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how and why firm organization structures evolve

woman's hand drawing an organization chart

what firms of all sizes are doing.

by marc rosenberg
the rosenberg practice management library

“you are not required to complete the work of perfecting the world, but you are not exempt from contributing to it.” – rabbi tarfon (70 ce-135 ce)

when we started writing this post, we intended to include several traditional organization charts depicting how firms are structured at various sizes. but as we thought about it, we realized this may be a worthless exercise because (a) there are far too many different structures to list, and (b) the structures adopted by firms vary widely depending on the management philosophy of the firm’s partners.

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firms often operate for years without much structure, enjoying happiness and profitability. then, with the blink of an eye, the firm “hits the wall.” growth slows or stops. staff turn over. systems become inefficient and out of date. profits stagnate. when firms hit the wall varies widely, but it often is between $5 million and $15 million.
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pro member exclusive

best practices for executive committees

six people meeting around a table

how many people? what do they do? and more.

by marc rosenberg
the rosenberg practice management library

“a group of the unprepared, appointed by the unwilling to do the unnecessary.” – fred allen

when firms are small or newly formed, the firm’s management philosophy is characterized by some or all of the following:

  1. “we all have a vote, and we make decisions as a group.”

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  1. partners share profits and duties. “if we all pitch in and take responsibility for a certain area of the firm (admin, staff, quality control, marketing, etc.), our firm will be well managed, and we can save the cost of a firm administrator.”

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pro member exclusive

how to evaluate managing partners

plus some thoughts on alternative management and perfectionism.

by marc rosenberg
the rosenberg practice management library

evaluating the managing partner is really an upward evaluation. like all upward evaluations, evaluating the managing partner should be limited to those people who can offer input based on actual experience, not hearsay.

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this means that at firms of fewer than 10-15 partners, all the partners will probably participate. but once a firm gets beyond 10-15 partners and has multiple offices, an increasing number of partners may not have enough direct contact with the managing partner to evaluate the person. firms with executive committees may wish to limit the evaluation to those on the committee.
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pro member exclusive

what millennial managing partners face

man seated at laptop talking on phone

plus six tips for those aspiring to the role.

by marc rosenberg
the rosenberg practice management library

cpa firm managing partners often serve for long periods of time. a tenure of 20 to 25 years is not uncommon. for managing partners to serve that long, they command the unwavering respect of the partners, often cling to old practices and, toward the end, may not be the visionary they once were.

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when a new managing partner takes over, this presents the firm with tremendous opportunities to change and improve the firm. the worst mistake is for the new managing partner to carry on just like their predecessor.
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management

twelve nuggets of advice for the new managing partner

seated man wearing suit looking straight ahead

plus some thoughts on compensation.

by marc rosenberg
the rosenberg practice management library

in an ideal world, a new managing partner will have been groomed and mentored by the existing managing partner for two or three years. a great way to do this is by executive committee participation. but alas, many things at firms under $30 million are not ideal. unfortunately, we have seen many firms anoint their new managing partner with relatively little training and mentoring.

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so, our first piece of advice is to provide for a two- or three-year process of gradual transition from the current to the new managing partner. regardless of the effectiveness of the transition period, here is advice that we always give to prospective managing partners:
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management

who does what in accounting firm management

confident businesswoman seated at desk

what’s the difference between a coo and an fa?

by marc rosenberg
the rosenberg practice management library

“shooting the ball is not an equal opportunity act.” – pat riley, nba head coach

who is on a firm’s management team?

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of course, the answer varies from firm to firm and depends on its size. these are the most common members of a firm’s management team:

  • managing partner – the firm’s ceo, not necessarily a full-time position
  • executive committee or board

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pro member exclusive

why have a managing partner?

businessman giving advice to female coworker

and how they should spend their time.

by marc rosenberg
the rosenberg practice management library

“you call it ‘nagging.’ i call it ‘listen to what i said the first time!’” – anonymous

after deciding on a management style for the firm, the next issue for the partners to decide is how the firm will be managed.

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the first question is: do we want the firm managed by a leader, which for a cpa firm is the managing partner, or managed by one or more committees of partners?
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leadership

partnership vs. corporate styles of firm management

unbalanced brass scales

also: are you one firm or a bunch of solos under one roof?

by marc rosenberg
the rosenberg practice management library

“you get what you measure.” – peter drucker

in the context of this post, the terms “partnership style” and “corporate style” are used to describe a management style. these terms have nothing to do with the firm’s form of legal entity such as partnership, corporation, llc, etc.

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partnership vs. corporate style

in our work with cpa firms, we have observed two distinct styles of management: partnership and corporate.

partnership style. democracy heavily impacts the way partnerships are governed. in a democracy, every partner has a vote and there is a “majority rules” mentality. checks and balances prevent leaders from becoming dictators. the “citizens” want a reasonable amount of input into decisions. the partners sometimes feel collegiality is more important than management discipline.
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leadership

management vs. leadership

woman holding marker beside whiteboard, facing three colleagues

seven experts offer their insights.

by marc rosenberg
the rosenberg practice management library

“democracy is no way to run a company.” – marc rosenberg, paraphrased from pat riley, nba coach

during my 30-year career in the business world, i have read many books and articles on management and leadership. i’ve also heard countless speakers at map conferences wax eloquent on these two terms. here is a very short list of my favorite definitions of management and leadership.

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management

management’s job is to:

  • decide what you want to be and make it happen.
  • hold others accountable for their performance.

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leadership

the single biggest key to firm success

man looking at five giant keys on the ground

plus the three stages of evolution.

by marc rosenberg
the rosenberg practice management library

“wisdom is the reward you get for a lifetime of listening when you’d have preferred to talk.” – doug larson

when i began my cpa consulting career, our industry used one word – management – to describe similar but different terms: management of the firm, leadership and governance. but our profession has grown more sophisticated. today, firms understand the important differences between these three terms:

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management: the execution of strategies, decisions, policies and procedures to operate the firm. this includes implementation of strategies and goals, planning, managing people and improving their performance, holding them accountable and ensuring continuous increases in growth and profitability. management is the process of making sure everyone knows what to do and managing them to make sure it gets done. my thanks to charles hylan, cpa, a partner of st. louis-based the growth partnership, for the bulk of this paragraph.
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mergers & acquisitions

how private equity is impacting accounting

and how these deals compare to traditional cpa firm deals.

by marc rosenberg
the rosenberg practice management library

one of the biggest game changers in the cpa profession since the dawn of the 21st century has been the introduction of private equity in merger transactions.

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prior to roughly 2020, 99 percent of all cpa firm mergers were between two cpa firms. an early exception was the “consolidator” phase of the cpa industry from the mid-1990s through the early 2000s. this is when three companies, the consolidators – american express, h&r block and cbiz – acquired a few hundred cpa firms, spawning the creation of alternative practice structures. because cpa firms must be majority owned by cpas, this new structure featured the attest function spun off as a separate but related entity, owned primarily by cpas while the remainder of the firm was owned primarily by the consolidators.
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pro member exclusive

being a partner is great! have you told your staff?

womand and man seated side by side at table in front of laptop, hanging plants in background

don’t assume they know how good you have it.

by marc rosenberg
cpa firm staff: managing your #1 asset

conveying to staff why it’s great to be a partner at a cpa firm is one of the weakest areas of partner performance. it’s also a best practice for managing staff.

more: what it takes to get a promotion in accounting | generational differences can’t be ignored | eight strategies for recruiting | training? cpe? they’re not the same | what leadership looks and feels at cpa firms | the importance of great bosses | why staff leave cpa firms … and how to stop them | how accounting staffing has changed
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true story

we worked with a five-partner firm on the east coast on succession planning. the partners were all in their late 50s and 60s and two or three of them planned to retire in the next five years. they were wrestling with a tough decision: do we merge into a larger firm as our exit strategy or do we/can we gradually turn the firm over to our three managers, all of whom have the talent and experience to be a partner? they dreaded the former option and preferred the latter.
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pro member exclusive

what it takes to get a promotion in accounting

smiling man in shirt and tie seated at desk

job descriptions for staff accountant, senior accountant, manager and partner.

by marc rosenberg
cpa firm staff: managing your #1 asset

“the last person i ever want working for me is someone who says, ‘that’s not in my job description.’” – neil degrasse tyson, cosmologist and astrophysicist

“well-written and effectively developed job descriptions are communication tools that allow both employees and supervisors to clearly understand the expectations of the role, its essential duties, the competences and responsibilities, along with the required educational credentials and experience.” – mary anne kennedy, hr daily advisor

more: generational differences can’t be ignored | surveying your staff: why and how | why developing women partners matters | six tips for setting compensation | eleven things that good mentors do | how remote work is impacting accounting firms | how to solve the big disconnect in talent management
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this post addresses the four most common positions at a cpa firm: staff accountant, senior accountant, manager and partner.

there is no such thing as a standard job description for these four positions. each firm must define them in ways that make sense for their practice. if ever there were job descriptions that should have flexibility built into them, most certainly they would be cpa firm positions, because the expectations vary as much by the type of assignments as by their title.
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