During the final keynote of Xerocon 2015 in Denver last month, it was suggested that one of the best ways for a successful firm to grow was to make that firm as efficient as possible by emulating the structure of large businesses. While such specialization (structuring by skill) offers undeniable benefits, is there a potential downside in regard to employee morale? The key point is that it’s critical to approach the decision with your eyes wide open. There is really no “one size fits all” approach—the answer will depend on factors like how many employees your company has and how large a range of services it offers.
Structure by Skill
The idea put forward in the Xerocon keynote is that the firm as a whole would operate much more efficiently by operating as big companies do, with departments of specialists in payroll, sales tax, bill payment processing, and so on. That is, the employees don’t have their own book of clients, and they don’t talk directly with the client. Instead, they work heads-down on one process very deeply and become experts at what they do. It’s like specialization taken to the granular level within the firm. In theory, this allows the worker bees to continue focusing on what they do without the distraction of client interaction or having to be an expert at everything.
An added benefit of this structure is that you have entire departments with similar skills, so if you lose an employee you have other employees who can step in and fill that need.
In this structure, if a problem arises, the issues are escalated to a customer relationship manager who has complete interaction with the client—basically, a customer service representative for your accounting clients. The accountants are not distracted or interrupted by conversations with the client. Someone else gets to be touchy feely with them in bringing an issue to resolution, and the worker bees get the answers they need to keep on working. In my mind, the customer service representative would ideally be a person with accounting knowledge so they could talk intelligently to your clients about the issues at hand.
Structure by Client
Let’s compare that structure with the idea of structuring your firm by client. In this scenario, each accountant is given her own set of clients to manage and maintain. They handle all aspects of the work for the client regardless of the task and become skilled in all service areas (i.e., payroll, sales tax). The accountant is fully responsible for servicing the clients and will call them up directly when there’s an issue without a middleman.
Cogs in a Machine
Far and away my biggest concern about structuring your business by skill instead of by client is how the structure would impact the team’s satisfaction with their jobs. We’ve worked hard to find the right linchpin people because we believe they bring creativity and energy to the company and help us be a company that customers don’t want to leave.
When presented with the idea of structuring the business according to skill, I leaned over to one of the accountants who works for our firm and asked, “Would you *like* doing the same exact thing on every client day in and day out?” To paraphrase the response, it was basically, “Oh hell no.”
It may make more sense in theory to have different cogs in the machine dedicated to one function, but employees aren’t cogs in a machine. They are living, breathing human beings, and it’s generally the connection with clients that makes a job more fulfilling. In my experience, the best employees don’t just clock in and clock out each day with their heads down, doing what they are told to do. They are provided with challenges and given the opportunity to overcome those challenges in their own unique way.
Doing the same thing every day gets old fast, and although I have no statistics to support this, I have to imagine that employee turnover is much higher when you aren’t being exposed to new experiences on a regular basis.
One thing I’ve noticed in the firms I’ve owned and managed over the years is that with the increased ability to automate and create systems, the amount of specialized technical accounting knowledge necessary to run an outsourced accounting department for small businesses is dwindling. (I will say that the specialized technical IT knowledge necessary is increasing, but that’s another article for another day.)
I’ll take payroll as an example. When I processed payroll twenty years ago, I needed to know a lot about how payroll was calculated, how to prepare the payroll tax filings, and how to troubleshoot problems. Today we use ZenPayroll, and my team needs to know virtually nothing about the inner workings of payroll in order to maintain a working system. They just need to know how to contact support if an issue pops up, and be able to effectively communicate issues back to the client. Any advanced questions can be escalated to the controller on that account.
A major factor in determining your structure is what services your firm offers. Part of the argument for structuring by skill is that there’s more cross-training and it’s easier to make substitutions if anyone is on vacation or leaves the firm. I can see that, but if your business focuses on a particular vertical, you can create entire systems (including payroll, bill payments, etc.) that are standardized, so you can still have this type of cross-training. Instead of coverage for just one skill, like payroll, you can have coverage for an entire client.
Our firm only offers one thing: outsourced accounting department services for ecommerce businesses. So we do payroll, sales tax, pay bills, and the other stuff a regular accounting department would do. We don’t do taxes. We don’t do audits. That makes it much easier for our firm to focus and to train our team.
On the other hand, if you have a larger firm that offers all services to all people, it’s going to be a lot harder for all your employees to be great at everything. In that case, it can make a lot of sense to specialize internally.
In short, if you don’t specialize externally, you should probably specialize internally.
Size of Firm
I pulled up some stats from the AICPA on the average number of employees in a firm in March 2012, and that number was five. In my opinion, five employees is really too small a number to have “departments” of specialization by skill set, as you’ll still only have one or two people in each department and that cross-training notion kind of goes out the window.
I think you really need to have 10 or more people working for you before you can effectively emulate the structure of a big business.
What Does Your Firm Do?
As you can probably tell, I’m not really convinced that there’s a “one size fits all” answer for how to structure your firm. Firms that offer more services (tax, audit, consulting, backoffice, CFO) and have more employees may find more of a need to departmentalize than smaller firms that focus on a particular offering or niche.
So, what about you? How have you structured your firm, and how is it working for you?