The class gap for accounting firms: pick your side

This is one of nine key insights identified in Karbon’s recent report, The Business Ability of Accounting Firms, which reveals the core weaknesses and progress of 250 accounting firms across the globe that were assessed through our Practice Excellence Scorecard.

The accounting profession’s class gap

To date, more than 250 accounting firms across the globe have taken the Practice Excellence assessment. Analyzing their results and data presents interesting findings, and helps to show what firms need to do to progress—and the risk of not investing in improvement.

For large data sets, you would expect the data to exhibit a normal distribution—presenting a symmetrical bell curve. However, this does not happen when analyzing the Practice Excellence scores of participating firms.

Instead, two peaks are presented, separated by a significant dip in the lower end of the Expansion quartile (firms with a score near 55%). This indicates a bimodal distribution and can be looked at as the progressives, and the laggards.

A large number of firms—including many solo and small firms that make up a large quantity of the market—sit in the Traditional and Transitioning quartiles. These firms demonstrate lower than average business capabilities. This could be attributed to a lack of time and resources, a resistance to change, or a lack of desire to invest in the firm itself.

In the middle of a distribution chart like this one, you normally see the highest bars. But one bar in this chart is significantly lower than those around it.

The steep curve preceding the dip, and the dip itself, shows a struggle for accounting firms to progress to the next stage. They are able to reach a certain level of Practice Excellence without investing too many resources, but this will only take them so far. To cross this gap, a firm needs to dedicate deliberate time and effort, and be committed to it.

But for those firms that invest in this, they are then able to accelerate (as demonstrated by the flatter curve after the dip). They find it easier to keep improving and progressing towards the Leader quadrant and a high level of Practice Excellence.