In a rapidly evolving accounting landscape where many firms pursue private equity investment, Grassi has taken a distinctively different approach by implementing an Employee Stock Ownership Plan (ESOP). Announced in November 2023, Grassi’s ESOP model demonstrates the firm’s deep commitment to independence, employee engagement, and exceptional client service. In this Q&A, Founder, CEO and Managing Partner Lou Grassi shares insights into the firm’s strategic decision to choose employee ownership, highlights the tangible benefits already realized, and explains how this innovative structure positions Grassi uniquely in the accounting industry. Explore why an ESOP is more than just a business strategy for Grassi—it reflects the firm’s core values and commitment to long-term growth and client success.
Q: Why did you choose an ESOP when many accounting firms pursue private equity investments?
A: I have taken a different path in an era where accounting firms increasingly take the private equity route. At Grassi, we’ve established ourselves as pioneers in the accounting industry by implementing an Employee Stock Ownership Plan (ESOP), which we announced in November 2023. This unique model reflects our bold commitment to independence and long-term sustainability, promotes employee engagement, enhances client service, and ensures enduring stability.
These unique benefits set Grassi apart from our peers and intrigue those interested in innovative business models. “We work exclusively for you, not outside investors looking for a return,” I often emphasize. This philosophy distinguishes Grassi in an industry where outside investment and consolidation are the norms.
The ESOP reaffirms our long-standing commitment to our people by giving them a stake in the business. In this way, we are taking another step in fulfilling our firm’s purpose: Helping people thrive, every day. At the same time, it enables new levels of investment and quality, keeping us at the forefront of client service.
Q: What specific benefits have you seen since implementing the ESOP structure?
A: Our decision to embrace employee ownership wasn’t just a business strategy but a reflection of our deeply held values and commitment to our clients and employees. While some larger firms have adopted similar models, employee ownership remains relatively uncommon in accounting. This distinctive approach has already yielded tangible benefits. We have reported increased client and employee engagement and retention rates significantly outperforming industry averages.
We also believe the ESOP will give us an edge in addressing one of the most challenging issues facing the accounting industry—talent shortage. This challenge is especially evident at the university level, where fewer students opt for an accounting degree. According to the AICPA, the number of accounting graduates with either bachelor’s or master’s degrees dropped 7.4% in the 2021-2022 academic year, the largest drop since 1994-1995.
The ESOP model fundamentally changes how people perceive the business. They no longer see it as an option but as an investment, leading to increased motivation and a focus on economic benefits.
Q: How has the ESOP implementation changed Grassi’s organizational structure?
A: As part of the ESOP, we implemented an alternative practice structure, creating two specialized entities: Grassi Advisory Group for tax and advisory services and Grassi CPAs for audit and attest work. This strategic reorganization enhances our service capabilities while maintaining our commitment to independence and quality.
The impact of these changes extends beyond our organizational structure. This alignment manifests in improved client service, as employees – now owners – have a direct stake in the firm’s success and client satisfaction.
Q: How does your experience with other ESOP companies influence your approach to leadership and growth?
A: Having served approximately 35 ESOP companies, we have witnessed firsthand the transformative power of employee ownership. This experience guided our choice to implement an ESOP rather than pursue private equity investment, which often leads to more frequent ownership changes and disruptions to client relationships.
In today’s competitive market, where talent seeks more than just a paycheck, Grassi offers something unique: a genuine ownership stake and a voice in the company’s future.
While maintaining our current leadership team, our new structure ensures long-term stability and significant growth potential. We remain focused on providing personalized service, ensuring each client feels valued and important. Our commitment to personalized service means that each client receives the attention and expertise they deserve, ensuring their success.
Q: What does this mean for your clients?
A: For our clients, this means partnering with a technically proficient firm that is deeply invested in their success at every level of the organization. The ESOP model ensures continuity of service, depth of expertise, and a commitment to putting clients’ interests first. As owners, every employee is personally invested in the firm’s success and, by extension, the client’s success. This unique structure ensures a sustainable future for the firm and its employees while guaranteeing a high level of service and commitment to client satisfaction. Clients can trust that they are working with a team that is not only technically proficient but also deeply committed to their success.
Clients’ biggest fear is that their firm is being sold to a private equity firm and that their level of partner engagement will drop significantly. By establishing the ESOP, we have made a true commitment to employees and our clients that we will continue to service them in the same manner as we always have.
If you would like to speak to Lou Grassi about ESOPs and our firm approach, please contact us here.
