transition, staff shortages remain issues.
by august aquila
rosenberg map survey
first, while the merger frenzy continued in 2016, firms were becoming more selective in the type of firms they were acquiring. over the last several years, firms were acquiring for the sake of more volume.
more from the map survey: extending retirement turns off future leaders | firms struggle to retain clients, key players | staffing and succession still rocking firms | will staffing challenges change the definition of partner?
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2016 was different. firms didn’t want to just add more volume, they were looking for specific niches that would strengthen their existing practices. also, it became more evident that firms were struggling with the fact that they had acquired a lot of problems.
every year, the authors of the rosenberg map survey ask the industry’s top consultants to share their observations of what they are seeing at cpa firms. specifically, they are asked the following questions:
- what kind of year was 2016? what were the major trends you observed? what were the issues you saw firms struggling with the most?
- 2017 is half over. based on your experiences this year, what are you seeing? what are the major trends? what are firms struggling with and what are they working on as the year progresses?
2016 was the year that firms began to address the various problems they acquired, from differing cultures to underperforming partners. firms started to clean house and work toward developing a one-firm firm.
second, firms continue to struggle with the meaning of what is a partner. too many partners are underperforming and are adding little, if any, value to the firm. firms are struggling with this issue and some are trying to resolve it by placing their partners in tiers. each tier has a compensation level. partners need to achieve higher levels of performance in order to move to a higher tier.
third, all businesses, including those in the accounting industry, are facing a shortage of good people. i am seeing more firms focus on how they can become the firm of choice in their given markets. this means that they are looking at the five key drivers of a professional service firm – markets, clients, people, finance and underpinning beliefs – and exploring ways that they can become better in each driver.
the major issue i am seeing with clients is transition. firms are becoming more aware that this is a key issue going forward. i see firms changing their deferred compensation plans by tying them to the partner’s transition plan. partners who don’t implement a transition plan can lose up to 50 percent or more of their deferred compensation.
as in 2016, merger activity is still hot. however, buyers are being more selective and are no longer just buying revenue for the sake of revenue. they are doing more strategic mergers.
finally, i am seeing firms develop partner compensation plans that create a larger differentiation between the top producer and a lower producer. partner base compensation is being adjusted accordingly based on production and value enhance criteria.