The CEO's role when a firm is 'running with the big dogs'

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The expression “running with the big dogs” is often used when describing a goal or an aspiration. For CPA firms, the goal of “running with the big dogs” usually means a firm aspires to stay independent and wants to perpetuate itself for the next generation.

Such a firm also aspires to be a mid-market sustainable brand—perhaps a Top 100 firm or perhaps even one of the Next Six (currently RSM, Grant Thornton, BDO, Crowe Horwath, CliftonLarsonAllen or CBIZ). All admirable goals that, when realized, result in a very high quality client base with very high quality professionals, and handsome compensation for the partners. Many smaller firms, particularly those that are doing many acquisitions and mergers as a growth strategy, however, fail to achieve these goals. Ultimately they either merge up or break up. Either way, it is not their preferred path.

So why do so many smaller firms, particularly those that want to transition to larger firms, fall short of their independence mantra? After all, their hearts and minds are in the right place!

At smaller firms many leaders “grew up” in small firm environments and have little understanding, if any, of what it takes to operate in a large firm environment. At smaller firms, the chief executive officer (or managing partner) often is the biggest biller or the best business development partner but the responsibility and authority as CEO are not clearly defined. And the Executive Committee or Partner Board at smaller firms wears many hats, including participation on the Operating Committee, Finance Committee and Compensation Committee. These committees, however, generally do not function properly. The partners on them feel powerless with responsibility but little, if any, authority.

At the larger firms, particularly at the Top 100, leadership takes on a different role. The CEO isn’t the biggest biller or the best business developer and the Executive Committee is not involved in day-to-day operations. Unfortunately, the smaller firms don’t recognize this paradigm shift until it’s too late.

Below are some of the key objectives and job duties for the CEO of a firm that wants to “run with the big dogs”:

Key Objectives of the CEO

  • Create a one-firm, firm-first culture, implement firm procedures and policies, and instill best practices in areas such as communication, business growth, cost controls, etc.
  • Drive revenue and profitability.
  • Protect the firm from significant risk. This requires the CEO to make sure the staff and partners are appropriately trained and evaluated, adhere to firm policies and are appropriately analyzing risk from a perspective of client acceptance, as well as client continuation.
  • Strive for a one-firm, firm-first philosophy. This requires partners to think of “our clients,” not “my clients.”
  • Be actively involved in the community by attending events, joining boards of directors of nonprofit entities, and being active leaders in these organizations.
  • Mentor future leaders. This requires constant communication with partners and staff, assisting partners in setting their goals and how they can improve themselves as well as the firm, and evaluating those partners against goals that were agreed to in the year-end evaluation and goal-setting meetings at a minimum of twice a year.
  • Commit to growth through industry specialization by building expertise, effectively going after target accounts and providing value to existing clients.
  • Assure that partners and staff are providing world-class client service while not sacrificing quality by having a pulse on the key clients and the services being provided. This includes taking an active role in client service and communication plans.
  • Communicate within the community, partners, staff and clients by maintaining a positive and enthusiastic outlook while dealing with both good and bad news effectively and in a timely manner.

Key Job Duties of the CEO

  • Design and develop a strategic plan, incorporating the firm’s strategic goals, and direct its development and implementation.
  • Assure the firm has an effective HR personnel plan for meeting current and future client needs.
  • Oversee the firm's short- and long-term financial condition while maintaining appropriate profitability.
  • Ensure all partners and managers understand the firm’s financial goals and that day-to-day decisions are made consistent with these goals.
  • Lead all partner meetings, which should be held monthly.
  • Oversee industry practices by monitoring leaders and industry group performance. Build industry expertise where needed.
  • Assure compliance with firm policies regarding capital expenditures and operating expenses, and oversee, monitor and control operating expenses consistent with firm policy.
  • Assure proper utilization of firm administrative management and information systems.
  • Function as the major spokesperson with major business organizations and publications.
  • Maintain relationships with leadership at other CPA firms (potential combination targets) and focus on providing services they cannot provide.
  • Resolve major client disputes consistent with the best interest of the firm. Obtain legal counsel on all significant disputes.
  • Implement and maintain effective client billing and collection policies and procedures consistent with firm policy.
  • Monitor client billing and collection results to assure compliance with firm billing, collecting and work in progress (WIP) policies and protocols.
  • Seek laterals who can beef up bench strength and diversification.
  • Monitor individual partner and manager fee realization versus plan and recommend actions to address negative variances.
  • Actively participate with partner goal setting and monitor progress throughout the year; the key objective is to provide for long-term viability of the firm through the growth of new partners and the maturation of existing partners.
  • Oversee client transition and succession planning for retiring partners.
  • Foster partner involvement in firm social functions and support personnel recognized for outstanding service in the community.
  • Make sure client accounts are handled in the most effective and efficient manner with the appropriate client service team.

Today, more than ever before, the CEO is the quarterback in a firm—particularly those firms that want to “run with the big dogs.” Don’t short-change the importance of the role. Too many firms fail when the CEO doesn’t have the responsibility and authority to move the firm forward. I strongly encourage you to think and act as a larger firm and make the necessary investment in an effective CEO.

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