Joey Havens
Becoming the firm of the future: Is your firm suffering from an identity crisis?

Defining who your firm is—and is not—is the first step to a successful strategy.

November 17, 2014
by Joey Havens, CPA

Editor’s note: This article is adapted from the first chapter of Joey Havens’ white paper, Becoming the Firm of the Future, which is available in the AICPA Private Companies Practice Section Human Capital Center. The white paper includes an extensive checklist of steps that firms can take to better position themselves to become the firm of the future, as well as discussion questions they can use in firm meetings or partner retreats.

CPA firms can take advantage of tremendous opportunities in the coming years, but we also face many challenges, including increasing market and technical complexity. Our past success and how we built our firms’ strategy for growth hinder us from addressing these challenges. To maintain relevance and prosper in a changing marketplace, a clearer sense of our identity is required. Firms that fail to better define their identity will miss new opportunities and risk being overtaken by more disciplined firms or watching their own relevance to clients decline.

Three signs that a firm lacks identity

Most firms don’t know who they are. Here are three signs that a firm has failed to chart a clear course:

Client hoarding. In many firms, each partner can make his or her own determinations about client retention and which opportunities are worth pursuing. But, often, that means firms’ client lists and service offerings become cluttered with isolated engagements that may be profitable but have no strategic value. These clients occupy the firm’s resources, leaving it without the time, energy, or strategic vision to cultivate the depth of knowledge and anticipatory skills to remain relevant in a new marketplace. Firms aligning client retention and acceptance with their long-term strategic goals will generate more opportunities for abundant and sustainable growth. This also provides for leveraging of knowledge, increased referrals, higher value to clients, and greater profit margins.

Being all things to all people. Many firms attempt to minimize risk by offering a broad-based array of services to a broad-based array of clients. But today’s clients demand more than compliance. They want insights, strategic vision, discovery, forward-thinking opinions, thought-provoking questions, and more proactive alignment with the challenges they face. It is difficult for our firms to meet these needs if we spread ourselves thin and attempt to be all things to all people. Our firms have not shown the discipline to say no to opportunities that distract us from being great. As Jim Collins wrote in his book Good to Great, the enemy of great is good. 

Complacency. Firms prosper when partners are accountable for progress toward the firm’s goals, growth, leadership and people development, continuous learning, and alignment with the firm’s mission. But, when firms grow complacent and fail to define who they are, they have a hard time establishing partner accountability. Not having a strong identity makes it hard for firms to distinguish between results that contribute to strategic growth and those that are irrelevant. It’s easy to be busy with low-value activities.

Defining questions

Is your firm exhibiting any of the three signs? These questions can help you recognize the problems you may have and generate ideas on how to better respond to a changing marketplace:

  1. Has your firm adequately defined the clients or industries it serves and the services and specialties it offers? Are there too many? How many industries and services can your firm really develop strong relevance in?
  2. Do your firm’s client acceptance policies reflect who you are and are not? How can you ensure your policies better reflect your identity?
  3. Have you reviewed the client acceptance list for the last six months to verify that only “ideal client prospects” are being on-boarded?
  4. Firms often are reluctant to turn away a potential client, even if it doesn’t offer strong profit margins, referral opportunities, or other strategic benefits. Are you willing to transition “good business” out of your firm because it does not fit your long-term strategy? What clients have been transitioned out due to poor performance or poor fit?
  5. Among the industries and services listed on your website, which ones represent areas in which you have critical mass? Which ones represent areas in which you are truly great, so much so that you distinguish yourself in the marketplace?
  6. Have you identified areas of your firm that will continue to have reduced profitability because they offer no real competitive advantage? Do you provide services that produce data and information for clients but don’t offer real value based on knowledge, wisdom, and thought leadership?
  7. Are your team members specifically aligned with your areas of focus so that they quickly grow in knowledge and wisdom about these areas?
  8. Are your individual partner goals aligned with your core strategies? Do your partners work together toward a common goal that is in the firm’s best long-term interest, or do they work in unrelated silos? Does your partner compensation system reward results on significant strategic goals and for continued professional growth?

What can we learn by asking questions like these? We gain insights into who we really are as a firm. These insights identify opportunities as a firm to say no to things that will not add long-term strategic value. These questions provide us the opportunity to bring more accountability to the alignment of partner results and high-value strategic goals. Firms that define who they are will generate a focus that provides sustainable growth and profitability. This focus will provide greater relevance to clients, grow depth of knowledge, enhance team member leverage, and improve profitability by delivering more worth to our clients. Our profession is well-poised to capitalize on the many opportunities available in a transforming business world.

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Joey Havens, CPA, executive partner of Horne LLP, is co-author of Creating Value and author of his BeBetter Blog, found at hornellp.com.