CPA Firm Management and Governance- Are They the Same?
I just released a new Monograph on CPA firm management. If I’d written this monograph prior to, say, 2005, the title would have simply been How to Manage a CPA Firm. But in recent years, a new term began being used by CPA firms: Firm Governance. Since the use of “governance” is clearly on the rise, we simply had to include this term in the title.
I gave a lot of thought to what “governance” means, what “management” means, how they are alike and how they are different.
I sought out the opinions of several other CPA firm consultants and their responses were, as they always are, enlightening and insightful. Their major conclusions were:
Today, when people use the term “firm governance,” they refer to formal, written rules and bylaws for making decisions such as voting and defining authorities of the MP and other individuals and committees. Two of my colleagues summed it up with “who does what.”
“Management” is the implementation of goals, policies, procedures, planning and holding people accountable, all related to the execution of decisions made. Management is the process of making sure everyone knows what to do and managing them to make sure it gets done. My thanks to Charles Hylan, CPA of St. Louis-based The Growth Partnership, for this paragraph.
Until 2005 or so (my guess at when “governance” became in vogue), there was very little thought given by managing partners and consultants to the fine distinction between these two terms. Management was clearly the all-encompassing term, with governance being a subset of it.
I would like to share an insightful quote from my friend and colleague, Denver-based CPA firm consultant Rich Reinhart of Grant Partners:
“Leadership is a whole other subject. I once read that if you want to understand the difference between leaders and managers you look to where their power comes from. Leaders derive their power from the consent of the people (partners). Managers derive their power from the organizational hierarchy. Leaders do not need titles. Managers always have titles.
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