IPA S Most Recommended Consultants Share Their Predictions, Trends And Insights For 2008 Part One

Transcription

1 IPA S Most Recommended Consultants Share Their Predictions, Trends And Insights For 2008 Part One March 2008 Volume 22, Number 3 Each year, IPA names the Most Recommended Consultants in the October issue, as named by the firms participating in IPA s Annual Survey and Analysis of Firms. We asked these leaders to share with us their predictions, trends and issues for Below is Part One. Part Two will be highlighted in the April 2008 issue. Sam Allred Declining parity: Firms will continue to move away from parity as leaders recognize the need to identify and treat emerging leaders in a special way within their firms. These emerging leaders will be selected far more often for special training, coaching and assignments. They will be coached toward the ownership table in the firm and not left on their own to see if they can advance. Part-time partners: Many firms will embrace the concept of part-time partners. Individuals who have proven ability to function at a partner level but who also desire a better work/life balance will be invited to become partners and work less than 2,000 hours per year. By the end of 2010, we will see hundreds of part-time partners in the profession. Closed compensation system: An increasing number of firms will adopt a closed compensation system where partners know the average partner compensation in the firm but don t know what individual partners are making. One driving force behind this trend will be a concerted effort to move away from using book of business as the major evaluation factor in determining compensation. Firm leaders will base a greater percentage of partner compensation on the achievement of pre-determined firm and individual goals.

2 Too many firms have inadequate bench strength: Bench strength is defined as those individuals in the firm who have the potential to become owners in the next five to seven years. Ideally, firms should have 200% bench strength. A firm with 10 existing partners should have 20 individuals who have the ability to become partners in the next five to seven years. At a minimum, firms should have 100% bench strength. Far too many firms fall below this level and have no written plan for finding and developing future firm leaders. Transitioning clients at partner retirement: A staggering number of partners will retire from the profession in the next decade. Firms are being entirely too casual in their planning for successful client transitions. Firm leaders need to become great at developing the processes and systems to successfully retire partners from the firm and transition clients to the proper individuals. Declining employee loyalty: We will never again see the level of loyalty shown by those who are partners in firms today. The paradigm of a traditional lifelong employee is gone. The model adopted by many young people today is to step up to new career opportunities every two years. Due to this variety of job experiences, resumes of the future may well resemble small brochures. Firms need to become experts in orienting new employees in ways that instill a sense of pride and loyalty from the very beginning of someone s career. They must also become very proficient in helping employees advance rapidly in their careers. Gary Boomer Mergers and acquisitions will escalate with values starting to fall because the supply is growing faster than the demand. Five years ago these arrangements primarily rewarded the retiring partner(s). Younger partners will benefit from the new deals and both can be winners if structured properly. More firms will move toward value pricing and modify their business model. Value pricing requires a person in charge who has both the responsibility and authority for pricing. Fixed price agreements and change orders will become required tools. The supply of technology personnel will tighten as firms look for business analysts rather than engineers. The demand is high and competition is rapidly increasing for those who have technology skills and business savvy. CIO positions in larger firms will require planning, innovation and higher-level

3 executive skills rather than just technical, budgeting and project management skills. CIOs must be able to innovate, market internally and build effective teams of internal and sourced resources. Firms should include their CIO on their management teams. Politics, consumer advocates and the IRS will force firms to disclose whether they are outsourcing outside of the U.S. and to mask Social Security numbers. Check out IRS Reg and Revenue Procedure Gale Crosley Firms are continuing to bask in the glow of having more work than they can service. Firms will continue to experience a shortage of resources at the same time there is fierce competition for the best clients. The profession has focused on recruiting and retention for years, but doing more with less hasn t been a priority. We can learn a lot from the manufacturing world, where Lean and Six Sigma projects squeezed waste and increased margins. There is room for improvement in the way firms deliver work. Firms are going to look more closely at this, as it becomes apparent that resources will continue to be tight. Alternatives like paraprofessionals and sourcing will become more prevalent. The pursuit of new clients will continue to be highly competitive. Firms that become more sophisticated with business development will land the best clients. Hiring professional business developers can catapult a firm into a new level of expertise and achievement in developing opportunities. Firms will develop a more sophisticated HR function. Human resources will go beyond compliance into more recruiting and talent management. I m delighted to see this trend, because far too many people have left public accounting because the conditions were not conducive to their success. Succession and mergers will be the dominant theme for at least the next five years. Strategic planning should include serious consideration of a firm s future. Many firms haven t invested in governance, people, growth, technology or management. Yet they don t necessarily view these investments as the very things that will sustain the firm, regardless of whether the strategy is to stay independent or merge up. More firms will be forced to reckon with past decisions. Many will become disappointed about their limited future options.

4 Standards are going to dramatically impact market dynamics. Regulation is one of the levers that drive change and innovation. We might not know exactly what those changes are, but being aware will help craft the best strategies. The other longer-term change is a revision of the tax laws. This is not imminent, but when it happens it s going to rock our world. Allan Koltin Freeing up of staff. I think we will see layoffs at the Big Four firms, as some of the auditing and related Sarbanes work begins to dry up. These firms were essentially in a hiring frenzy in the past five years and, while they will attempt to deploy some of this talent back to the middle market, they will reduce their staff to accommodate reduced growth percentages will be the biggest year yet for mergers and acquisitions. According to my recent calculations, over 90% of the Top 100 firms are involved in some type of merger/acquisition discussion (up, down and sideways). I think post-tax season we will see the fruits of many of these firms labors. The merger and acquisition trend is not restricted to the Top 100 firms, as I believe firms of all sizes are figuring out that combining resources and talent can help a lot of partners get their firms to the next level of growth and profitability. The tax practice will be rejuvenated. Let s face it since 2002 tax and related areas have been the odd man out and essentially were put on the sidelines with the passage of Sarbanes-Oxley. I believe that firms will be returning to tax as quickly as they left it, and we will see an escalation of tax growth and tax-related projects. This will also put back into popularity the recruiting of tax talent at all levels within the firms and I think this will cause a rebalancing of the tax partners within the firm (especially at the larger firms) and put them on par with the audit partners. For local and regional firms, a wonderful growth area has been tax-related work for public companies. I think we ll begin to see an increase in this area for these firms. ssues that I see as significant to the profession involve the economy, growth and future leadership. While one could argue that the Golden Age is or will soon be coming to an end, I think 2008 should still be a decent year for CPA firm growth and profits. Having said that, it does appear that we will be entering into a recession sometime in the latter part of 2008 or early While businesses and

5 individuals always need accountants (and their services), it will ultimately reflect some tightening of the belt in terms of the organic growth rates for CPA firms. The interesting dilemma for accounting firms will be how they handle the labor pool. As firms work hard to recruit and retain talent, it will be interesting to see whether they will be able to hold onto this talent and potentially redeploy it in other areas. It may be nothing more than a breather for accounting firms that have been understaffed for a long time. They may actually welcome a short-term flattening of the growth curve. Another trend will be the return of growth and marketing to the profession. We essentially have been in a low marketing/sales mode for the last five years, as organic growth has benefited many firms that were simply in the right place at the right time. I think we ll find a lot of firms going back to the basics regarding the training and retooling of partners and staff in terms of how to develop new prospects as well as cultivating referral sources. For some partners, I think many of them may have become spoiled in terms of the pendulum of business swinging their way, and they will find it will be much more difficult to cultivate business this time around. Last, a trend that continues to plague the profession and gets more attention each year is that of future leadership, primarily as many first- and secondgeneration managing partners retire, as well as strong leadership in various service lines and niches within the firm. Fortunately, firms today are not only recruiting great talent, they are also focused specifically on finding the right talent, in terms of who can fill future leadership positions in the firm. INSIDE PUBLIC ACCOUNTING - (ISSN ) The Competitive Advantage For Accounting Firm Leaders. IPA is the profession s authoritative independent newsletter for reporting and analyzing news, trends, strategies and politics. 2008, The Platt Consulting Group, LLC. All Rights Reserved. It is a violation of federal copyright law to reproduce all or part of this publication or its contents by any means. INSIDE PUBLIC ACCOUNTING is published monthly by The Platt Consulting Group. Principals: Michael Platt and Kelly Platt. Send address changes to INSIDE PUBLIC ACCOUNTING, 4000 West 106th St., Suite , Carmel, IN Subscriptions: U.S. $379; Canadian and overseas air mail US$459 (U.S. bank or international money order). Call about corporate discounts. Back issues: Subscribers $25; non-subscribers $50. For reprint information and pricing: (317) ; info@plattgroupllc.com Phone: (317) Fax: (317) Web: Subscribe to INSIDE Public Accounting See Page -6-

6 Subscribe To SPECIAL OFFER FOR ONLINE VISITORS! INSIDE Public Accounting provides you with Your Name: Best practices, countless ideas, tips and resources to better manage your firm News and happenings around the profession, its people, its firms Analysis of issues, firm news, benchmarks and trends Strategies for dealing with your toughest issues and much more! Please subscribe me to INSIDE Public Accounting (12 months for $379). Please contact us about multiple copy discounts. Company/Firm Name: Address: PLEASE FAX THIS FORM TO (317) City: State: Zip: Phone: Fax: Payment Type: Check Enclosed MasterCard Visa C.C. Account No. Name That Appears on the Card: Billing Address: Exp. Date: Three Digit Security Code from the back of the Credit Card: THE PLATT CONSULTING GROUP, LLC 4000 West 106 th Street, Suite Carmel, IN Phone Fax Please make checks payable to: The Platt Consulting Group, LLC