Earlier this month I accepted an invitation to participate in a web seminar organised by Accountancy Age where I joined a panel with Jane Galvin, Head of Professional Services at Barclays Corporate and David Evans, UK Senior Partner of Mazars LLP to answer questions on the future shape of accountancy firms by Gavin Hinks, editor of Accountancy Age.
During the hour “grilling” a number of interesting issues were explored and those who are interested should look at the recording (
http://finance.brighttalk.com/node/827). For my part, the most interesting themes were as follows:
What has been the impact of the recession on accounting practices?
My feeling is that accountants, after enjoying many years where they have achieved 15-20% annual growth without too much effort, have had a dose of their own medicine by taking a long hard look at their internal processes and costs (both staff and discretionary). At haysmacintyre, we have also concentrated on ensuring that we continue to provide the very best service to our clients. This has meant thinking long and hard about where we can really add value.
I also observed that with the shake up across the market generally, we had been the fortunate recipient of some really high quality experienced accountants who had become disillusioned with the way that some of the larger firms had managed their adaptation to a tougher economic climate.
Jane agreed with this view and added that the downward fee pressures has meant client loyalty has diminished and that a more positive impact was to force partners out of their silos to work in teams to get the most out of their most significant clients.
David added that it was also important to adapt to a different approach to the market and this required “razor sharp focus” on the objectives and business model.
Are accountancy practices taking a more strategic approach now?
Jane was quick to observe that whilst accountants have always advocated the need to focus on cash flow and profits, for many years the accountancy profession was more focused on top line growth and fee income. She started the ensuing debate about the extent to which accountancy partnerships were becoming more “corporate” in their management.
Whilst at haysmacintyre we have a corporate structure with a managing board, we remain aware of the need to ensure that all partners buy-in to key decisions and strategies without compromising the speed with which we can react and change.
Jane urged firms to explore the impact, benefits and alternatives to partnerships but was at pains to stress – with some good examples – that both corporate and partnership structure could support a high degree of success (although she suspected that the partnership team may have had to work a little harder). Interesting that she predicted “in 15 years the majority of accountancy firms will have a corporate structure”. She felt that the indicators of a lack of strategic approach were: partners not accepting change, a lack of tough action on partners who are not contributing, contributing partners who do not want to support non-contributing partners and, most importantly, management teams that do not deal with underperformance generally.
Does the partnership model have a future?
Whilst I strongly believe it does, I indicated that once a practice is beyond around 25 partners it has to adopt a corporate style of management to survive. However, a more pressing issue is that many of the new generation of accountants are either not attracted or driven by partnership.
David indicated that with 13,000 people and 600 partners they operate at Mazars as a global business with a corporate structure but that the challenge was to ensure that the partners are engaged in the decision making process even though the board runs the business. Once a year, all partners vote on the leadership and the key strategies but then leave the management teams at a country level to implement and manage the business on a day to day basis.
It was interesting to hear this and contrast it with our approach where the buy-in and involvement of 24 partners is crucial to the success of the business
What about the role of non-accounting professionals within accountancy firms?
Jane was encouraged to see that many more firms now sought external advice – and many turned to their banks to help with the modern management challenges. She saw evidence of a greater reliance on HR directors and FD/CFOs at board level and even NEDs within the larger firms and this was filtering down to many of the Top 50 firms
I commented on the professionalisation of management as it is something at haysmacintyre we have been committed to for some time, with senior finance, HR, marketing/business development people as well as a Chief Information Officer. We also draw on other relevant external advisers where relevant.
David, when asked about whether we would see practice heads or even chief executive officers as there are in law firms, indicated that this would be the natural next step – although he counselled that such individuals would need to have a deep understanding of the mindset of a partnership.
What are the remaining major challenges?
Jane suggested that a key question for nearly all firms was that of managing the ageing partnership and, often, the problems of a lack of quality managers coming through the ranks. Allied to this is the rather different mentality of today’s young professionals. She indicated that many firms had tried to tackle succession over the past 18 months.
I commented that the new age discrimination legislation – allowing older partners to extend their working lives way beyond retirement age - may be perceived as a block to younger partners so active management of expectations was required.
Jane indicated that many firms saw mergers as a way to promote growth and increase progression opportunities to provide the type of environment required to enable the “Generation Y” partners – who want the financial rewards but with more focus on work-life balance – to thrive.
David felt that the biggest threat to the accountancy profession was similar to most commercial organisations – the demographics of the Western economies that forecast that there will simply not be the right quantity of the right calibre of staff in the future.
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