Some things have been around so long that it’s hard to imagine doing without them, but from time to time it’s a useful exercise to reexamine even the most fixed of fixtures to see if they still serve a useful purpose.
We’ve been getting rid of a lot of fixtures in the 21st century. The internet has shown us we don’t need travel agents, bookstores, broadcast TV or encyclopedias. Thanks to cellphones, we’ve learned we can do without watches, cameras and radios (to say nothing of compasses, maps, navigators, weathermen, and cash at Starbucks). And recently, the pandemic has taught us that we can do without offices, photocopiers, breakrooms, and the physical presence of other human beings.
Given all that, I’ve been wondering lately if we can do without accounting firms. (Before you lash out at me, let me say that I was spurred to this question by Richard Susskind’s and Daniel Susskind’s fascinating “The Future of the Professions: How Technology Will Transform the Work of Human Experts,” which posits the same question — so please lash out at them, instead.)
Let me clarify that I’m not wondering whether we can do without the services provided by firms, or the accountants who work in them; I think it’s fairly clear that we cannot. No, I’m specifically wondering if we need the accounting firm as a structure for managing and delivering those services, and employing those accountants (and auditors, tax pros, financial planners, valuation experts, etc.).
Let’s start with the downsides: The firm structure is not a particularly efficient way of raising or mobilizing capital. Given the number of firms that complain about the difficulty of finding the next generation of partners, it’s clearly less attractive as a structure to potential partners than it once was. Too many firms don’t even capitalize on one of the form’s clear advantages — the ability to have a wide range of expertise in one place — to aggressively cross-sell services to a single client base; instead, they act more like a collection of individual practitioners in a WeWork space. And the rules of partnership can often slow decision-making and prevent firms from taking risks and nimbly meeting challenges.
While firms have been trying to deal with these deficiencies — for instance, by moving to more “corporate-style” leadership (think CEOs versus managing partners), and by welcoming private equity firms (and their money) into the field — the question remains: Is this the best way to organize professional services? At one end of the spectrum, accountants might be better off as individual practitioners who pool their expertise with other professionals on an ad hoc basis for single engagements, or operate through independent platforms that bring together groups of experts as needed; at the other end, they might be better off working for a genuinely corporate entity. It’s not hard to imagine a whole host of ways to work that might be better for accountants than working in firms. (I’m leaving aside what might be better for clients and the public in general; for that, and for much else that’s relevant to the profession, I strongly recommend looking at the Susskinds’ book.)
Obviously, we’re not getting rid of accounting firms any time soon, nor am I recommending that. Rather, what I’m suggesting is that it’s worth taking a long, hard look at the firm as an organizing principle for the accounting profession, to see if it still serves the original purposes it was adopted for, and if there are improvements to be made — or if there’s another, better structure the profession could adopt.
I’d love to know your thoughts — send them to me at daniel.hood@arizent.com, and we’ll share as many of them as we can in our October issue.
