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By Michael Goldstein

[Editor's note: This is one of a series of articles by CPA Journal editor Michael Goldstein on firm culture. He explores the nature of firm culture and the impact it has on the personality and long-term success of CPA firms.]

When a single individual or even a small group of individuals give rise to a professional firm, the firm's culture will represent the thinking of the founder(s). Few founders appear to be influenced by anyone outside their inner circle, which is usually made up of themselves plus as few people as they can get away with. Many of them seemingly subscribe to the "if it's not invented here, forget it" mentality. Before it appears that I am a cynic about to launch an attack on founding fathers and mothers (the latter are on the increase among CPA firms, but for simplicity I will address only fathers), I recognize that there are very successful firms that have achieved their success based on the efforts, abilities, and work ethics of their founders. It is, however, also true that too many founding-father firms fade away like old soldiers. Why?

In many instances, there is a demonstration of false paternalism, where in reality the founder takes care of a select group of one. After all, in the founder's mind, who indeed is the rainmaker, leader, and manager? And, having made this determination, all that remains is the need for the founder to gather around him technician/workers or, sometimes just workers--why invest in more? The emerging (apparent) culture becomes "work hard and you'll be taken care of" (whatever that means). After a suitable number of years, the boss/worker relationship usually climaxes in a complicated partnership agreement strongly favoring the founder, perhaps even harmful to the anxious would-be(s). This may even include occupying offices owned by the founder and leased to the new partnership on terms agreed to by the founder, real estate owner and the CPA firm founder, majority partner. These kinds of arrangements work in attracting and holding in place those with limited expectations for developing practices on their own. But then comes the day of reckoning, when the founder sells out (within or outside the firm), retires, merges (more on this later), becomes infirm, or expires. Sometimes the "lucky" but unprepared and deluded technician/worker group gets to be the now unprepared buyers, who will probably continue to service the present clients until those clients sell out, retire, merge, or expire, or at least long enough for the founder, or founder's estate to be paid out.

While this represents a form of succession, it actually points up one of the more notable failings associated with founders--succession is frequently not part of their culture, and that goes for family members who are part of the firms, as well. Many founders, for whatever reason, just don't want to address succession until at least the first heart attack. Why be concerned with preparing the next working level or generation to take over or even help them to learn what they, the founders, already do so well? Among some founders, in their minds, nobody including their offspring will ever be ready or able to replace them. When finally faced with the prospect of their mortality, the approach frequently is to sell the practice (usually called a merger--it sounds better) to an outsider, preferably a larger firm that can first, assure a payout to the founder and second, depending on the founder's benevolence, a place for "his people." I have witnessed the sometimes unpleasant fate of his people, but the ones who are even more likely to ultimately lose in the deal are the untutored and unprepared offspring--usually they have been oversold. Depending on need, the technicians and hard workers may fare well in the new firm, better than if they are left to continue the practice without their rainmaker leader, who never bothered to develop a new generation of rainmakers and leaders. *

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