Throwing “The Book” out!

In full disclosure, I’m a statistics junkie.

And always have been.

I think I’m one of the few people other than those who pursue it as a career, who took not one, not two but THREE statistics classes in college.

Whether it be sports, business, professional services or some other arcane arena, I file fact and figures away for future reference, which usually manifests itself in columns such as these or CPE presentations.

Other numericals such as batting averages or yards per pass attempt are best left for backyard barbecues or cocktail parties.

So as you can imagine, I got a minor thrill when the AICPA recently released its quadrennial succession survey, an amalgamation of several hundred slides citing responses from both sole practitioners and multi-owner firms on a variety of succession-related topics.

In addition to the usual shocking number of firms and sole owners who have no succession plans or practice continuation agreements in place, there was one slide buried far deep (#121 to be exact) which showed just how many firms are now transitioning from the old-school tradition of “eat what you kill” silo model of operations where each partner operates autonomously to a one firm model philosophy where the stakeholders are accountable for their portion of the firm-wide goals.

There are several reasons behind the rapid ushering of this business model, easier client transition during any succession plan being chief among them. It also helps eliminate what we call the “Lone Ranger” mentality – specifically among the older partners who tend to guard their individual books like the Secret Service during a Presidential inauguration.

So that being said, according to the AICPA the size and percentage of the firms moving away from the BOB model plays out thusly:

1. From 1-8 FTEs (full time equivalents) 22 percent
2. 8-16 FTEs – 36 percent
3. 16-26 FTEs – 53 percent
4. 26-51 FTEs – 61 percent
5. 51-101 FTEs – 47 percent
6. 101-201 FTEs – 76 percent
7. 201-plus FTEs – 62 percent

The “One Firm” culture also tends to be more Democratic in terms of governance – i.e “one partner, one vote,” while governance in an EWYK firm is almost always based on equity.  It also is fairer in terms of compensation – particularly those who don’t have a book such as the quality control person.

Mark Twain was fond of saying “there are lies, damn lies and statistics.”

So whether the old guard likes it or not, the transformation is here and here to stay – statistically or otherwise.