As CPA firms grow and evolve, many discover that the governance model that once served them well now struggles to keep pace.

If decision-making slows, accountability falters, and leaders feel stretched between strategy and operations, the question is whether your governance structure is working for you, not against you.

Governance is the system that determines how leadership aligns, how priorities are set, and how quickly the firm can act when opportunities – or crises – arise. The challenge for many firms is recognizing when that system has reached its limits.

Growth Can Outrun Structure

Growth is one of the clearest signals that governance may need an update. As firms expand in size, revenue, service lines, and locations, what used to be an informal process can become too time-consuming.

In a firm with a handful of partners, the group can spend a lot of time hashing out a strategic plan or partner compensation with support and encouragement from the managing partner. That approach isn’t ‘wrong,’ but it may result in inefficiencies as the firm grows.

If a firm goes from a single office to a regional practice, speedy but transparent decisions become essential. Yet many firms continue to operate like a small firm long after they’ve outgrown it.

A more structured governance model means clarifying decision rights so leaders can move more decisively. That model can vary, but it usually involves delegating authority for operational matters so the managing partner can focus on the firm’s long-term direction. That may take the form of an executive committee overseeing strategy, or a more corporate model, where a C-Suite of executives handles operations.

When Vision and Structure Drift Apart

Another major trigger for rethinking governance is a disconnect between leadership effectiveness and the firm’s strategic priorities. When leaders struggle to balance day-to-day operations with forward-looking strategy, governance may be part of the problem.

A well-designed model allows leaders to spend their energy on positioning the firm for growth rather than getting bogged down in administrative minutiae.

Firms that have diversified into advisory services or are exploring a merger or a private equity partnership may have seen this dynamic play out firsthand. The strategic direction has evolved, but the governance framework hasn’t caught up to keep the firm competitive and agile.

Accountability and Scalability: The Twin Pillars of Growth

As firms grow, accountability becomes more difficult as well. MPs can drive accountability well with a small partner group, but once that group expands, the leader simply doesn’t have the same time to devote to the endeavor. Some MPs simply are not gifted in that area and are unwilling to make modifications.

If accountability is suffering, it’s time to ask whether the existing structure doesn’t clearly define who is responsible for what.

Additionally, an effective governance model scales with the business. It clarifies roles, ensures that performance expectations are consistent, and provides mechanisms to hold leaders accountable for results. Without that clarity, firms risk stagnating – not because the people aren’t capable, but because the system doesn’t support growth.

Outside Forces Are Turning Up the Pressure

Sometimes, the need to rethink governance comes not from within but from outside the firm. Competitive pressures, evolving client expectations, and new forms of capital are reshaping the profession. Private equity investment, for example, is driving faster decision-making and more formalized accountability structures across the profession. PE firms won’t wait for 14 meetings to make a decision – they will act.

Technological advancements, the rise of outsourcing, and any number of other changes may mean the old way of deploying resources isn’t working anymore.

Similarly, demographic shifts within the partner group and the addition of new service lines are altering how partners must lead. Advisory partners think differently than tax partners – some want to move faster, some slower, some are risk-takers, some are more reticent. Similarly, the generational differences are starker than they were in the past – firms now have 30-year-old and 65-year-old partners in the same room. The different ways of thinking are a blessing, but also a challenge.

Governance that worked in a bygone era may no longer support the agility and inclusivity required today.

Transitions Offer Natural Opening to Revisit Governance

As founding partners retire and new generations take over, the door is open to candid conversations about whether the existing governance structure still meets market demands and serves firm priorities.

It may become clear that gaps in authority, accountability, or decision-making have slowed the firm down. Partners are collegial, however, and take great pains to avoid offending anyone. That’s why a transition is a good time to examine the governance model and fix it before the next leaders comes aboard.

Recognizing the Moment for Change

Firm leaders understand it’s important to review their governance structure every so often, but they’re hindered because they value stability (a good thing) and feel like ‘If it ain’t broke, don’t fix it.’ However, the system may in fact be broken but it only becomes obvious when big decisions must be made or a crisis hits.

The most successful firms build in a timeline for evaluating whether their structure still serves the firm’s size, strategy, and culture. Asking a few key questions can help:

  • Are decisions being made at the right level and with the right input?
  • Does our governance structure support our strategic goals?
  • Do our leaders have the authority and accountability they need to execute effectively?
  • Can our governance model scale as the firm grows more complex?

If too many answers point to “no,” it may be time to act.

The Payoff of Getting Governance Right

Revisiting governance isn’t about rewriting bylaws or adding committees – it’s about freeing leadership to lead. When decision rights are clear, communication improves, accountability strengthens, and the firm can respond faster to opportunities and risks alike.

For firms committed to long-term success, governance is an ongoing discipline that keeps leadership aligned with strategy and the firm’s evolving future. The question for firm leaders isn’t whether to revisit their model – it’s when. And for many, that time may be now.

This is the second in a series covering governance issues within accounting firms. Watch for part 3: “Capital Conversations Without the Drama.”