For several years now, accounting firm leaders have heard experts share various challenges that must be addressed to ensure future success. These issues have been on countless partner retreat agendas year after year: launching advisory services, changing governance models, improving accountability, developing the appropriate talent strategy, or addressing succession.

We have seen several firms attack these issues head on, and as can be seen in the latest INSIDE Public Accounting Insights report – the IPA 500 – these firms are beginning to demonstrate higher success rates as a result. The question is why more firms haven’t addressed these challenges.

Usually, the issue isn’t that firms lack the intelligence or strategic insight to solve these challenges. Accounting firms are filled with talented, ambitious professionals who generally understand what needs to change.

The issue is that each of these challenges requires change and change is difficult. It requires uncomfortable conversations and decisions that may affect people’s compensation, authority, status, or sense of identity.

It’s not a strategy problem.

It’s a courage problem.

Obstacle to Change – Partner Activation Barrier

At the top of the pecking order in most accounting firms are hard-working partners with large books of business. They made the partner ranks by maintaining high productivity rates and demonstrating strong client service. Their status affords them nice compensation and some semblance of control. The silent truth most firms face is that many firm partners would prefer to maintain what has worked in the past instead of changing to succeed in the future.

Firms are beginning to realize this mindset causes conflict and an obstacle to change. I refer to this as the Partner Activation Barrier.

Choose any of the challenges firms try to address through a sound strategy and you will find if success isn’t achieved, it likely languished at the Partner Activation Barrier:

  • A firm can appropriately identify potential new advisory services, hire the right individuals to lead the effort, determine how to market these services and price them – and the effort stalls because partners do not shift to an advisor role with clients. Instead of learning to bring all the firm’s services to support a client, they choose to stay in a compliance mindset, valuing their specific service more than the firm. Choosing to stay in this compliance mindset limits the success of new advisory services.
  • As firms grow, their governance models often need to evolve, eventually leading to a different governance model than one in which every partner has a say in every decision. Moving toward a new governance structure, led by a smaller board of directors and a CEO or managing partner, can give a firm the ability to make decisions more quickly and strategically. But it can also mean taking someone’s input away. If partners do not commit to following the new governance model, leadership may be challenged in ways that limit the future success of the firm.
  • When the conflict between maintaining partner status and firm progression begins to increase, a typical reaction is a cry for increased accountability. The partners see behavior in other partners they would like to correct, and they ask leadership to create policies and procedures to hold the partner more accountable. Unfortunately, the policies are a poor substitution for partners holding each other accountable to the standards and strategy established by the firm.

Impact of Resistance

When the resistance to change is strong, firms will often begin to hesitate in decision-making.  This isn’t a sign of poor leadership, it is a realization that because decisions have personal consequences, the outcome of the decision may not be successful.

This hesitation leads to a delay in adaptation. Unfortunately, if a firm doesn’t adapt it won’t just stop moving forward, it can begin to slide in the opposite direction.

When the Same Conversation Keeps Coming Back

This is how firms get stuck.

The issue appears on the retreat agenda. Partners discuss it. Everyone agrees it’s important. Then the year gets busy. The next retreat comes around, and the same issue is back on the agenda.

This happens with governance. It happens with advisory. It happens with succession, pricing, partner accountability, and other decisions that are difficult because someone will be affected.

Eventually, people become tired of talking about it. The firm begins to accept the lack of progress as normal, and that’s dangerous.

When leaders (and partners) repeatedly discuss an issue without acting, they send a message to the organization that the issue isn’t truly a priority. And everyone notices.

The problem isn’t necessarily that the original strategy was wrong. It may be that nobody was willing to make the decisions required to execute it.

Inaction Can Undermine the Firm’s Future

What firm leaders often don’t understand is that they are selling the firm whether they realize it or not.

Even if the firm isn’t looking for a merger partner, the selling is happening internally as partners transition from one generation to the next. Future partners are evaluating the firm, too. They are looking at governance, culture, economics, opportunities, and whether the firm is positioned for the future.

Succession isn’t simply about finding someone to take over a retiring partner’s clients. It’s about building a firm that the next generation wants to own.

That requires today’s leaders to make decisions that may not benefit them personally but will benefit the firm they eventually hand over.

Courage Starts With Believing in the Firm

Leaders who make difficult decisions are those who strongly believe in the long-term future of the firm.

They believe in the next generation. They understand that growth requires change. And they trust in themselves, and that doing what is best for the firm will ultimately strengthen everyone connected to it.

It means leaders must distinguish between what is best for an individual partner today and what is best for the firm over the long term. And every time, one or the other wins out.  The more the individual wins, the more it hurts the firm.

Sometimes, an outside perspective can help. A consultant removed from partnership dynamics can ask difficult questions and challenge leaders to address issues they already recognize.

At Thomson Consulting, we have helped firms work through difficult conversations involving governance, partner alignment, succession, and strategic change. We’ve had these awkward conversations in our own firms.

The courage to act doesn’t mean making decisions quickly or without consideration. It means being willing to make the decisions the firm’s future requires – even when they are difficult.

Sometimes the hardest part of strategy isn’t knowing what to do.

It’s deciding that the future of the firm matters more than the discomfort of getting there.