Rethinking Accounting Firm Structures: The Pentagon Model for a Sustainable Future

A pyramid-shaped practice structure has worked well for accounting firms for more than a century, but experts believe the model is breaking down and should be replaced.

The pyramid model works by leveraging work to the base level of the pyramid – the inexperienced new hires – who work their way up to eventually become a manager and finally, after a decade or more, they make it to the narrow top of the pyramid as owners.

A more sustainable structure looks like a pentagon, advocates say. The structure involves fewer entry-level staff at the bottom, a wide middle made up of experienced staff, managers and experts, and owners at the top.

This is not to say that firms operating under a pyramid structure are not successful, but firms under a more corporate model (represented by the pentagon) are setting themselves up for the future, as demographic and cultural shifts are making the pyramid more difficult to hold up, experts say.

Is the Pyramid Crumbling?

The reality is that fewer entry-level job candidates are available now and demographic changes show graduating classes will be smaller in the future. Also, the traditional apprenticeship model, with staff learning through observation and face-to-face discussion, has been altered by remote work. Young people aren’t interested in working 80-hour weeks,  either – 50 is more reasonable.

“That extra 30 has to go somewhere,” notes Jennifer Cryder, CEO of the Pennsylvania Institute of CPAs, who outlined her support of the pentagon in a recent report on retention.

“I think those at the top are probably working harder than ever – which is kind of surprising because we know firms are more profitable than ever – but they’re getting squeezed from a lot of directions,” Cryder said.

Cryder sees a way forward, along with Lisa Simpson, the AICPA’s vice president of firm services, and many others in the profession. While entry-level hires are still needed and valued, some of the more tedious tasks can be pushed off to technology or other professionals, overseas or closer to home. Those moves can lessen the grunt work while giving newer staff more interesting projects and a speedier way to climb the ladder.

“Those people at the bottom are probably going to grow faster because their work is going to be a little more focused and they might be engaging with the client earlier than they would have been,” Simpson said.

The middle level can be made up of lateral hires and non-CPA experts, such as technologists, corporate finance experts, business developers and others, Cryder suggested.

Moving to a Different Structure

Are firms making the move? Yes and no. Some have worked under a corporate model for a decade or more; some are just starting to hire a C-suite, outsource and implement new technologies; some are sticking with what’s worked in the past; others are focused on the economics of the firm more than ever before.

David Stonesifer, CEO/MP of Reading, Pa.-based Herbein + Company (FY22 net revenue of $46.5 million), says his conversations with MPs these days center on private equity’s impact on the profession more than new business models or anything else.

“I think we’re doing things a little differently,” he said.

While the pyramid model worked successfully for Herbein, the firm has grown so quickly that changes became essential. Now, Stonesifer said the structure looks more like an hourglass than a pentagon, but he is working to relieve the bottleneck in the middle and lessen the workload for entry-level hires. Here’s how Herbein’s business model is changing:

Overhiring – Stonesifer says the labor shortage has loosened a bit over the last eight months and he’s hired a recruiter, which has made it easier to attract entry-level staff with the intention to move them up the ladder quickly. Recruitment at all levels is continual. “We’re always on the hunt for great talent. I’ve seen it time and time again. If a talented person joins our firm, whether we think we had a need or not at that time, their schedule miraculously gets filled pretty quickly.”

Outsourcing – About a year and a half ago, Herbein opened its own 30-person office in the Philippines with plans to increase staffing to 50 in the next year.

Training – The firm is setting up Herbein Academy, a training program that will design a curriculum based on an individual’s career path. An industrial psychologist joined the firm about a month ago to help younger partners learn non-technical leadership skills.

Hiring non-CPA managers – Herbein has recently hired three managers covering learning and development, recruitment and culture. The culture manager will handle onboarding new hires over an 18-month to two-year period, which should improve retention and progression up the ladder.

Governing with the future in mind – Stonesifer says the firm has operated much like a corporation for more than a decade, with governance in the hands of a small group of elected leaders, who are focused on future investments. “That old model doesn’t allow for building a war chest and planning for the future, and fortunately our firm hasn’t operated like that for a long time.”

Considerations in Moving to the Pentagon

Attracting pros from other firms – Making lateral hires at the manager level is tough, and firms have been struggling for years to find experienced professionals. “I think that building a firm to successfully bring in lateral hires is about culture,” Cryder said. “I don’t even think it’s about hiring or onboarding, necessarily, it’s about culture. I think firms are going to have to figure this out because they’re not going to be able to rely on home-growing talent the way they did before.”

Hiring non-CPAs – Simpson says a client success manager, a new role some firms are starting to embrace, is one way to relieve some of the workload at the top levels. Professionals in these non-CPA, billable positions can ease the transfer of information between clients and experienced staff in tax, audit and advisory, improving client experience. “I think it’s going to be just a huge shift in how firms are engaging with their clients,” Simpson said.

Hiring from industry – For example, Simpson said, one firm has hired former executives from a health care system to bolster expertise in its health care practice. “Maybe 15 years ago they wouldn’t have done that because they didn’t have public accounting experience,” she said.

Developing shared service centers – In addition to sending tax returns overseas, another way to lessen the workload is by setting up a shared service center of tax professionals in parts of the U.S. with lower compensation rates, Simpson said.

Embracing technology – Advanced technology, such as AI, is becoming embedded in products firms already use, increasing access and improving affordability. “I think that as we’re talking with firm leaders about where they’re investing, technology has to be on that investment road map, because if not, it puts them behind from an efficiency standpoint, but also from a recruiting standpoint because you’re not going to be as attractive to candidates if you’re not showing that you’re moving forward digitally,” Simpson said.

The pyramid model relies on a large base of entry-level hires progressing to the top, but demographic changes, fewer graduates and shifts in work culture, such as remote work and reduced working hours, are challenging this approach. Adopting advanced technology and enhancing culture are crucial for successful implementation of the pyramid model to future-proof the firm.


Recent Posts


Sign up for the IPA INSIDER: a bi-weekly news round up sent directly to your inbox.

Related Stories