A strategic approach to build firm capacity

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t wasn’t meant to be this way. Automation and technology advances should have reduced pressure on staff, allowing firms to focus on higher value advisory services. However, the reality is accounting firms around the world face significant staff shortages making it hard to meet client needs, increasing pressure on professionals and limiting firms’ ability to explore new opportunities. Firms know they need to address their capacity challenges, yet, it is like the analogy of the woodcutter trying to cut down a tree with a blunt saw: when it is suggested to the woodcutter he should stop, he refuses, saying he does not have time as he needs to get the tree chopped urgently. This will feel close to reality for many firms who are having to ask employees to work longer, hoping they can cope with staff shortages and expanding client needs. Accounting firms need to urgently find space to sharpen their saw. Firms need a clear sense of direction and must determine what staff capacity they need, including what capability to keep in house and what to outsource.

Before addressing capacity challenges, it is important for accounting firms to understand: What business do they want? How do they see their firm growing? Who are their target clients? And what services will they focus on?

US firm KerberRose demonstrates the benefits of taking a strategic approach to a firm’s development. They took a bold step of recruiting a Chief Strategy Officer, David Yeghiaian, into their leadership team three years ago. Yeghiaian played a critical role holding conversations across the Partners to help determine what the firm’s value and purpose is. Yeghiaian explains, “KerberRose is passionate about our local community. So, maintaining offices in that community, close to our clients in Wisconsin, is part of our DNA. We have offices in 12 locations, three were added in just 12 months. Having a clear sense of purpose enabled us to focus on the importance of building and maintaining this local presence.” KerberRose’s focus on their clients and community led them to determine their goal is not to develop the firm for a future sale; their priority is to develop their services for their clients and be a positive force for good in their community.

The Partners knew their clients would increasingly value services going beyond traditional accounting services. Yeghiaian highlights, “we identified wealth management, IT, marketing consulting and HR consulting as key service areas that we expected to be on the rise. And we have found increasing demand for accounting and finance services. It was also equally important to agree what we should not do – which is often a tougher decision. For example, we did not venture into an opportunity with Artificial Intelligence as the timing wasn’t right to fit with our current core expertise.”

Clients are at the heart of KerberRose’s strategy, it has therefore been important to develop a culture and way of working which reflects this. Functional teams sit next to each other in offices to reduce a service line mentality. Melissa Olsen, Shareholder-in-Charge of Human Resource says, “we introduced bonuses and rewards based on whole firm performance and a Shareholder/Manager scorecard. This has encouraged cross-working and an advisory approach.” Yeghiaian says, “we also adopted an overall account management approach, moving to issuing clients with one invoice covering multiple services. Of course, there were challenges, but clients have been very supportive.”

Having a clear strategy and sense of purpose, developed by all the Partners and the wider team, has created a guiding north star for the firm which keeps them focused when they do have resourcing and capacity challenges.

KerberRose has ensured their staffing capacity and capability enables the delivery of their strategy. In 2019 80% of the firm were accountants, in 2022 this has fallen to 60%. This was a planned strategic shift to build their target advisory service lines.

Yeghiaian explains, “we wanted to ensure that growing service areas like HR, marketing and finance were not torn between meeting our firms’ internal needs and serving clients. We introduced an 80/20 rule – where team members chose either to do 80% client work and 20% internal, or the other way around. Team members who really enjoyed client work focused on that while those who liked internal support followed that route. It helped avoid team members feeling like they are pulled in too many directions, and increased staff retention and satisfaction as team members could focus on their preferred path.”

Olsen notes investing in training for the team has been important, “training to move to value-based pricing has helped team members adopt a one firm advisory mindset as team members learned what really drives value for a client. PrimeGlobal’s leadership training has helped develop a consistent approach across the firm. And PrimeGlobal’s initiative to bring together HR, IT and Marketing professionals during their conferences will help to create even more collaboration between functions.”

Olsen says, “a clear strategy helped us plan our capacity needs. We acquired an HR group in 2021 to ensure we had the right capability and capacity to deliver the HR services our clients need. As clients strive to attract and keep staff in a competitive market, we provide methodologies, templates, and policies to our clients. Training and development are important to the next generation – so these services will continue to grow.”

Olsen also highlights that they have been able to extend capacity through partnerships which support their strategy. For example, KerberRose is an equity owner of Careers Partners International, which has a global presence to help clients with outplacement and career transition.

The focus on internal compared to external service has also enabled the firm to take a strategic approach to outsourcing, with team members having capacity to focus and manage outsourced solutions. The firm is moving to an external managed IT service to help provide extended support, manage risk, and utilise more business applications; so its internal IT team can focus on assisting clients with managed IT services.

Accounting firms can be nervous about looking at outsourcing solutions to help with capacity challenges, particularly outsourcing offshore. They worry about client’s perception and risk to data. However, outsourcing can be a major part of the solution to help overcome capacity challenges and deliver a firm’s strategy.

Karan Gupta, non- Executive Chairman at India firm SPC NXT, explains, “outsourcing testing, data and research work can help firms with the heavy lifting around core services such accounting, audit, and tax. This allows the firm to focus on building their own capacity around advisory and consulting services. They can scale up areas such as Client Accounting Services without facing capacity challenges or distracting them from expanding advisory services.”

Gupta highlights that outsourcing can create efficiencies and improve the offering to firms’ clients. He says, “a US firm might receive a client request at the end of their day. That’s the morning for the team in India. They can be working on analysis and solutions ready to present back to the firm when they wake up in the morning.”

SPC NXT is a long-standing member of PrimeGlobal and supports several of its member firms with their outsourcing needs. Bert Mills, Managing Partner at US firm Moore Colson explains, “Since the beginning of 2020 we have been working together with SPC NXT on OffShore Risk Assurance & Advisory (SOX & SOC) services. We have successfully worked out an off-shore Service Delivery Model which provides a manpower arbitrage solution. The SPC team helped us create new forms and templates that have driven efficiencies in our general practice.”

This targeted use of outsourcing has helped Moore Colson achieve its strategic goals, expanding risk services whilst continuing to train and develop their inhouse team to be more advisory. It has also helped provide a competitive solution to the Big 4 who have a considerable offshore presence.

Working with an outsourcer who takes time to understand a firm’s strategy is critical. Collaborating with other members of PrimeGlobal provides assurance around quality and the values of the firm. Gupta explains that they are working with a PrimeGlobal member to ensure the outsourced staff feels part of their team. The outsourced team are dedicated to exclusively support the firm, and the look and feel of the office space in India matches that of the US firm. Gupta notes, “we even ensure the coffee machine is the same in India as in the US offices.”

Offshore outsourcing has developed considerably. SPC NXT does not focus on low-cost data processing. They have invested in technology, adopting global technology solutions, and staff training, employing a range of professional staff. However, the services remain far more cost effective than onshore options. They can therefore be flexible in the type of support they provide. Firms should have strategic conversations with outsourcers to find solutions that specifically support their capacity needs. For example, SPC NXT is working with a PrimeGlobal member to support one of their clients with their own professional recruitment needs.

Gupta and Mills agree that building mutual trust is essential. They started discussions at PrimeGlobal conferences and decided to pilot the approach. This has proven very successful, and they are now exploring extending outsourcing support to other services. Gupta recommends a firm should always pilot outsourcing first and ensure that they are satisfied the outsourcer has strong internal controls around data protection and technology. Working with firms offering outsourcing services which are fellow members of an association or network creates a strong foundation for trust and confidence in quality.

With continued staff shortages and wage inflation, now is the time to step back and reflect on strategic solutions to resolve staff capacity challenges. KerberRose demonstrates the importance of determining strategic direction – so despite headwinds a firm’s capacity remains aligned to achieve its goals. During the pandemic firms have shown incredible agility and willingness to adopt new ways of working. As Gupta says, “the pandemic has proved that it is possible to work remotely and create a common team culture. It is a good time to use this learning to make the outsourcing model really work.” There are solutions if accounting firms take a more strategic approach to overcome capacity challenges.