Firm growth can lead to levels of operational complexity that are costly, inefficient, and unhelpful. Arcane systems accrue over time, and initial management and accounting practices become too complicated to clearly read a firm’s financial position. Taking a step back and evaluating administrative and organizational structure can be highly profitable.
Challenge
An interdisciplinary firm with more than 1,000 employees in 20 offices across the country, working in several major markets, to improve business performance and reduce overhead.
An outdated accounting and reporting system made it difficult to decipher where the firm stood financially. While they had many offices and markets, they had committed to leadership in key market sectors and were developing a good reputation in all 20 cities in which they were located. Their leaders were strong and understood their roles in their matrix-firm model.
Insight
A matrix organization with a clear focus on key markets and geographies is inherently complex. We needed to preserve the strength of that complexity but reduce the complication.
Over the years, the firm had accumulated hundreds of internal overhead account numbers for various costs, all of which ended up getting used. Labor and expenses found their way to these accounts, but there was no way to control them efficiently. Without being able to access the numbers easily, it’s easy to see why the overhead grew.
Metaphorically, the firm had too many credit cards in its wallet. It was using them all, creating a situation where the numbers were entered into the accounts, but a clear picture of how money was being spent was impossible to see.
Leadership in the various offices was strong, but there was no regional perspective in their management. Each office was functioning as its own entity and was not sharing resources with other offices. There were a lot of moving parts that needed to be better utilized.
Action
The firm now has a much better understanding of its financial picture, and there is better alignment of all the firm’s principals and associates.
We started with the accounting system, assisting firm leaders in streamlining the number of overhead accounts and establishing accountability for them. We also reinforced the concept of regional leadership and regional accountability for offices. Rather than having each office function separately, we helped our client establish regional leaders who oversaw several offices. By doing this, each office would have more management attention. The regional leaders also would have the motivation to make sure the offices in their region were collaborating and sharing resources. This helped solve personnel issues without extensive hiring and firing and led to operational efficiencies.
The firm’s profitability increased 20% in 12 to 18 months. They now have a much better understanding of their financial picture with better alignment of all the firm’s principals and associates. And they are positioned for more profitable growth in the future.
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