This is the second in of a series of blogs on the subject of accounting firms and their operating models:
Locally Integrated Model
Regionally Integrated Model
Nationally Integrated Model
The locally integrated operating model:
This is when firms establish satellite offices in areas close to the firm’s central office. A good example of this is where a New York City firm establishes additional offices in the New York suburbs, some of which may be out-of-state — i.e. New Jersey and Connecticut.
Here are the advantages of the locally integrated model:
Partners can become active in local business communities where they live.
It enables the firm to be in close proximity to clients who are located in the suburbs.
It may open up new industry markets for the firm such as pharmaceutical companies in New Jersey for a New York City-based firm.
It may open up new, sometimes less competitive, markets for acquiring other firms.
Offices close to home make commuting easier which can be a draw for female professionals raising children in the suburbs.
In certain specialties such as real estate, being “local” can help with referral relationships e.g. from local banks and lawyers.
Firms that are set on having multiple offices are often more comfortable starting this journey with a few offices in their “backyard.”
These can be meaningful advantages.
There are also some key success factors that need to support the locally integrated model:
Careful thought needs to be given to firm governance to ensure that the overall industry and service line practice structure is deployed successfully in all locations.
The overall overhead structure needs to support the opening of new local offices, taking into account the cost and utilization of office space and support staff in all locations.
It may be necessary to meet client expectations of lower billing rates from professionals in satellite offices.
Giving partners the choice of working in a satellite office can potentially hurt business results, if partners who “play big” with major main-office clients move to satellite offices for personal reasons.
There is presently a proliferation of firms that have adopted this model. The key is to think carefully about risk and rewards before committing to this approach. The answers can differ substantially from firm-to-firm depending on many factors.