Firms in the accounting industry have been expanding rapidly over the last few years, both organically and through mergers and acquisitions. This has included significant geographic expansion beyond the firm’s core location. As this pattern continues, it is becoming imperative for firms to commit to one of several operating models to enable strong governance, attract clients and engage staff in the firm’s future vision. This is the first of a series of blogs on this subject.
Here are the basic options for operating models:
Centralized Model
Locally Integrated Model
Regionally Integrated Model
Nationally Integrated Model
Federated Model
The Centralized Operating Model:
Under the centralized approach, the firm is housed in a single office. Often the firm is committing to deep market penetration in a particular geography, generally a major metropolitan area. Most firms began with centralized operating models, moving to a different operating model over time.
Advantages of the centralized model:
Since all partners and staff are in a single office, it is easier to manage the firm.
Areas of practice specialization are easier to identify based on the industries that are strong in the office’s geographic location and the services that clients need in the geographic location.
Strength in an industry, brand and reputation can be easier to build in a single location.
Collaboration among partners is strongly facilitated by their physical presence in the same office.
All partners have in-person access to the firm’s managing partner and executive committee members.
Since the firm’s office is in close proximity to clients and prospects, spending time with clients, professionally and socially, is convenient.
Mobility of staff among practice groups is free of geographic constraints.
These advantages can be powerful.
There are also some key success factors that are needed to support the centralized model:
The firm needs to be in a market large enough to support growth without geographic expansion.
The firm’s location needs to be desirable for attracting and retaining talent.
The firm needs to be as active in acquiring talent as firms that are growing rapidly through geographic expansion.
As they grow, many firms move away from this model usually as a way to grow rapidly through acquisitions. Given the added challenges of managing a firm with multiple locations, it’s worth asking a key question before committing to this change: “Would we be better off working harder to grow our client base from our existing location?” A related question is: “By emphasizing acquisitions, are we de-emphasizing organic growth which drops to the bottom line more quickly?” Firms will answer these questions differently, and there is no one right set of answers. But these issues deserve careful thought before moving away from the centralized model.
