By Steven E. Sacks
The NEW Fundamentals
One of the revelations arising from the Great Recession was that CPA firms found they could do more with less human resources, or at least maintain the same level of productivity. We are now operating in what is referred to as the gig economy, in which important functions can be outsourced and firms and companies can still focus on core competencies that impact growth and profitability.
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Because it is increasingly challenging to maintain high standards in all functions while still focusing on core competencies that drive growth, seeking outside help is becoming an attractive option. So, when should you outsource services?
The answer is not black and white – it continues to evolve. Outsourcing is not limited to lower levels; executives have turned to this approach for senior-level functions, and as a result have become more flexible leaders. They are in favor of recruiting executives who act as COOs or CFOs on a limited basis to help implement and see to completion firm goals. All this without increasing overhead or paying benefits.
“Stay committed to your decisions, but stay flexible in your approach.” – Tony Robbins
Companies use a combination of internal and external services at all levels, even in the partnership group. Many senior leaders have turned to a new approach to investing at the highest levels of the organization: flexible leadership capacity. The notion is to identify those resources on an as-needed basis, requiring senior partners with the relevant experience to accomplish overall firm goals without adding to its overhead.
Two common trends management teams face are
- operating with limited capacity and capabilities and
- evaluating technology projects that will enhance productivity.
Even pre-COVID-19, leaders over the previous five years saw revenues decrease, which had caused them to reduce their full-time staff by a proportionate rate. The work that had to get done did not decrease. We got past the nadir reached in 2009 but then were hit with the pandemic, so there are still some sectors that are reluctant about hiring more personnel on a permanent basis.
Layoffs are a fact of life for those in the workforce, though that will likely be small comfort to those who experience it. No longer will there be an organization’s “lifer.” Technology, globalization, outdated business models and a growing younger workforce are working against the mid- to late-career workers. Gone are the days when a worker could count on having the same employer through good times and bad.
It does not matter how firms seek to become leaner. The focus still remains on identifying and pursuing means to accomplish objectives based on agreed-upon objectives. But the push-pull conundrum still requires reaching goals based on pragmatic objectives and seeing through to completion initiatives that are logical and directed to what makes sense.
Whether these ideas can be delivered is another matter. Competitive pressures haven’t reduced simply because firms seek to be leaner; partners are often under pressure to accomplish more objectives, set more priorities and drive more initiatives than they can realistically deliver. The results of their performance can impact their compensation.
Using Current Resources or Looking Elsewhere
Outsourcing is not a new approach for CPA firms. We can usually find this in payroll and human resources. The important aspect is that core skills and activities reduce the reliance on services that are not essential. It increases bandwidth that can be leveraged in other areas and offers flexibility to manage other important functions. It offers a way to remain nimble in a high-risk, rapidly changing business environment.
For services, such as payroll or help support, outsourcing is a way to minimize resources devoted to non-core activities. At higher levels, it can provide the necessary productivity and technical expertise to help you complete an important initiative. It can also help you accelerate progress toward strategic goals.
While our economy still is in flux, companies are careful about overhiring. When combined with talent moving around companies at rates much faster than ever, this has resulted in a talent vacuum, resulting in the postponement of major projects or restructuring.
A way to be flexible to meet this challenge is to look to outside companies that specialize in providing rent-an-executive resources that can immediately hit the ground running in working with members of the firm’s senior partner team.
The use of temporary skills is often found in the area of technology: planning and implementation, software identification, and contract negotiation. The existing leadership may not have the wherewithal or knowledge to function in the technology space. By outsourcing this service, the rest of the senior team can devote its efforts to the rest of the company’s operations, including finance, manufacturing and marketing.
Flexible leadership goes well beyond temp hires or the usual approach to outsourcing. The idea is to looks for those individuals with deep experience that enables them to have a temporary C-suite position outside the accounting profession with all the responsibilities and authorities it makes sense to have. This will relieve the rest of the partner group of the overwhelming amount of work arising from a key partner who left the firm. Further, this person may prove to be a “keeper” after the initial needs for his or her skills have been satisfied.
Making a Plan
When searching for an interim C-suite person for your firm, make sure that the person has sufficient experience with the specific type of work experience, as well as a track record of positive reviews. The person should have served in the same type of role needed (e.g., COO, CFO, CIO) so that he or she has a “big picture” perspective, while also being able to get into some of the nitty-gritty details.
You may find that you need someone a football team needs: a generalist/specialist. Someone who can return kickoffs, punts and be a wide receiver. This “flexible” player can handle multiple assignments or projects and identify the financial and human resources necessary. This takes the pressure off the other senior partners and managers.
Technology companies are probably the best examples of users of flexible leadership. Companies such as Apple, Google, Facebook and Salesforce are some of companies that look ahead to where there could be bottlenecks and will consider early on how to identify and fill capacity shortages. However, you will also find them in other sectors, such as entertainment (Netflix), ride sharing (Uber and Lyft) and hospitality (Airbnb). The latter companies have created models that other companies can replicate or modify while implementing flexible leadership.
Innovative accounting firms may eventually use “flex” leadership to manage costs and move quickly to become market leaders, and they will do so with the appropriate expertise, while managing costs.