In the rapidly evolving accounting landscape, organizational structure has an impact on a company's competitive edge and agility. The traditional partnership and the modern corporate structure stand out as the two prevailing models employed across the profession.
Both models have proven effective; however, more and more accounting companies, including Nimbl, which I founded, are favoring the corporate setup. Advantages include scalability, leadership development, specialization, innovation, and distinct ownership vs operational roles.
It's important to note that I'm referring only to organizational structure and not ownership, legal, or tax filing structure.
Scalability
The first major advantage of a corporate structure is scalability. In a partnership model, each partner typically maintains a portfolio of clients and handles diverse responsibilities. As the firm grows, it can become challenging to manage increased workloads with a consistent service level.
The corporate structure's hierarchical organization clearly defines roles and responsibilities, supporting efficient management of growing client bases and teams. Levels of leadership are created to meet the needs of a growing organization.
Nurturing leadership
Next, a corporate model inherently fosters leadership development. In a partnership model, there is often limited room for upward mobility until a partner retires or growth creates openings.
In contrast, a corporate structure allows for vertical movement through leadership roles without the hurdle of partnership status. Upward mobility can serve as a catalyst, inspiring and motivating employees.
High-level specialization
In the partnership model, partners usually lead the key business functions, such as sales and HR, sometimes with support from junior specialists. Conversely, the corporate structure supports role specialization at the highest levels.
For example, a specialized VP of sales who may not have a background in accounting can develop strategic sales approaches and a well-designed client journey. The partnership model often relies on relationships and word of mouth for revenue growth.
Similarly, a dedicated HR leader can foster a healthy work environment, effective hiring processes, and an overall stellar people experience. The accounting profession notoriously falls short in these areas.
Nimble and innovative
A corporate structure enables accounting companies to be more nimble and innovative. The hierarchical corporate design can allow for quicker decision-making, allowing firms to react swiftly to changes in the market, technology, or regulatory environment. Partnerships require buy-in on major decisions from most or all partners, which can stall or stop progress.
Companies with a corporate structure are also more likely to invest in innovation. The partnership model incentivizes short-term cash flow for maximum distributions rather than long-term investments that may not bear fruit until after partners retire.
Separation of ownership and operational roles
In a corporate structure, ownership roles are distinct from operational roles. This allows individuals to focus on their specific areas of responsibility without the complexities of ownership dynamics interfering with operational decisions.
Even if an owner is also an operator, the corporate structure creates clarity around how owners fit into the operations. For example, a COO with a larger ownership position than the CEO will still defer to the CEO for operational decisions.
In an accounting partnership structure, all of the owners are usually also operating partners. It can create confusion when partners shift between ownership and operational roles in the same setting.
Nimbl as a case study
Nimbl provides accounting, tax, and finance services. It is an LLC filing as a partnership, but I designed it from the beginning to be "nimble" with a corporate organizational structure.
My equity partner and I keep our ownership hats intentionally separate from our operational hats. I serve as CEO, my partner reports to me as president, and we have VP- or director-level heads of client service, revenue, people (HR), and internal operations (finance and IT).
Each leader is an experienced specialist and has ownership of outcomes in their domains. None of these positions require a technical accounting background. Team members have a clear progression path that doesn't depend on working for years to become a partner. As the company grows, we will add leadership positions.
Client service is key
Regardless of the model chosen, the ultimate success of any accounting company rests on its ability to deliver excellent client service and a rewarding people experience, while keeping up with rapid changes.
The partnership model has been the go-to model for decades, but the corporate structure's advantages make it an increasingly popular choice for future-focused accounting companies.
