An often overlooked aspect of accounting practice ownership structure is how powerful the Veto can be. The Veto is often underestimated. It’s important to keep this key power in mind when setting up a firm’s ownership structure. Partners can be very collaborative as long as decision making is clearly governed. Latent Veto power can be both frustrating and stifling. It is often expressed when major decisions are being made, such as when partners go to buy or sell a CPA firm.
Has your firm’s ownership structure been tested? Is your firm able to move quickly when it comes to making big decisions? Do you have a collaborative environment?
Veto power in the wrong hand(s) can literally make change-and therefore growth- impossible. This could become even more problematic as the need for fast change increases in the accounting profession.
Having an ownership structure that will facilitate change is going to be more important in the future. Some very intelligent people are predicting that technology will cause major disruption in the professions – and sooner than you might think. The winds of change are picking up and accountants are going to need to be able to adapt rapidly. In this new environment-NOT changing will be the risky approach. For a deeper dive of this topic, check out The Future of the Professions: How Technology Will Transform the Work of Human Experts.
Leaders won’t be able to allow management by committee to stifle change. This has always been true, but is becoming more critical than ever. Management (or “leadership”) by committee is often ineffective when it comes to implementing change because people get into comfort zones and many on the committee often attempt to eliminate all risk, especially when it requires them to change personally. This leads to a focus on preservation – instead of successful growth through transformative change. When you put a group of smart people together that are threatened by change, they can develop a long list of why not to do something. If the “no’s” win more often than not – then this will limit change in an effort to maintain comfort.
For multi-partner firms that want to change more rapidly, someone needs to be an empowered CEO who can clearly determine the firm’s growth. Clear CEO authority and responsibility will allow firms to move more boldly and quickly from a strategic leadership perspective. If the CEO does not have the controlling interest, then at least the CEO’s role and authority cannot be at the direction of those he or she is responsible for leading; otherwise, “who is really in charge?”
When many partners share leadership, effectively and efficiently developing partner buy-in for implementing change is essential, but also can be challenging at best. The firm must have an unusually collaborative leadership team – and that often includes some way to override the Veto.
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