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July 11, 2013

Industry comment: Delivering the benefits of a growing network

By Kevin Arnold, chief executive of Nexia International

We all know that one of the key drivers for a firm joining a network is the opportunity to develop their international capabilities and enhance their ability to attract new clients. Growing networks such as Nexia International face the additional challenge of supporting the needs of member firms while continuing to enlarge the global network.

At Nexia International, we have experienced significant growth of 34% over the last two years, with total revenue at $2.8bn in 2012, an increase of 22% on the previous year. Our 2012 increase was largely accounted for by US firms CliftonLarsonAllen and CohnReznick making the positive decision to stay with the network following their respective mergers. It’s a useful principle to work on the basis that every member firm is a potential merger target. In the cases of Larson Allen and J.H. Cohn, many of their partners were already active participants of Nexia’s special interest groups, committees, etc, and, as such, were firmly embedded in the fabric of the network and deriving real value from their membership.

Recruiting high-quality firms in key and emerging world markets has been critical to our success. However, as we increase our global representation and larger firms join the network, one of the key challenges is to ensure that existing member firms – particularly smaller ones-do not feel marginalised.

Culture of co-operation
As a network expands, some firms may feel that their membership is not valued in the same way as before or that their ability to attract international clients will be inhibited, as they will now have to compete with larger firms for business. It is our job to reassure them that this is not the case.

Member firms that get the most out of being part of a network are those that are proactive and committed to developing the international capabilities of their own practices, as well as genuinely helping other members around the world meet the needs of their clients. This requires a culture of co-operation within the network – where firms feel confident about referring work to one another. Encouraging international and intranational referral work has been a keystone of our strategy over the last few years and will continue to be the focus for the future.

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Enduring professional relationships go a long way towards promoting a sense of trust and collaboration, so facilitating networking opportunities through global and regional conferences and training courses is crucial. In addition, we have introduced several internal initiatives to encourage referral opportunities, enable information sharing between members and help identify potential conflicts of interest. This gives member firms the tools they need to feel confident about referrals.

Key to referral activity is mutual trust between members and confidence in a firm’s ability to deal with referred clients. In this context, we require our members to maintain stringent quality control standards as a condition of ongoing membership. This helps to encourage referral opportunities, as members are reassured that clients will receive consistently high standards of professional advice – regardless of a firm’s size or location.

Rising expectations
Following our strategic review in 2010, an appreciation that the network is making significant strides has raised expectations among Nexia’s board and senior management. This, in turn, has trickled down to what member firms expect of themselves and each other. The challenge now is meeting these expectations.

In my experience the key to success is to remember that a growing network is only as good as the sum of its parts, in other words, the relationships, friendships and camaraderie between its people. In reality, accounting and tax professionals rarely want to do business with other firms – they do business with people they trust.

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