We hear firm leaders tout, “We’re one firm.” Yet, when we assess their practice, we find many behaviors, processes, and measures that are counter to one firm. Before we look at those, let’s define what a one-firm business model is – and what it is not.
The concept of one firm was devised to alleviate the impact the partnership model has had on public accounting, where an entrepreneurial business model turned instead into a siloed management structure or what is referred to as an “eat what you kill” model. These silos result in a lack of teamwork, hoarding, duplication of effort, a lack of leverage, limited or inconsistent investment in people, and more. To address these issues, firm leaders must shift to a one-firm concept where firm leaders strive to and operate in a unified way, rather than as individual silos. Operating in a one-firm environment requires:
- Developing a unified vision for the future of the organization and a strategic plan that all are working toward
- Streamlining decisions by roles and empowering an executive and/or management committee, rather than each partner having a say in every detail of running the firm
- Defining ideal target clients and client acceptance procedures at the firm, service line and industry segment level and not allow the firm’s product/service and client mix be defined by each partner
- Approaching clients as firm clients rather than an individual partner’s clients
- Investing in an operational infrastructure and resources, developing team members, and measuring and rewarding leverage
That all sounds good, right? And you probably would say that yes, you are committed to one firm, too. However, what behaviors, constructs, or outdated measures do you still have in place that are preventing you from truly acting as one firm? Let’s explore the top five inhibitors to a one-firm approach for you to assess which ones may still exist in your firm:
- Leadership behaviors – high-functioning firms have high-functioning leaders. The three most common leadership behavior deterrents to the one-firm model are lone-wolfing, selfishness, and hoarding. Lone-wolfing, or the entrepreneurial spirit has been a hallmark of public accounting and has provided many benefits innovating new services to help clients, new ways of serving them, the use of technology and more. However, when all partners are doing their own thing, it creates little fiefdoms under one roof instead of one firm moving in the same direction that leverages the skills and gifts of each partner for a common purpose. That’s where selfishness comes in, and while we all have selfish-interest, if leaders operate from it rather than the greater good and common vision for the firm, it causes internal competition, churn, and lack of trust – all of which will tear down and devalue your firm. Coming together with a common vision and agreed upon plan to get there creates efficiencies and enables decision-making because everyone is working towards a common goal rather than for themselves. Great leaders acknowledge and share their selfish-interest and submit to the greater good and common vision firm leaders defined for the organization.
- Compensation models – traditional partner comp models often overly reward individual performance and effort. Focusing on billable hours and book of business as the primary emphasis for paying partners incents hoarding and selfishness, which are all counter to one firm and do not incent people development, a team approach to clients, or selling the ”right-fit” clients for the firm. Partner comp models need to be updated to be performance-based to align with the firm’s vision, strategic plan and growth strategies. A good performance-based partner comp model includes a salary or draw, a bonus based on agreed upon goals, and an element that provides a return on equity. The trick is to have enough of the bonus be incentivizing, usually around 30% of total compensation, and that rewards firm performance and less individual performance. To be one firm– means less (or no) emphasis on billable hours and individual book of business.
- Partner buyout formulas – many firm leaders have come to the realization that their buyout formula is too rich and no longer sustainable for the number of partners retiring in the next 5-10 years, so the buyouts are being renegotiated for current retiring partners and a new buyout formula defined for the remaining partners going forward. The negative impact many current buyout formulas have on one-firm behavior often include:
- Buyouts calculated on a partner’s book of business, which incents hoarding clients and not transitioning them before retirement. Partners sell and keep clients that are not profitable, not fun for staff to work on, or not leveraged, so the client only has a relationship with the partner. This makes it difficult to transition and retain the client when the partner retires.
- Buyouts are based on a partner’s shares, which can also incent hoarding, and the multiple used to calculate the value is often over-inflated.
Firms that move to a performance-based compensation model where their buyout is tied to a multiple of comp will further their one-firm approach.
- Service lines and scheduling –when firms allow silo-based scheduling of jobs and resources, they risk duplication and inconsistency, which is expensive, makes it difficult to train staff, and can impact quality and increase risk. If you’re not scheduling and planning capacity across the firm, you likely have pockets of team members being overworked and others underutilized. Assigning a single leader for each major service line, like tax, audit, client accounting, advisory, creates a consistent one-firm approach for selling and serving clients, defining consistent processes, workflows and technology use, and scheduling and managing capacity.
- Remote and hybrid work – even with the significant move to remote work over the last couple of years, and the hybrid work model being here to stay, firm leaders are still grappling with consistent messaging and expectations for remote and hybrid work. You can’t operate as one firm if one partner or group says team members have to return to the office and clients have to be served onsite, while other partners and groups are managing a truly flexible, hybrid team and service model. A one-firm approach requires refraining from comments that alienate your remote team members, such as “learning is not happening or not as effective unless staff are in person” or “remote workers don’t have visibility and can’t get promoted like those who are in the office” and requires providing parity in remote team members’ career development, promotions, and client assignments.
Which of these one-firm inhibitors do you still have in place? What would you add to this one-firm detractors list that, if changed, could enable you to better manage leadership behaviors, initiatives, and other constructs as “one firm”?
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