future of your firm? Why?"
GIBBONS' GEN X VIEWPOINT:
I would classify specialization in an accounting firm in two areas:
1. Specialized area of knowledge.
2. Industry focus or niche.
In my view, the driving force for knowledge specialization was necessity. The pace of change and complexity of technology, taxation laws, accounting standards, industry regulation, and business is accelerating. Simply put, the world is changing so rapidly that it is impossible to keep current in every area. In order to be relevant and provide the level of expertise necessary, you need team members with specialized knowledge in one or more areas.
As a Gen Xer who came up through the ranks of a midsized public accounting firm, it was clear that "knowledge specialization" was the key to success. In fact, the last four partners admitted in our firm were highly specialized. In my view, the "specialized area of knowledge" was identified (and understood) as a key driver to firm success.
Now, as a new partner, I will only consider admitting another partner if this individual adds to our firm's bench strength. Specialized knowledge is required to broaden the scope, breadth and value of our services provided to clients. I see knowledge specialization as the first step to building the foundation of a healthy and successful firm.
The second step in specialization is industry focus or niche development. Although this is similar to aspecialized area of knowledge, it is more focused on developing "famous persons" in certain industries. This industry-specific knowledge becomes a magnet to prospects and prospective alliance partners who want to benefit from dealing with our firm and the individual(s) with this specialized expertise.
Clients are becoming more sophisticated, requiring more industry-specific advice - and they are willing to pay for it. Being able to deliver this specialized advice differentiates our firm from the typical "compliance provider" and makes us a "trusted advisor" instead.
This type of specialization should increase profitability by providing economies of scale and justifying premium billings as we become invaluable to our clients' businesses.
For these reasons, I believe that specialization is absolutely required for a firm to flourish into the future.
MANERA'S BOOMER VIEWPOINT:
Specialization by industry is a critical component to the future of any firm that wants to be profitable and grow in today's marketplace.
Since my first year working at RLB in 1981, I have seen many trends and changes. When I began my career here, RLB was a reasonably sized two-office public accounting firm with approximately 25 staff members. There were no computers in the office and, as a general rule, the partners would all meet the definition of "generalists" with varied practice workloads.
Firm growth occurred during this period, but the introduction of computers in the 1980s and the increased complexity of the tax rules created technology specialists and tax partners as specialists by service line.
Specialization by industry was the more subtle trend that accelerated during this period. As a firm, RLB was an early entrant into the PKF North America Network of accounting firms. We were introduced to the concept that firm growth correlated with "famous persons and niche markets," which is a concept that holds to this day. Specialization is really a function of the fact that clients rank knowledge of their industry as the most important factor in determining which accountant to engage.
In the 1980s, almost all of us would have been engaged in doing the work for municipal clients, medical clients, construction clients, and so on. In the environment today, the clients' needs in each of these areas are significantly deeper. The government reporting for municipal clients is more complex, medical clients are allowed to incorporate and represent a more complex engagement than in the past, and builders have integrated their operations so that most of them also develop property, which is also more complex than in the past. Even other service providers, such as lenders, have adopted industry specialists over this same period of time.
Again, I believe that specialization by industry will be one of the keys to the future of the firm. A client must feel comfortable when they trust us as their advisor. We provide that comfort when we specialize in their industry and understand their industry issues.
This column is facilitated and edited by Krista Remer, the Generation X consultant, and Jennifer Wilson, the Baby Boomer co-founder and partner of ConvergenceCoaching, LLC (www.convergencecoaching.com), a leadership and marketing coaching and training and development firm that specializes in helping CPA and IT firms achieve success. To have your firm's generational viewpoints considered for a future Accounting Tomorrow column, e-mail us at krista@convergencecoaching.com.
