Using Leverage and Balancing the Pyramid

Many accounting firms have become under-leveraged, creating significant problems with succession planning, growth, profitability, and staff retention. There is a direct correlation between the ability for partners to delegate and leverage their time and the ability to grow the firm and increase profitability. In addition, this issue has been fueling the volume of merger activity over the last five years.

The demand and competition for quality staff is a major obstacle in establishing the proper balance, mix, and ratio of partners to staff. Many firms looks more like an inverted pyramid, resulting in partners doing manager level work and spending less time with practice development activities and neglecting the financial management of their engagements. The lack of a traditional pyramid structure with inadequate numbers of quality staff to delegate work has also hindered partners in their ability to be more innovative and creative in meeting the needs of the marketplace. Some of the questions that firms need to consider in balancing their partner and staff structure are:

  • Is the firm “carrying” too many underachieving partners and managers? Is the firm too “top heavy”?
  • Does the leadership of the practice need to make some tough business decisions regarding balancing their partner and staff structure?
  • Is the current partner compensation program demotivating the partners to delegate to junior partners or managers? Are partners being held accountable for delegating work and increasing profitability on their engagements?
  • Is the firm properly developing its staff so that partners and managers can leverage effectively?
  • Are high billing rate partners doing too much low level work?
  • Is the firm’s scheduling process taking into account the proper matching of work and talent, and career development? Do we have enough “quality” staff in the appropriate positions to have a successful delegation process?

Return on Investment
Delegation and leveraging requires the proper implementation that may be time consuming at first. However, the ROI can be extremely rewarding, such as:

  • A more engaged and empowered staff
  • Increased productivity and efficiency
  • Increased realization on engagements
  • More innovation and creativity by partners
  • Increasing the probability of creating and implementing succession plans.
  • Gaining a competitive advantage in pricing of engagements

If You Build It, They Will Come
You’ve heard the saying—“If you build it, they will come.” There is no substitute for talent in CPA firms. Partner leveraging of quality staff, more than any other factor is the criteria that most often separates the best and least successful CPA firms.

Supplementing leveraging with a formal performance management system for partners and staff together with recruiting the best professionals available will configure your pyramid structure for a more profitable firm with a succession plan. Developing a pyramid structure with a proper mix of partners and staff is difficult, however the benefits far exceed the pain to fix it.