Platt’s Perspective: Five Years After The Lehman Brothers Collapse

Shortly after the 2008 Lehman Brothers bankruptcy led to the world financial system almost going over the edge, futurist David Pearce Snyder told an audience at the AICPA that “this is not your father’s recession,” and “it will be five more years before the economy returns to a new ‘normal.’ ”

So now, five years later, the obvious question is, “Are we there yet?” The quick answer is, “Not quite, but we’re making progress.”

The profession has made adjustments. Initial belt-tightening and layoffs occurred early and led to preservation of income for the firm. “Right-sizing” and getting rid of underperforming staff came next. Leaders learned how to calm a nervous team – they offered open, honest dialogue, and a plan for going forward. Stepping up accountability came next, leading to elimination of some under-performing partners. Mergers became the quickest method of growth, with many firms in the “buy” mode. This coincided not only with paltry growth among smaller firms but also the pending retirement of a generation of Baby Boomers, which fueled even more acquisition activity. Strategic business development efforts took hold in many firms, supplementing “opportunistic” growth with “intentional” growth. Sales training for partners re-emerged and recruitment efforts stepped up for the expected additional work, which has started in a number of areas around the country.

What we don’t yet know is how strong the comeback will be, and what a new normal will look like. Temporary employment agencies are reporting a surge in part-time and temporary positions in the marketplace, leading many to question whether there is confidence that growth is sustainable or concern that it is fleeting.

Firms that have institutionalized a “do more with less” mentality as well as a culture of making tough decisions and acting on them are showing strong growth and profitability. One in eight firms reported organic revenue growth of over 10% this year – that number was 63% in fiscal year 2007. Almost one-fourth of firms are reporting double-digit income growth this year – that number was 55% in 2007.

Now, as then, one-third of participating firms show profitability above 35%. Fees per employee among the IPA 100 – after all the adjustments in staffing – are now about $15,000 higher than they were in 2007. After the mega-mergers of the last few years, minimum fees to get into the IPA 100 are still hovering around $30 million, as they were in 2007, showing the next group among the IPA 200 continuing to grow and rebound.

Words like “normal” are fairly subjective, and we’re still too close to determine if things have completely settled into the “new normal” as Pearce Snyder suggested. But signs of growth are encouraging and more consistent than in the recent past, and the future looks bright for those who make bold, intentional decisions and refuse to settle for the status quo.