Fixing the Broken Partnership Model in CPA Firms, Part 3: Practical Tips for Shifting to the Corporate Model

As we’ve seen in Part 1 and Part 2 of this series, the corporate model offers CPA firms a compelling alternative to the limitations of the partnership model, particularly for those seeking sustainable growth. But understanding the benefits of the corporate model is one thing, and putting that knowledge into practice is quite another.

Realistically speaking, what should a transition from the partnership model to the corporate model look like? Here are some practical steps that can help your firm get started.

Begin with the End in Mind

Big changes can be daunting. To achieve the alignment necessary for a successful transformation, firms must be crystal clear about their end goal. This means taking the time to analyze gaps in the current organizational structure and envision exactly what your firm and its leadership will look like at the end of the transition.

When starting a corporate transition, many firms find it helpful to engage a third party to determine the best ways to structure and communicate the changes they are planning. There may be legal and regulatory requirements to consider when addressing the partner agreement, for example, as well as internal resistance to the idea of a new structure and approach to decision-making. Identifying and addressing these issues early in the process can make a significant difference in the final outcome.

Start Small and Build the Basics

One of the easiest action steps for firms to start with is filling the role of CEO. Starting here can be particularly fruitful because the new CEO can help the firm gradually accelerate the decision-making process while building out the rest of the C-suite and board.

When fleshing out the firm’s new leadership roles, keep in mind that organizational structures will vary based on firm size. Transitions will look very different for a four-partner firm and a 400-partner firm, but in the beginning the important thing is to be clear about the necessary leadership roles and the requirements for how and when they should be filled. For smaller firms where leaders tend to wear many hats, it may help to map out structural growth incrementally to pinpoint where you need to be two, five, or even ten years—or as the firm reaches different revenue milestones.

Similar considerations apply to building the board. Like your org chart, the board will continue to evolve along with the firm as the board-to-partner ratio changes over time. The key is taking the time to set parameters that will help you identify the right people for the job and clearly define term limits and other criteria for how the board will operate.

Rethink Incentives to Boost Engagement and Retention

We’ve talked about how you can get started with changes to firm leadership, but there’s one other practical action to consider if you’re interested in leveraging your firm’s transition to the corporate model as an opportunity to strengthen employee engagement and retention. In the LumiQ podcast that inspired this series, Allinial Global President and CEO Mark Koziel discussed the idea of implementing a phantom stock plan as a way for firms to rethink traditional bonus arrangements and promote a stronger sense of ownership and engagement across the entire firm.

Similar to the idea of restricted stock units (RSUs), a phantom stock plan is a form of equity compensation that grants hypothetical shares of company stock to employees based on predetermined criteria. It doesn’t necessarily entail voting rights, however, and stock can typically be issued to anyone who wants it.

This type of arrangement can be incredibly useful for firms looking to reward younger generations who actively contribute to the firm’s value but don’t typically get to experience the economic benefits of ownership in the way that partners do. It’s also a great incentive for retention and fostering a sense of ownership and inclusion by opening more seats at the table.

Leverage Your AG Membership

Transitioning to the corporate model isn’t a quick-and-easy, one-size-fits-all process, and chances are that this post may have sparked even more questions than it answered. But as an Allinial Global member, you have a distinct advantage in your access to the real-world knowledge and experience of our worldwide community of innovative, best-in-class firms.

Connecting with our member communities in AGConnect and at AG conferences and events is a great way to start learning how similar firms are progressing on their journeys and what’s working well for them. And that’s the true power of Allinial Global—independent firms talking to each other, sharing best practices, and winning together.