Alan Whitman, CEO of Nichols Cauley and past head of Baker Tilly, looks at the factors that inform the way firms will grow in the future, and the strategies that will support them.
Transcript (transcript generated by artificial intelligence; for discrepancies, refer to the recorded version):
Dan Hood (00:03):
Welcome to On the Air with Accounting Today. I'm editor-in-chief Dan Hood. Accountants learn best from other accountants, the thickest to learn from the right accountants. And when it comes to achieving extraordinary growth in a sustainable fashion, there's shoe out there who are better positioned to teach the subject than Alan Whitman. He was the CEO of Baker Tilly for seven years, during which the firm tripled in size to $1.5 billion. He left a position for even more spectacular growth, and he's now head of a new firm, Nichols Cauley, that just this year joined our roster of the Top 100 Firms. So we're glad to have him with us today to talk all about how firms can achieve that kind of success, maybe not exactly that high level of success, but hopefully something like that. It's the subject among other things of his most recent book, "Break the Mold," but it's also something he's working on every day in his practice.
(00:43):
Alan, thanks for joining us.
Alan Whitman (00:44):
Well, Dan, thank you for having me. It's always a pleasure to be with you and to talk about all things growth and sustainability, as you said. A real honor to be with you today. So thank you.
Dan Hood (00:55):
Thank you. We're looking forward to learning a lot. I mentioned Nichols Cauley. This is the big thing you're working on now. And it's a really interesting sort of structure for it. It's private equity back, but there's a bunch of other wrinkles to the firm itself. Maybe you could tell us a little bit about that.
Alan Whitman (01:11):
Yeah, thank Nichols Cauley is a new style entering into this space, if you will. What I loved about it when I met the principles of the group about a year ago is that they came together and built us a thesis on their own. It's not a PE backed thesis, if you will, or developed thesis. It was a traditional CPA firm, an insurance brokerage agency and a sell-side investment banking firm. They came together as they had been working together for many, many years, and they came together saying, "Listen, we're going to bring something new to the market. We're not going to bring to the market another CPA firm with advisory services. We don't consider ourselves a CPA firm with advisory services. We consider ourselves an act as though we're a financial services company that offers insurance and risk coverage, transactional services, accounting, the things that you and I know and are used to coming from CPA firms, and we're going to grow it as we have built it.
(02:08):
And that is grow all the different types of services as a company, not as a traditional partner-led firm. And what I loved about it when I first met the group also was the fact that the insurance discipline was a company. The investment banking discipline was a company, and the CPA firm was a company, as opposed to a partner or a few partners that have tried to build a book of business over here, and a few partners that have tried to build a book of business over there. And so the construct of the platform or the company is very different than what you have in the mainstream. And as I call the mainstream is ... And they're great. Don't get me wrong, this is just an and. It's a different and. We're not considering ourselves a CPA from this trying to transition to advisory services like we hear so many times in articles and from the pundits and from CPA firms themselves.
Dan Hood (03:00):
Right. So how do you integrate those ... I mean, you've described them as three companies, right? How do you integrate those together to make sure in an accounting firm you'd call that cross-selling or one firm approach, but how do you bring those together?
Alan Whitman (03:16):
Well, one, it's going to be one platform, one brand, one group of infrastructure functions, et cetera. We're going to be a company. And you're right. And in the accounting firm, we call it cross-sell. I don't really like the word cross-sell. I like cross-serve, tomato, tomato. I do believe it's more about service than it is a bestselling. However, I understand. I understand where people have come with cross-sell. Look, the secret sauce of Nichols Cauley is they came to this thesis. They came to doing a sponsored back deal because they wanted to add the different disciplines to what they were doing by themselves. The legacy PRS, Partners Risk Services, which is now leading our risk and insurance services discipline, they were looking to bring in CPA professionals and the services there as they were on the investment banking. So we're not fighting the, hey, me in mind, and I'm just going to take care of myself.
(04:13):
The leaders of these businesses bought in because they developed the thesis themselves. So when you design that thesis yourself, and it's not me jamming it down your throat, for instance, as the CEO with crazy ideas or what have you, it's a whole different environment. Nobody's objecting, everybody's looking for it. So we've had roadshows. We've had lunch and learns. We've had practice sessions where the producers on the insurance side or the investment bankers in the sell side transactions practice are looking for opportunities to bring in their new colleagues to add services to the relationships that they've had for many, many years. So when you're not fighting an uphill battle, you're actually enabling them and us to execute the strategy that they came up with. It's a totally different environment, one where it's looking for opportunities to bring additional people to the conversation rather than being forced to because you got to hit a metric or you got to perform at this level or that level.
(05:14):
It's a very different environment at Nichols Cauley.
Dan Hood (05:17):
Yeah. Well, I mean, as we say, with the traditional cross-serving, cross-selling, that is the number one obstacle is the partner unwillingness to, or the partners being an obstacle or a hurdle saying, no, no, it's my book of business. I don't want you messing up my client. I don't want you screwing up my current ... I mean, really thinking about it. It's pretty much the only obstacle. I mean, there's some knowledge questions and some understanding of people need to know what the firm can offer before they can tell clients about it. But really the big obstacle in most firms seems to be that willingness to share. So if you've already cleared that hurled, fantastic. You mentioned sponsor back. One of the big conversations going on across the profession, particularly when it comes to growth is private equity. I kind of want to get your thoughts on that.
(05:59):
Where do you think that's ... What's its role in the profession? Is it permanent change? Is it short-term change? Is it going to significantly rearrange how accounting is done in the future or is it a more of a flash in the pan kind of thing? What's your take on it?
Alan Whitman (06:14):
Well, I don't think it's a flash in the pan, Dan. I think it's here to stay, but I'd like to go upstream a little bit and get to the more macro level issue. Private equity or an ESOP or institutional investor going public, that's a means to an end. That is a solution to a broader issue. And that is to transition from a lifestyle type business, partner-led, good enough is good enough, to a business business. Actually become a business where good enough isn't good enough. We actually have goals and results that we need to achieve. And so I think that whether it's ... Let's just not call it PE, let's call it a professional investor that enables the people in the organization to be much more disciplined, much more intentional, much more structured in how they run the business. Look, private equity or ESOP, they're not going to change how tax services are delivered or how audits are delivered or how advisory is delivered.
(07:12):
We, the professionals, are going to still do that. What the investors are helping ... I know they're helping me, and I've seen them help a number of other companies that I've advised over the last couple of years. What they're helping the leaders with is structuring and becoming more intentional and more disciplined in how you run the business.
(07:35):
The goal here is elevate our performance as a business, not just as an organization that delivers professional services. It's not an either or. It should be a both and. So I don't think it's a flash in the pan. I think it's very good. I think with anything, there are things to look out for, of course, and there could be some unintended consequences of doing certain things, but there were unintended consequences of doing things as a partner-led organization. And so this is a new innovation, if you will, of how these organizations are stewarded and governed and managed.
Dan Hood (08:07):
Right. Gotcha. It's interesting. I mean, you said it enables firms to be more focused and more disciplined. Some people, I think for a lot of partners, particularly partners who may be a little more comfortable, a little more used to a lifestyle type firm, it's not enabling, it's requiring more focus, more discipline. And that can be great or not, as the case may be, depending on what you got into the profession for and how close you are to your retirement and how much you want to work. Is there room for non-firms without that outside investment, without that ... I guess, let's put it this way. Can the lifestyle firms survive alongside this more disciplined, more business-oriented, more business-like accounting organization?
Alan Whitman (08:49):
I don't know what the word survive means, but I think the answer to that question is yes. There's different fraternities, there's different sororities, there's different types of chocolate chip cookies, there's different type of jeans. I mean, there's many different things in this world, and some are the pinnacle of price, and pinnacle of execution, and pinnacle of features, and some are a run of the mill. And I'm not saying one is better than the other. It's just there's many different people in this world that associate with different types of organizations. So I think that those companies will continue to exist. Will they accelerate the way the others that have capital and have more disciplined business acumen operate? Probably not. And so there may be a divide, there may be more of a haves and have- nots, but that doesn't mean the have- nots or meaning they don't have a professional investor are going to go away.
(09:42):
They just may not accelerate. They might not grow as fast. I was talking to somebody, I was talking to a firm that said, well, we're going to grow at 12% a year. Oh, I know. Yeah, I was talking to them. I went to dinner with them a couple weeks ago. And I said, well, 12% organic growth is great. That's great. That's awesome. We're going to grow at 25 to 30% because we want to be at 12 to 15% organic, just like you. And maybe we'll be higher than they will because we'll have some tools that they will have because we'll be able to make investments and we're going to do the acquisitions and we're going to do the acquisitive growth. And so we will become a much more substantial, more sustained, more relevant organization, which will better position us from a competitive landscape and lens.
(10:21):
So that doesn't mean that the 12% growth firm is going to be bad. There will come a time when they're going to be like, can we keep up? Who is our competition? Is our competition my firm? Is their competition my firm? Or do they need to go find a new competitive set and compete with them? And so I think the competitive landscape will change because there will be some that say we are never going to ... I've heard it all sell out or we're never going to be anything but independent. I don't know if it was you that wrote this. I saw this over the weekend. There was an article about what does it mean to be independent? I think we're making more of it than it is, but it's my
Dan Hood (11:03):
Opinion. Gotcha. But it makes sense. Certainly if you're looking to grow at anything above a sort of maintenance rate, it makes sense that if you want to stay independent, you wouldn't have the resources to growth. You wouldn't have the war chest to go out and buy meaningful acquisitions to make complimentary acquisitions, that sort of thing. Go ahead.
Alan Whitman (11:25):
But everybody says, well, you're going to have all this capital and you're going to be able to spend like a drunken sailor.
Dan Hood (11:32):
At no point did I bring drunken sailors into it, but all right, all right, I know what you're
Alan Whitman (11:35):
Saying. Look, we have made investments at Nichols Cauley early on that we would not have made if we were independent or partner owned. There is a rigor, an enormously disciplined rigor in analyzing the investments and making sure they're paying off, et cetera. So it's not like we just get to go hire 25 people and they do what they do. No, no, no. There is an ROI on all these investments. We talk about them intentionally and thoroughly. We know what we're going to hire, what we're going to invest in. And the goal, the requirement is that there's going to be return. And so you learn fast, some say fail fast. You learn fast when you do that. Regardless, there is a rigor and a discipline, a manic nature of where are we going to spend our money, how, and how quickly can we recover return?
Dan Hood (12:26):
Right. Yeah, no, I mean, it's well worth clarifying that this is not just, like you said, not just drunken sailors on a spree, but being able to spend the money, whether you spend it well or badly is still you have the money to spend in a way that you can make investments in technology that a firm of similar size that doesn't have outside investment can make. And whether you make it well or badly or well, you're still able to spend it. But you also have expertise coming in from outside in many cases, not every PE firm or outside deal brings this necessary or brings it to the same level, but it brings outside expertise that an independent firm might not have available to it. So if you wanted to make the distinction between firms that really want to grow, if you really want to grow, some kind of outside investment is going to turbocharge that in a way that an independent firm might not necessarily be able to do.
Alan Whitman (13:13):
Yes. The outside investment and the outside, as you just said, the intellectual capital. One of the great things about being a CPA or a consultant is you see, pardon me, you see many different companies and you build your repertoire, your ability to consult and to analyze from all the experiences you have. Okay, so let's just turn that around. Our sponsor, Madison Dearborn, has had hundreds and hundreds of experiences seeing different companies and how things work. And I get the benefit of all of that through one lens, through my team's lens, which is wonderful as opposed to having to go research it myself or having to take chance. And so the intellectual capital that I'm enjoying by partnering with my deal team is uber helpful and it speeds things up.
Dan Hood (13:56):
Okay, cool. Let's for a minute talk about growth and how some firms might not want to grow, like I said, more in the maintenance level. They want to maintain a lifestyle and that's fine. But for firms that want to grow, when you look at them, what do you think of the things that are in the way or the challenges they need to overcome or the things they need to face? We did a survey of firms that had taken outside investment, mostly PE, and sort of assumed that the things they were looking for outside capital were for acquisitions or to help with partner retirements. There's a big overhang of baby boomer partners, they need to get paid out and so on. But the number one thing they said they wanted outside capital for was technology, which we thought was a surprise to us and was an interesting response.
(14:40):
But when you look at it and say, what do firms need to, what challenges do they need to meet? What things they need to have in place to achieve the sort of growth higher level than maintenance
Alan Whitman (14:50):
Growth? Well, you know me and I say the sentence all roads lead to and from strategy. And so whether you have an outside investor or whether it doesn't matter, you need to have a strategy and you need to stick to the strategy. You need to talk about the strategy every day. Every decision you make, what you invest in, what you don't invest in, what you do, what you don't do, a big part of strategy is what you're not going to do because a lot of firms as they're growing, I wrote this in the book, Break the Mold, they go through an accumulation phase where every client is a great client because it's just extra revenue. And we all know that one, there's a lot of diminishing returns. You're not making any extra money because you're limiting us executing strategy because you're dealing with the masses of clients.
(15:32):
And so one, you have to figure out what your strategy is and go execute that. Don't try to be everything to all people. You've got to be this to this few people. And so whether it's investing in technology to limit or minimize the number of human touches to a project or to a process, whether it's building your wares in a certain sector, a certain industry, a certain geography, whether it's how you automate, whether it's how you develop people, all these things are germane to what a strategy is, where you're going to exist, and just do that and get really, really good at that scale. You don't want one person's offices in 50 states. You want scaled offices because again, synergies. And so we don't need to put flies on the wall everywhere and we're just going to cover the entire map. No, let's get a couple places and let's build deep scaled practices in this or that, not in everything.
(16:28):
And so yes, look, people want to make investments in technology. My first hire was a young man who came out of one of the big four. Then he went to a consulting room and it was AI and tech automation. That was my first hire. And he's done wonderfully. We are automating so many things in our organization. The second was a chief strategy officer. And I want her, Jackie Wiggins worked with me as my chief of staff while Baker Tilly. She should get a lot of the credit for our success back in those days when I was the CEO. She's now with me again, and we are defining our strategies and we're just going to build scaled practices that meet our strategy. And so there's many different things that you go into a financial sponsor for. There's not one. So one person could be technology, another could be people, another could be acquisitions, another could be consulting services.
Dan Hood (17:20):
Excellent. Since you brought up strategy, that's where I want to go next. I want to dive pretty deeply into that. As you said, it's mentioned in your book, I know it's a passion area of passion for you. So I want to dive more deeply into strategy, the role of strategy, the accounting firms, some of the strategies of the firms you've worked at, some of the strategies you've directed, but we're going to take a quick break first. All right, and we're back. We're talking with Alan Whitman of Nichols Cauley and we're talking about a number of things, but now we're going to be focusing pretty tightly on strategy. As I said, scenario I know that you think a lot about and you pay a lot of attention to, and it's pretty important to you. You've described it in some detail, your strategy at Nichols Cauley, but maybe we could get a little more detail on that.
(18:07):
And the main focus is the main trusts of the strategy you have that you're building with your new chief strategy costs.
Alan Whitman (18:15):
Yeah. So if you think about the prongs of a strategy, where, what, how, and by whom? So where our strategy is, our thesis that depend upon we're going to be in the Southeast. We're going to get real concentrated presence in the Southeast. And more specifically, we're going to be in the second and third tier markets. There's a lot of wealth. There's a lot of types of clientele that we want to serve, which I'll get to in a second, in those second and third tier markets. We don't need to be in the first tier markets. There's a lot of firms there. Let them have their fund. We're going to be where we're going to go where others aren't. So that's the where. The who, the who are, we're going to serve small and medium-sized businesses, the companies that are predominantly underserved and aren't able to secure the highest level of advisory capabilities, which means we're going to have to develop the high level of advisory capabilities.
(19:10):
We're going to go after some people that you would not think are in a firm of our size. We've started our platform at $70 million, which is a good size firm. Don't get me wrong. You mentioned we're a top hundred firm. Yes. But those firms of those size aren't by and large made up of people that came out of the Big Four. Well, we just did an acquisition of a group that just came out of the Big Four. And so we are bringing the highest of high expertise people to this platform because we want to be able to serve the underserved, small, medium-sized businesses in the second and third-tiered cities and markets with the best of the best. Then we're going to use automation to get much more quick, seamless, frictionless so that the experience that we have, our people have and our clients have is second to none.
(20:02):
And so we are shifting our model from being the traditional hours-based, production-based, to using automation, systematizing our approach so that we can be much more freewheeling in our service delivery as opposed to sequential. You do this hour, then you do that hour, then you do that hour, and everything kind of lines up one after the other. Our promise, our commitment, our goal here is to manage, protect, and grow our client's wealth. Manage, protect, and grow our client's wealth. It's not to be the best auditor or the best tax advisor. We are going to be very, very good at that or best insurance agent. We are going to be very, very good at that, but that's not what we lead with. That's the solution. That's the how we manage, protect, and grow our client's wealth. If we can do those three things, we're going to be successful.
(20:57):
And you asked earlier about how is the secret sauce? Cross-sell, as you reminded me and the audience, why is this different? Because I'm not talking about cross-serving or selling. I'm not talking about additional services. I'm talking to every team member at Nichols Cauley. Dan, how have you managed, how have you protected, and how have you grown your client's wealth? You can't do that by delivering a tax return or delivering an audit by itself. You have to do that by doing the types of things that you do together with the insurance side and the risk side of the business, together with the investment banking side and the wealth management side of the business. That's how you manage, protect, grow. So we're not dealing with the how, we're dealing with the what and the promise, and now the conversations are very, very different. And when we go to performance management, I'm going to look at everybody and have a quotient or a KPI on, all right, how did Alan do managing, protecting, and growing our clients' wealth?
(21:56):
That's the promise that our clients get from us.
Dan Hood (21:59):
Gotcha. And as you say, with each individual person, depending on what they do on a day-to-day basis, that managing, protecting and growing may look different for, well, not each individual person, but for each individual service line, it may be somewhat different, but it's all got to tie out to that. That makes a ton of sense. Just to give people maybe a little something to compare it with, tell me about the strategy at BakerChilly. And I particularly want to ask about it because I've heard you talk in the past a little bit about how the strategy of Baker Chili changed as it developed. You were there for a good long time, but while you were in charge, your strategy changed somewhat as the size of the firm changed and so on. So maybe we could talk about the strategy and then a little bit about how you executed change in the strategy as you moved along.
Alan Whitman (22:43):
Sure. We were like every other fast growing CPA firm. It was accumulation, it was quantity. We were, and I believe they still are, I guess they still are, an industry-based organization. I think Baker Tilly was the first to go to industry specialization back in the late '90s, and that owed very, very well from them. Having said that, we were trying to be all things to all people because we thought we could be, and we were doing very, very well. And so back in 2018, we hired Dave Coleman out of Axiom Consulting Partners to pen a new strategy. And it's interesting, Dan, it was very similar to the types of things that we're doing at Nichols Cauley. We didn't talk about audit and tax. We talked about at Baker Tilly, enhance and protect our client's value. That's what the Baker Tilly team members were promising to do, enhance and protect.
(23:32):
Ours manage, protect, grow at Nichols Cauley. And so look, every company has its own strategy, but the construct of a strategy, they're pretty similar. So you'll see some similarities in the two. We make ours, our own, as Baker Tilly did its own, but Baker Tilly dealt with where, who, by whom and how. So there was a part of the strategy that dealt with delivery of services. There was a part of the strategy that dealt with what we're here to do, what they're here to do, and that is to enhance and protect. There was a part of the strategy that dealt with how and how the intersections of things came to be to make the magic and then by whom. And so the principles of the strategy built, of course, were very similar. I learned a lot when I worked with Dave Coleman, who's very well known in this space and Paxton Consulting Partners.
(24:20):
And I just used it. Jackie and I used it again, the same principles here at Nicholas Collie. And so again, in this firm of $70 million, which is, I don't know what we are, 350 people, they're getting the benefit of our experiences at a half a billion to ... Well, at that point we're $700 million. And so we and Nichols Cauley are playing way up and it's resonating. We've got, you haven't asked this yet, we've got four acquisitions under LOI contract. We're in the middle of diligence, and there's another six or seven that we're talking with. In fact, I just had a conversation this morning with somebody who reached out to me. They had heard of what we're doing, and they're in the outsourcing services business. And so I'm going to go visit with them next week to talk about the value of Nichols Cauley.
(25:11):
So the framework is the same, but we're playing above our boxing weight.
Dan Hood (25:17):
Right. But we just want to make sure no from Axiom hears this and send you a bill for consulting services- He shouldn't. At one remove, but ...
Alan Whitman (25:26):
Yeah. Well, I've hired them since twice, so they're making plenty of money off.
Dan Hood (25:31):
They're doing all right. All right. We want to make sure they're taken care of. We want to make sure in all cases that the advisors get taken care of.
Alan Whitman (25:37):
Well, and by the way, so Axiom became Lotus Blue. Axiom became Lotus Blue. Lotus Blue is now owned by Sullivan Cotter, Dave Coleman. So now I've got it all straight to the audience.
Dan Hood (25:50):
Excellent. Excellent. Just a quick gen, you mentioned a number of acquisitions on the line, others that you're looking at. Is it safe to assume those are sort of all over the map? It's not just accounting firms, it's a range of firms, or is it mostly focused in a particular ...
Alan Whitman (26:05):
There's a tax firm, high-end tax firm. There is a full service firm. There's a couple of insurance agencies. There's a couple of outsourcing firms, outsource services, subscription-based services, so many different things we are looking at. And some of the traditional accounting firms that we are talking with are very, very, very focused on one sliver of the market, very, very specialized, which I love because then you can get scale, you can get really, really granular and really intentional about building this versus trying to build everything.
Dan Hood (26:42):
Want to keep going on strategy because I think it is an area that not a lot of firms, particularly smaller firms, think enough about or approach in an intentional enough manner. I think people, when you've got a strategy, you've mapped it out, maybe you've worked with some outside people to help you figure it out or not, but you've got your sense of, like you said, who and where and what and who's going to deliver. When you have that, how do you keep a firm on track with that? It's very easy, I think, for any kind of organization to lose track of that sort of stuff in the day-to-day. They're like, "Well, I'm doing a tax return, or I'm working on the audit. I'm not really thinking about the overarching strategy." How do you keep people engaged with that and on track with that and aware of it as something they're paying attention to every day?
Alan Whitman (27:24):
Yeah, great question, Dan. And you're right. People get to be working in the business versus on the business, or they work on the immediate versus the important. And while both are important, the important is critical. And so that's where I come in, that's where communications comes in, both externally and internally. There is a communication opportunity that I let go by without reminding everybody why we're here and what we're doing and what we're not doing and demonstrate what we let go and what we decided to pass on. Very, very diligent in the communication activities inside the organization. Another trick of the trade is we have revamped our performance management platform to mirror strategy. How are you doing when it comes to Managed Protect Growth? How are you doing when it comes to executing our value creation plan, which is organic growth and cross-serve and margin improvement?
(28:18):
And so we have real specific, "Are you doing this? And if you are, tell us how you're doing it so that people know that we're not going to forget about it. It's not going to be a flavor of the day. It's not going to be like a sugar high where it gets excited, we get everybody a buzz, and then we forget about it. " No, we are every day reminding people of why we're here and why we're not here. And so I've written about this a lot. I know when people have gotten it when they start repeating what I'm saying, and they get it before I do it. And so my job is to change the mindset and to change the lexicon and to change the phraseology inside the organization. I mean, it's no different than people that know me know I don't like the term my client or I won.
(29:09):
And so I had a colleague that wrote an email to somebody and he copied me. And in the email, he said, X, Y, Z, I won this client today. And I wrote back to him, I say, "We won." And didn't get mad about it, didn't, didn't, but people need to think, I want them to think how we should be thinking. And so there's a lot of repeat there, a lot of wash, rinse, repeat, and pretty soon people know this strategy is what we're doing, so I got to get on board.
Dan Hood (29:39):
And then it's tied into their compensation and their reward. So that's- Hide
Alan Whitman (29:43):
Into their
Dan Hood (29:43):
Compensation.
Alan Whitman (29:44):
Exactly.
Dan Hood (29:45):
It is not just a mental exercise. There is some serious real-world repercussions of-
Alan Whitman (29:52):
When we did the strategy at Baker Tilly, a partner who's a very successful partner said, "Wow, this is great. I'm going to put a piece of paper in front of me, I'm going to get my team together and I'm going to put a line right down the middle and on one side, enhance and one side protect. And we're going to go down this client plan to figure out what are we doing to enhance and what are we doing to protect? Which I thought was brilliant. And this was an audit partner and so he needed others around him. So we are starting to think about, how are we managing, how are we protecting, how are we growing? And if you get people to think that way, then they're going to do it that way, then you know it has stuck.
Dan Hood (30:26):
Very cool. Very cool. And we talked about the enormous growth at Baker Tilly, which continues. I'm sure I know you from just what you're talking about, the plans you have at Nichols Cauley, can expect significant growth there. What's your experience of firms changing as they grow? Do you find that once you get beyond, obviously once you get beyond the serve, you take the two, three partners in a sharing an office space and they grow up to a more corporate environment, 20, 30 million, whatever the case, whatever the number may be, it'll vary from firm to firm. They get to a point where they look more like a company than just the two or three partners. When you go from that level to a Nichols Cauley or from Nichols Cauley to what Baker Tilly was 10 years ago and then from Baker Tilly for what it was 10 years ago, what it is now, how do you see firms change?
(31:10):
You don't need to go through each one of those individual periods, but what are the main changes you see as firms grow at that level?
Alan Whitman (31:17):
Well, I think it's an increased amount of discipline, structuring strategies. Firms, they don't have strategy. And the one thing I haven't mentioned, and I think it begs mentioned here, probably when you think about this and you listen to this, I have not mentioned numbers. A lot of firms say their strategy is to be a hundred million dollars or their strategy is to be 500 million or grow at 12%. That's a result. Results, result. If you do everything right, we'll get the goals that we want. So to me, this is more qualitative and quantitative. Quantitative are the results. As you mature, you'll come up with a new strategy. As you mature, you're going to have to build new systems. I often say you need to build the engines to do things with people for people because as a real small two partner, there are no engines.
(32:09):
The engines are the people. And at one point you realize that people can only do so much, Dan. They run out of theme, they run out of time. They're not a generator that just keeps running and running and running or the fan, the ceiling fan that just keeps running for you. These are people. And so you need to build the engine to do things with people for people. And sometimes in spite of people, like a growth engine, there are a lot of people that don't want to grow. They just don't want to focus on growth. That's okay. So we have to do things in spite of the people that want to focus over here. A lot of people don't like when I say in spite of, but it's the truth because some people, we want just to do the work or do the analysis or do the technical work, but yet the revenue of the organization has to grow.
(32:51):
So you'll start building engines. You'll start getting a little bit more organized in the system of the company. And so there's little tricks along the way. You'll start making investments. I remember as Baker Tilly got larger, we developed an investment fund. Well, that was a huge undertaking because it was taking profits out of the partner pool. But we knew we needed to put money aside. And so we took our medicine. Now, it was painful, didn't taste very good, but after a while, it worked. And so there's many different things, but it's becoming more of a ... I wouldn't say a company, but an organization rather than a firm. There's a difference between an organization. And one of the big changes I've often said is in smaller organizations, you're some of the parts. A partner has a book, a partner's a book, and you add it all up.
(33:46):
And you know you're mature and when you're not some of the parts, you're a whole with a strategy and an organizational construct made up of the parts where all the partners are realizing that I just can't do it my own way. My activities are meant to perpetuate my team or my units or the firms, the wholes strategy. That's a huge shift. One of the chapters in the book is the Trek to maturity. And that's mentioned in there, going from some of the parts to a whole made up of the parts.
Dan Hood (34:19):
Excellent. I wish we had two to three more days to dive more deeply into this, but that honestly, I think that's a great note to leave on the notion that you want to become greater than the sum of your parts. And that's the eventual goal. It's not a numbers thing. It's as much of it. It's a gestote. It's a feeling of the whole organization if that's where you're headed. Makes a tremendous amount of sense. Alan, thank you so much for joining us.
Alan Whitman (34:41):
Dan, it's always a pleasure to be with you. Thank you for everything you do for the profession and for the industry, and appreciate you having me.
Dan Hood (34:47):
On. Yeah, that was great. Alan Whitman of Nichols Cauley. The book that I mentioned, it's still out now. It came over late last year. Break them old, take a look at it. And again, Alan Whitman, thank you so much. Thank you all for listening. We hope you'll join us at a future webinar. This episode of On The Air was produced by Accounting Today with audio production by WenWyst Jeanmary. Rate or review us on your favorite podcast platform and see the rest of our content on accountingtoday.com. Thanks again to our guest and thank you for listening.
