Is the Partnership Structure Dying?

Source: Partner Insights

The following includes excerpts from PI, reproduced with permission:

Through all of the rapid change in their external environment, “accounting firms have been slow to change their governance structure. And while the partnership structure may work for the partners, neither market forces—nor your clients—will wait while you hold a partners’ meeting to make decisions relevant to your clients’ needs. Consequential decisions must be more rapidly responsive than can be done with traditional firm management structures.”

“Professional services firms have two major choices. They can reshape their firms to meet the needs of the prospective clientele, or they can ignore the needs of the clientele, and simply run their practices predominantly with the needs of the firm in mind. The first is an exercise in growth. The second is an exercise in imminent disaster.”

Given the diversity of today’s CPA practices, the market may have “little need for the practice you feel passionate about.” To deal with this, “you can:

Go somewhere else to find the market for your particular skills.
Educate yourself in the kind of practice your market needs.
Bring in someone with the skills and experience your market needs.
Find a firm with complementary skills and merge or acquire it.
Form strategic alliances with firms who have the expertise that you are lacking.

“What you can’t do, as a professional firm, is something the product people do very well—change the needs of your market to match your skill.” (For example, Microsoft caused the market to adopt Word over WordPerfect.)

“Can you imagine an accounting firm specializing in construction accounting converting a market dominated by industry to go into the construction business?”

“In Part II, I will discuss the partnership structure and why it may not be viable today.”

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From Partner Insights, Aquila Global Advisors, LLC, September 23, 2008, www.aquilaadvisors.com.