We used to think that copying others or repeating the same actions because they are institutionally easy or have worked in the past was very non-strategic behavior. Experience has shown us that in some cases it may be the most strategic behavior for particulars firm when it comes to expanding geographically and expanding specialties.
How is this possible?
A case in point is CPA firms that grow by frequent acquisitions, rather than by following strategic plans that call for geographic growth and acquisitions of specialized senior talent in a focused way. Is this a bad thing? Often yes, but sometimes it’s the right thing to do.
To understand this, let’s look at the four keys to a successful CPA firm strategy:
- It needs to be the correct strategy.
- It needs to be strongly supported by the firms’s leadership.
- It needs to be supported by the firm’s partners.
- The firm has to have the talent to achieve the strategy or be able to acquire the talent as needed.
Where these factors are met, following an organized strategic plan is by far the best approach. But what if they are not met? What if the firm’s managing partner likes to act by consensus rather than boldly? What if the firm’s executive committee has difficulty reaching decisions or following them once they are reached? What if the partners pay lip service to a strategy but struggle to move beyond business as usual? In these situations, following the strategy tightly is not a realistic path to success. Doing nothing is also not a path to success, particularly where the firm’s partners are committed to the firm’s continued independence.
There are firms that fit this profile that are also very good at acquiring smaller firms to grow talent locally and expand geographically. These acquisitions allow the firms to expand into new specialties that include both service line and industry expertise. They also grow the firms’ revenue and create opportunities for spreading fixed infrastructure costs over a larger base. We’ve heard many stories where new consulting specialties were acquired by firms that do not have the institutional ability to grow in a planned, strategic way.
Here’s another way to think about this. Where planned focused growth is not possible a reasonable workaround is to make acquisitions that will inevitably lead to growing the firm’s presence and capabilities. For whatever reason, the firm’s culture readily accepts acquisitions that skirt the firm’s politics which inhibit planned growth. So, these firms take this path. So long as they keep an eye on the strategy and leverage new talent that gets brought in through these deals, they can be more successful than if they fail at trying to follow a strategy or do nothing.
It’s not the preferred path, but for some firms, it’s the only path — i.e., it’s the preferred path for them. And that makes it the best way for them to be as strategic as they can, given their culture. But one big note of caution. If you take this approach, it won’t address other strategic priorities such as talent development and moving to a rationalized operating model for industries and services. These priorities will require separate initiatives with the firm’s partners leading the way.