Fixing the Broken Partnership Model in CPA Firms, Part 2:

How the Corporate Model Can Move Us Forward

In our last post, we reviewed some of the ways that the partnership model can create challenges for today’s accounting firms. But what does work for growth-oriented CPA firms?

As Allinial Global President and CEO Mark Koziel pointed out in the LumiQ podcast episode that inspired this series, we can learn a lot by studying the firms that have grown exponentially in the last 15–20 years. Among today’s top 100 US firms, for example, roughly 80% have transitioned toward the corporate model.

Why? Let’s explore some of its key advantages for CPA firms.

Structuring for Success

As firms grow larger and more complex, they have to think differently about they operate. In many cases this happens organically as new needs arise, with the addition of roles such as Chief Technology Officer, Chief Marketing Officer, or Chief People Officer. But many CPA firms are reluctant to scrap the role of managing partner—and as the firm grows, managing partners are increasingly burdened by the competing responsibilities of managing the firm and keeping up with client work.

The corporate model helps resolve this tension by dedicating specific leadership roles to the important work of managing the firm. It is organized around a CEO, whose sole job is to focus on what’s best for the firm. The CEO is supported by the C-suite, which consists of executives dedicated to the administration of the firm (COO, CFO, CIO, etc.), as well as a governing board, which provides an additional layer of accountability and oversight of the firm’s management and strategic direction.

One important distinction to note is that none of the above roles are intended to be partners. Simply changing the managing partner’s title to CEO solves nothing. To reap the full benefits of the corporate model, the firm needs to commit to making a substantive change in the way it is organized. Adopting an infrastructure that includes a CEO, C-suite, and board is essential to alleviating administrative burdens, streamlining decision-making, and eliminating conflicts of interest.

Redefining the Role of Partner

But where do partners fit into the corporate structure? Shifting to the corporate model doesn’t mean that CPA firms need to throw out their partnership agreements. It just means they need to structure them in a way that enables the CEO and C-suite to effectively manage the firm.

Although firms adopting a corporate structure may choose to implement alternative approaches to ownership, voting rights, or profit sharing, the corporate model doesn’t mean that partners will lose their say. A properly functioning C-suite and board should remain in regular communication with partners, seeking their input and conducting partner votes for significant decisions. And partners continue to play an invaluable role for the firm within the corporate model as they focus on an equally important priority—client satisfaction.

Truly Client-Centric Service

Another powerful advantage of the corporate model is how it can transform client service and pave the way for the firm to become the ultimate trusted advisor. Shifting the administration of the firm to the CEO and C-suite enables everyone else to focus on delivering more value to the client.

Firms operating under the corporate model often introduce a client coordination role to make even more of an impact in this area. Much like a customer success manager, the client coordinator is tasked with thoroughly understanding the industry and the client. They then leverage that knowledge to ensure that service lines have the appropriate staff and services to meet all of the client’s needs.

The client coordination point is particularly valuable for firms that want to move from billable hours toward a subscription model that is truly client-focused. When the firm prioritizes deep knowledge of the client’s business, they are much better positioned to anticipate and respond to all of the client’s possible needs. And when firms provide more value to clients, everyone wins.

Where to Start?

While the corporate model offers numerous advantages for CPA firms, it still represents a significant departure from the partnership model. Like any business transition, it requires a deliberate, coordinated effort to be successful.

In our next post, we’ll look at some specific action steps that CPA firms of all sizes can take for a successful transition toward a corporate structure. But in the meantime, if you’re interested in moving from theory to practice, you can connect with fellow Allinial Global members who are in the process of transitioning or have already transitioned into the corporate model by joining our Firm Size Executive Working Groups (EWGs) at Summit 2023. For details, contact Natasha Schamberger, North American Regional Director and Allinial Global Liaison to the Firm Size Executive Working Groups.