August 25, 2023
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Will accounting firms of the future be accounting firms?
One regular topic of discussion around here is: What will accounting do next? In most cases, when we talk about this, it’s about whether firms will continue to just be accounting firms or if they’ll be something else. Maybe Accounting+ firms?
The general idea is that accounting firms are hiring many non-accountants, which allows them to offer non-accounting services. These non-accounting services increase revenue, headcount, and expertise, but also overhead, bureaucracy, and so on. The most ambitious of these multifaceted firms will not be so much a boutique of old-timey accounting offerings as it will be a professional services big box store. “Oh, you’re looking for digital services? That’s on aisle 35. This is the financial services section. I know, it’s confusing to us, too.”
Something else that may be happening is that accounting firms of the future simply won’t be firms. And by firms, I mean partnerships. The vast majority of accounting firms have long been organized as partnerships—limited liability partnerships to be precise—and I’d wager that the vast majority of them today are partnerships as well.
Recently, however, mega-lite accounting firm BDO announced that they would reorganize as a professional services corporation. The transition became effective on July 1, and the firm said that the move would “position our firm for ongoing success as we continue to grow and transform.”
There’s a lot going on with this. They issued bonds to a private equity firm to finance the purchase of shares to put into a new employee trust that will buy shares from current partners. They’re starting an employee stock option plan (ESOP) and ditching their old pension. The “partners” are technically employee-shareholders now. That’s a lot of change for a firm that’s been around for a long time and was definitely used to doing things like virtually every firm did them.
Why’d they do it? The talking points are “tax advantages and greater flexibility.” They claim, for example, that the ESOP is something that will help with attracting new employees. In their telling, it is “unique and innovative in our profession,” which might actually be true. But will it work? Will ditching the partnership model work? Does issuing bonds to a private equity firm make sense? At all?
I honestly have no idea. But BDO is trying all of this, and they’ve been happy to tell anyone who wants to hear about it. This is one accounting firm that is suddenly evolving at the speed of light compared to its peers. A non-partnership accounting firm isn’t unheard of, of course. CBIZ, Inc.— a top ten accounting firm in revenue—has been a public company for years, quietly doing its thing. But that’s the extreme end of the spectrum—a public company, that is. Professional service corporations—the form BDO has taken—have long been a thing. So, while the partnership model will likely remain the standard, I can’t help but wonder if more firms will think about alternative structures.
And that’s what makes the BDO situation interesting. It’s shaking things up in a very public way at the near top of the accounting world. It remains to be seen whether this trickles down to smaller firms that are thinking of leaving another part of the accounting legacy behind. Just by virtue of that—not doing things the standard way—BDO’s move has invited plenty of skeptics, including many of its own partners and employees. But people who appreciate a loud breach of norms in the accounting profession are definitely enjoying it.
Time was when you had to break some bad news to someone—whether business or personal—you sat them down, bought them a cup of coffee or a stiff drink, and got right to the point. Or maybe it involved half-truths—e.g., “It’s not you; it’s me.” Whatever the circumstances or amount of forthrightness, it was generally accepted that you gathered the necessary fortitude to tell the person the bad news straight to their face.
More recently, electronic communication has eroded the need for these uncomfortable situations. I mean, who really wants the discomfort of sharing bad news with someone? Certainly no one.
Anyway, it all started with the landline phones and evolved from there—email, texting, and has now arrived at its most natural state: D-list celebrities informing the recipient via a video app on a small computer:
In an era when it’s now possible to outsource our most sensitive communications, such as using ChatGPT to write wedding vows, all sorts of topics are being transmitted via Cameo videos, including job resignations, breakup talks and apologies.
Last year, Christopher Gonzalez, a 35-year-old motion-graphics designer for television and film, quit his job by dropping into a companywide Slack channel a Cameo video from William Hung, who won over fans in season three of “American Idol” in 2004.
Gonzalez said the video was the best $30 he’s ever spent. “I just thought it would be such a weird, unconventional way to transition from a job,” he said.
He’s correct on two fronts: 1) That will be the best $30 he’ll ever spend, and 2) It is a very weird, very unconventional way to transition from a job. But that’s where we’re at, I guess.
I’d worry about employers trying to use this approach when firing employees, though. It’s not difficult to imagine this going terribly wrong. Remember the CEO who unceremoniously let 900 people go over Zoom? Remember Greg on Succession? An out-of-touch employer using Charlie Sheen to encourage people to get back out there and start WINNING feels like a real possibility.
Fresh from Gusto (and friends)
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- Catch my colleague Will Lopez, Gusto’s Head Ambassador, in Chicago at “Bridging the Gap” The Unique CPA’s 3rd annual conference, August 29-30. Use promo code WL23BTGDC to receive $150 off.
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