The aging practice

By Morden Shapiro

The challenge for the established principal and firm is how to recover their lost energy

Two years after getting his CA designation, Jack Talent founded an accounting practice. Within 10 months, he had two employees and was leasing additional space. Although Talent complained about long working hours and demanding clients (especially new ones), he admitted he was having the time of his young life. Fun, exciting, unlimited opportunities, every day is a different experience is how he would describe his work. Meanwhile, Peter Richards is one of four partners in a mid-size, 30-year accounting practice that occupies an entire floor of a professional office building with plenty of staff. Richards and his partners have created a comfortable life for themselves. Alright, sometimes boring, too much change, too many new standards, not as much fun as it used to be but all in all a pretty good life, is how Richards would describe his work.
 
Talent and Richards represent two ends of a very broad spectrum. The obvious differences between them are that Talent's practice is filled with excitement whereas Richards' seems to be boring. Talent's exudes energy, reacts immediately to developments, and generates policies and procedures quickly. By comparison, Richards' practice is slow moving, ponderous and less responsive to change.

The evolution from a young, energetic, fluid new practice to a well-established, sedate one is a natural phenomenon. Neither is good or bad; each has its strengths and weaknesses. The challenges for most practitioners are to determine where they are on the evolutionary scale; how satisfied they are with their current placement, and how can they recover their lost energy.

It is helpful to understand the aging process in the evolution from the youthfulness of Talent's practice to the age of Richards' practice. It consists of stages that mirror human growth: baby to child, to adolescence, to adulthood, to parenthood and eventually to the geriatric circle.

And this aging process is initiated on day one in all practices. If you have joined or acquired an existing practice, you are stepping into an ongoing aging process and should determine where the firm is on this evolutionary scale.

Each growth stage has its own characteristics. In the real world, each stage varies in length and circumstances and may have more or less impact in one organization than in another.

Baby In this initial stage, the slate is clean, the landscape is pristine. There are no policies, no standardized procedures and no corporate culture. There is usually no client base and the proprietor or partners are likely new to ownership.
 
Child This is a discovery stage. The practice begins to attract clients. Procedures are developed, the practice learns to manage workflow and deliver product.  There may be errors in judgment. The firm's personality starts to emerge.

Adolescence This is a time of experimentation and testing of limits. Organizational self-awareness often leads to better control and a defined image. There's more confidence and assertiveness. Marketing becomes more formalized.

Adulthood There is a growing sense of responsibility. Principals ask who they have become and who they want to be. Policies and procedures become formalized. Change is less rapid and less extreme. Image and reputation become more important. Principals sense their own mortality and their business decisions are affected by this. Experimentation and exploration are less frequent.

Parenthood This stage is manifested by a sense of responsibility for employees and for clients who may outlast current principals. The firm culture becomes more conservative and more risk averse.

Geriatric circle By this stage, depending on the firm's size and culture, there is a distinction between the firm and its owners. The firm may have a persona of its own.

It may have developed a self image of being so solid, so well established and so entrenched in its market that the presumption is it will exist indefinitely. Alternatively, there may be a sense the end is near, that its value and ability is disappearing and that its focus should be on how best to wind up the firm.

In either case, decision-making is likely to be short sighted, there are likely few fresh initiatives. The organization may seem to be at a standstill, or moving slowly.

A major challenge of the aging process is to recognize the consequences along the way. Notice the loss of energy and readiness to experiment — which are the very things that helped give rise to the develop-ment of a successful practice in the first place, helped it attract clients and develop services and respond to changes and problems in an effective manner.
 
The issue thus becomes how to recover that lost energy. How does one overcome the difficulties presented by new legislation, greater standards, market pressures on pricing of services and increased demands from clients that you demonstrate the delivery of value and benefits?

As the company and the principals age, their timelines shorten. Decisions about such matters as technology, people and space are now based on short-term cost/benefit models rather than on long-term considerations. This shift flows from a sense of mortality of the senior decision-makers as well as uncertainty about the survival of the firm. And that may lead to a self-fulfilling prophecy.

For example, a firm may decide to lease less space because it is concerned about the ability of the firm to grow. But because of space constraints it may not be able to support the infrastructure necessary for growth with the result that growth does not occur. And it is all too easy to interpret this as a validation of the concerns.
 
Sometimes, as it ages, a successful firm may focus on its client base and service it without addressing growth and the need for younger clients, a new industry base, or the need to offer new services. It may be seduced into feeling it has it down pat.
 
But as the firm and its people age, so does their client base. Active business cli- ents become passive holdings; entrepreneur clients die and become "estate of" files. Only then does the firm realize it has lost contact with the world in which it operates, and much like the runner who has lost contact with the field, there is no hope of reconnecting with the pack.
 
The problems of an aging practice relate to a broad range of issues that can be classified according to the following:

•  the loss of characteristics that historically contributed to success;

•  changing priorities that may be detrimental to the continuing well-being of the firm;

•  institutionalization of policies and procedures that may have become inappropriate or inefficient;
 
•  the loss of a connection with the world in which it operates.

These problems present special practice management challenges. One of those flows from the fact those who manage the practice are often subject to their own aging issues such as being so content with their success that they are reluctant to move out of their comfort zones.

From the position of established management, it is tempting to think that one's successors should be clones of themselves. It is also uncomfortable to consider giving up control because the risks involved in doing so are parallel to the growing aversion to risk and uncertainty. But it is necessary to rediscover that earlier chemistry in order to continue to thrive and prosper.
 
Try to complete the self-assessment checklist, then develop strategies that might move you back to an earlier position in the aging process. Unlike the human condition, it is possible to recapture the lost youth of your firm.

Morden Shapiro, FCA, CMC, B.Comm., is with management consultants Morden Shapiro & Associates in Markham, Ont.

Technical editor: Grant Robinson, FCA, partner with Robinson & Co.