also: next gen leadership will rise.
by jennifer wilson
the rosenberg map survey
editor’s note: every year, the rosenberg map survey asks the industry’s top consultants to share their observations from cpa firms across the country. how do you think the next 12 months will unfold? also, how would you assess the last 12 months?
unless there’s another round of vaccines, we’ll see more covid-19 disruption as colder weather forces more firm activities indoors. more consolidation will happen as more firm leaders feel pressure to move their problems to a larger firm and the megafirms feel more pressure to keep up with the joneses and absorb more.
more: 2024 outlook: ‘specialization is the future’ | remote work will see cuts; pe will trickle down | tech, capital will drive accounting profession growth | ‘great shakeup’ in cpa firms on the way | pe, consolidations to keep impacting accounting profession | soft skills are front and center
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at some point, perhaps longer than 12 months from now, one or more of the superconsolidators is going to falter. more than likely is some significant service failures as their lack of integration and acculturation drives turnover and a talent shortage beyond what they’re able to rescue. i hope this doesn’t happen, but it feels like some of these firms are facing a perfect storm of financial performance and growth expectations, high client demand, capacity issues and a less unified, disorganized leadership apparatus unable to respond to these challenges.
we’ll see more firms experimenting with non-traditional capacity strategies including offshoring, outsourcing, fractional staffing, hiring retirees, non-cpa resource additions like eas and strong operational and administrative resources added to the service delivery workstream and more. this, combined with automation and reducing the client base to eliminate clients that no longer fit the firm’s ideals, will allow some firms to tell a truly differentiating, “destination workplace” story that attracts talent their direction. one of the big winners in all of this could be the solo or very small practitioner who can benefit from the client-culling efforts of firms above them, trading their client base up but keeping it manageable and realizing higher fees and a higher quality relationship, too. another real winner in all of this – next gen talent. they can work anywhere. smart firms will help these ng leaders develop a vision for the firm that compels them forward and will empower them to change everything – ideal target client, product/service mix, pricing (away from hourly to subscription), compensation structures, scheduling process and talent programs galore. i can’t wait to witness this rise of the next gen leader/owner and the progressive firms that will emerge in their care and am happy to say we’re seeing some of this now. very encouraging!
last thought as i reflect: what separates the firms that will sustain from those that will falter will be the degree of selfish interest with which the leaders are making decisions that affect the entity and its future. the more firms allow existing partner compensation processes, long-held partner buy/sell expectations and the desire of traditionalist partners to maintain control to be the “tail” wagging the firm’s “dog,” the more at risk their overall sustainability.
2022 was better in some respects and worse in others. the lack of major tax legislation made the spring busy season less stressful than we’ve had the prior two years. other positives include people finally getting out there and traveling, taking time off and feeling more confident scheduling firmwide events, partner retreats and more in-person collaboration.
finally, client demand for services has never been greater and firms have many opportunities to sell new services to both new and existing clients. high client demand and short staffing led to most firms killing it financially and partner earnings coming in at an all-time high. challenges cast a shadow on these positives, though, including capacity/staffing issues and the realization that the easing of pandemic conditions and/or slowing of the economy will not lessen the shortage of cpas. in fact, in an npr podcast, going concern’s adrienne gonzalez shared that a staggering 75 percent of aicpa members became eligible for retirement in 2020. this was referring to an aicpa exposure draft that cited this statistic. whoa!
firms also experienced record levels of turnover as their people sought better-paying jobs at more progressive or flexible firms or companies. the high client demand has contributed to overselling in most firms, creating a feeling of overwhelm – even burnout – for all staff levels including partners. partners unsure of how to handle these complex issues are either responding with inaction or trying to move their problem by selling all or part of their firm to an outside buyer.
but there have been bright spots in leadership around the country, with progressive, talent-centric firms making hay during these tumultuous times, offering anytime/anywhere work, right-sizing their client bases to bring work in line with capacity, investing in dynamic capacity strategies and automation, raising fees and salaries and helping their next generation team members and leaders build a firm they love.