Leadership is crucial for driving business performance and building a strong and collaborative business environment. Accounting firms require effective leaders with a range of skills that combine interpersonal communication, emotional intelligence, and a tech-savvy mindset.
The constantly evolving business landscape demands adaptable leadership that balances unique leadership traits with necessary actions. Numerous leadership styles have been studied and tested over de years, and while each has its benefits and challenges, in the end, there is not much surprise: the most prevalent styles in public accounting firms are still the well-known transactional, transformational, and laissez-faire.
So, let’s take a close look at each one of them.
Top 3 Leadership Styles in Accounting Firms
Transactional leaders: Orderly and efficient
Transactional leaders prioritize maintaining order and efficiency within their organization. They rely on rules and procedures to guide decision-making and expect team members to follow them strictly. These results-driven leaders measure the results of their subordinates by the preexisting merit structure within a firm and use rewards and punishments to motivate team members to achieve specific goals.
According to the research, this is one of the most common leadership styles within public accounting firms.
Strengths:
- Brings order and efficiency to the organization through clear rules and procedures
- Effective in situations where consistency and reliability are important
- Useful for achieving specific goals in the short-term
- Provides clear expectations and feedback to team members
Weaknesses:
- Risk of micromanagement overcome.
- May stifle creativity and innovation
- This can lead to a rigid and inflexible work environment
- May not motivate team members who seek autonomy and ownership over their work
Transformational leaders: Creative and mission-driven
Transformational leaders create new leaders. This style inspires and empowers team members to achieve autonomy within a shared vision or mission. They encourage creativity and innovation and are often seen as charismatic and visionary. Coaching and mentoring help team members develop their skills and achieve their full potential.
Although this style is often regarded as a very effective leadership style, it may not be the best in every situation. In some cases, firms may need greater direction, control, and oversight to ensure progress — what transactional leaders can provide.
Strengths:
- Most effective in situations where adaptability and flexibility are important
- Provides opportunities for team members to develop their skills and achieve their full potential
Weaknesses:
- May not provide clear guidelines or expectations
- Overly reliant on the charisma and vision of the leader, which may not be sustainable in the long-term
- May not be effective in situations where team members are not receptive to change or innovation
Laissez-faire leaders: Trusting and hands-off
“Laissez-faire” means “let you do” in French. These leaders delegate decision-making authority to team members and provide them with the freedom to work independently. They trust their team members' skills to solve the day-to-day workload and don't get involved in mundane tasks. Support and guidance are given when needed, but the leader does not intervene in day-to-day operations. As these types of leaders do not micromanage, to work they need a team with highly skilled and motivated members but can be less effective when more guidance and direction are needed.
Strengths:
- Effective when team members are highly skilled and motivated
- Fosters a culture of trust and mutual respect
- Effective in situations where team members can work independently
Weaknesses:
- This may lead to confusion or lack of direction if team members are not clear about their responsibilities
- May not provide enough support or guidance to struggling team members
- Less effective when team members require more direction or oversight
5 Soft Skills Every Leader Need To Train
In addition to leadership style, soft skills are critical to building effective leaders in accounting firms. Here are five soft skills that should be developed:
Business Performance Vision
A clear strategy is essential for driving business performance, and finance leadership is crucial to achieving this. Leaders need to have a vision of where they want to take the organization and understand how to align their teams toward achieving that vision. This requires strategic planning, goal-setting, and performance-tracking skills, as well as a strong understanding of the financial aspects of the business. By developing this skill, leaders can ensure their team is working towards common goals and objectives that align with the overall business strategy.
Emotional Intelligence
Strong leaders recognize, reflect, and regulate their emotions in healthy ways that power their interactions. Emotional intelligence encompasses self-awareness, self-regulation, motivation, empathy, and social skills. By developing this skill, leaders can understand and manage their own emotions and those of their team members, leading to better communication, collaboration, and overall performance.
Critical Thinking and Adaptivity
Attuned critical-thinking skills enable leaders to identify, analyze, solve, and execute strategies for varying challenges. Curiosity, planning, and flexibility ensure leaders can adapt.
Leaders need to be able to think critically and make sound decisions based on data, facts, and experience. They should also be able to anticipate challenges, identify opportunities, and develop contingency plans. By developing this skill, leaders can make informed decisions that benefit the organization, while also being able to adapt to changing circumstances.
Digital Mindset
Digital literacy gives a firm a competitive edge, boosts innovation, and ensures that accounting and finance professionals remain relevant in this evolving digital landscape.
Leaders need to have a good understanding of the latest technologies and trends in the industry, such as cloud computing, automation, and data analytics. They should also be able to integrate these technologies into their day-to-day operations to improve efficiency, accuracy, and profitability. By developing this skill, leaders can leverage digital technologies to enhance their team's productivity and better serve their clients.
Negotiation
Negotiation training guides a leader through the different types of negotiation, the rules in which to engage, and the processes to strengthen these skills. Leaders need to be able to negotiate effectively to reach mutually beneficial agreements with clients, vendors, and other stakeholders.
They should be able to identify the other party's interests, understand their own strengths and weaknesses, and develop a strategy that maximizes their chances of success. By developing this skill, leaders can create win-win outcomes that benefit both parties involved.
Effective leadership has a pinch of everything
By embracing a dynamic leadership style that encompasses multiple facets and traits, leaders can develop the resilience needed to navigate the ever-changing and complex business landscape. The ultimate goal should be for leaders to find their unique leadership style that is authentic to their strengths and fits the needs of their team and organization.
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References:
Fieler, B. (2019, August 5). CPA Firm Leaders and Defining New Roles. Tax & Accounting Blog Posts by Thomson Reuters. https://tax.thomsonreuters.com/blog/cpa-firm-leaders-and-defining-new-roles/
Leadership, management, and administration: What’s the difference? (2019, July 3). Accounting Today. https://www.accountingtoday.com/opinion/leadership-management-and-administration-at-accounting-firms-whats-the-difference
Top 8 ways to build leaders in your firm (illustrated checklist). (n.d.). Top 8 Ways to Build Leaders in Your Firm (Illustrated Checklist) | Resources | AICPA. https://www.aicpa-cima.com/resources/download/top-8-ways-to-build-leaders-in-your-firm-illustrated-checklist
Kevin Mitchell, CPA
Senior Manager and CPA with over 20 years of experience in accounting and financial services, specializing in risk management and regulatory compliance. Skilled in managing audits and leading teams to deliver exceptional services. Proud father of two.
