Finally? I think, yes. I have worked in this profession for a long time and always wondered why no one ever developed a diagnostic test to measure overall CPA firm performance. I wrote an article many years ago (Metrics of Greatness, 2006) about how we measure “greatness” of a CPA firm. Since that article was written, not much has changed in that respect.
It seems to me that the only metrics used to measure a CPA firm are net revenues and average partner compensation, and sometimes, number of employees and locations. That’s it. No more, no less.
So, what does this mean? It means the only way to improve is to get bigger and make more money. I would argue there is a lot more to consider in measuring “greatness” of a CPA firm. Simple things like how we treat employees, client satisfaction, and corporate citizenship to name a few.
So, I have developed a CPA Firm Diagnostic Tool that takes into account many attributes in measuring a firm’s performance. The components and weighting of the tool are not scientific; they are all anecdotal and based upon my many years in the industry. I carefully chose the categories and weighted the categories based upon my intuition.
The test is meant to be self-administered, on a subjective basis. However, many of the components can be measured on an objective basis (for example, average partner compensation).
The tool is not meant to provide a competitive ranking of one firm to another – because of the subjective nature of much of the information. I believe where the tool can have significant benefit is self-evaluation within a partner group, monitoring and continued improvement, identifying strengths and weaknesses, and providing good insight into merger and acquisition diligence.