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Enough has already been written and covered, both in the financial and mainstream business media, about the ongoing “accounting talent crisis.” Most of the coverage in this regard, while factually correct and loaded with concrete stats, has revolved around the problem as opposed to providing any concrete solution for the short term or the long run.
While most literature on the subject of accounting talent crisis has highlighted accounting talent shortage as the prime cause behind the crisis, and rightfully so, there isn’t much talk about the business models being the culprit behind the same.
This presented us with an opportunity to get two of the foremost accounting thought leaders in Ronald J. Baker, the founder of VeraSage Institute — the leading think tank dedicated to educating professionals internationally— and Hitendra R. Patil, the President of the Global Finance and Accounting Outsourcing Services of Datamatics Business Solutions, Inc. (DBSI), across the table and let them share their thoughts on the subject.
We got the buy-in from two of Accounting Today’s Top 100 Most Influential People in Accounting, Hitendra, and Ronald, and we turned it into an enriching webinar for the accounting fraternity. Below are some key excerpts from the transcript of the discussion that flowed during the webinar between the two. However, if you still fancy an audio and video visual to get to the root of the accounting talent crisis, you can still watch the on-demand webinar below. However, like us, if you prefer reading, continue with the content below.
We start the discussion with Hitendra, who shares some critical stats to paint a clear picture of the ongoing accounting talent crisis. The highlights –
- 300,000 (17%) exoduses between 2019-2021
- Less than1% small-medium-size CPA firms find enough staff
- BLS – 6% more accountants and auditors needed by 2031
- 7.8% less Bachelor’s in 21-22, 6.4% less Master’s – most significant single-year drop since 1994-95
- 75% of today’s public accounting CPAs will retire in the next 15 years.
The stats make it clear that the situation is rather grim. Continuing his opening note, Hitendra shares the current status of talent retention in the US accounting profession. According to which –
- Eight percent of young professionals, ages 18-38, plan to leave the profession within a year.
- Thirty-nine percent of young professionals have switched jobs in the past 24 months.
Furthermore, Hitendra talks about the shift in work culture over the past few years. Specifically, the post-pandemic era is reshaping the workings of accounting firms. The remarkable change in the work culture, with more and more accountants preferring the hybrid work model over the traditional work model, makes it clear that the work culture has a significant role in managing the talent crisis in the accounting landscape.
Among the other factors that have resulted in the ongoing talent crisis, Hitendra lists the following primary causes –
- Low salaries compared with other industries
- 150 credit hours for a CPA license
- Additional costs and time commitment
- Onerous workloads
- Mundane tasks
- Lack of meaningful work
- (Perceived) threat of new technology
After a convincing and thought-provoking opening remark, Hitendra introduces Ronald J. Baker to the audience to move the conversation.
Is The Talent Crisis Real?
After a warm welcome for Ron, Hitendra throws a couple of tough questions at him, saying, “There have been numerous reports citing talent shortage in the middle, big, and small-sized firms alike, which indicates that the accounting profession is actively battling talent shortage.” Hitendra asks, “So, what are your thoughts on the ongoing accounting talent shortage and the shirking pipeline of accounting students?”
“While those are two different questions, they are, in more ways than one, correlated,” adds Hitendra.
Ron responds to Hitendra’s address: “Great compilation of statistics, Hitendra. Those stats do paint a scary picture. To understand the situation thoroughly, we will have to take a look at the entire accounting profession as a funnel, with the students and aspiring accountants atop the funnel, followed by the people who intend to leave the profession in the coming year or two, and finally, at the bottom you have the folks who will be retiring or are nearing retirement age.” He further adds, “To attract more young talent towards accounting as a profession, we need to reach out to schools and maybe tweak the accounting curriculum if needed. When I was in school, we had a two-year accounting program. I’d like to see more such accounting programs. We also need to offer more internship opportunities to aspiring CPAs, which will address your middle-of-the-funnel problem. And for the bottom of the funnel, I would like to see more elderly CPAs take up the mentorship roles and maybe be the torchbearer for the generation to come by putting their experiences and guidance in the form of a book or a memoir.”
To further the conversation, Hitendra responds, “Absolutely agree, Ron; there needs to be a fundamental shift in how accountants are perceived in society. I have been actively chasing some of the biggest dictionaries in the world to suggest an amendment to their definition of “accountant” or “accounting.” For ages now, accountants and accounting have been associated with number crunching, but there is a lot more than number crunching in the profession. Because of this image, there is an ongoing notion that accountants and the accounting profession are most susceptible to being replaced by Artificial Intelligence (AI).”
“Now, before we move towards the crux of the discussion, which is the “business model,” let us not forget that despite all the technological advancements, the “work-life balance” is the utmost priority for modern employees,” says Hitendra.
Identifying The Culprit
As we move ahead, Hitendra takes the discussion towards pinpointing the real culprit of the talent shortage. Hitendra says, “To identify the culprit, we must collectively look at the market. Is it the perception, or is it our creation?”
In continuation of his question, Hitendra shares an exciting excerpt from his book reading: “The World Bank reports that 80 percent of the developed world’s wealth resides in human capital, illustrating that we’ve been in a knowledge economy since the 1950s.”
He adds, “When firms “sell time,” the natural focus is on extracting as much work as possible from the time available. “Staff utilization” and “billable hours” are the key management metrics.”
Hitendra adds another aspect to his earlier question: “Has the accounting firms’ mentality changed?”
In response, Ron says, “Yes, to some extent it has. I won’t say it has not, as I am a paranoid optimist. Having said that, the “billable hours” remain in sight, but the modern firms, startups, and smaller firms owned by young people are more focused towards aspects that we discussed earlier, the work-life balance and more. Firms have started focusing less on the age-old long hours in the office and concentrating on the value proposition.”
Ron adds, “While there has been a change in the organization’s culture, much more needs to be done. And even changes in the business models based on the relationships.”
How you can change your business model?
Hitendra agrees with the points made by Ron, mentioning his CAS and CAAS surveys that he has been running for years now and how those surveys, too, have pointed in the same direction.
Taking the conversation forward, Hitendra says, “You mentioned the need to change the business models.
So, how and what sort of changes should we bring into our existing business models? You have been very vocal about bringing in the subscription business model, so what exactly is this model, and how do firms adapt it? And what can this business model’s impact be on the accounting staff, and can it help address the talent crisis problem we are discussing today?”
Responding to Hitendra’s question, Ron starts by saying, “Well, Hitendra, you are correct in assessing that the ongoing accounting talent crisis is, in some way, the byproduct of our business models. If I fit in lightbulbs in your house and 15 – 20 blowouts, I cannot blame the bulbs. It’s the electric system at your home that’s the problem. In the same way, for accounting, the business model is at fault for its mundane tasks, long working hours, and all that.
To change your business model, you need to re-look at your strategy and your positioning in the market. Your plan should not be to be everything to everyone; you cannot offer all the services your customers want.
In the same way, you will have to reposition your business in the market based on the services you offer. It would help if you redid the pricing, strategy, and positioning. Having a subscription model addresses all those requirements. The best thing about having a subscription model is that it puts people at the epicenter of all your offerings. As accountants, we can impact the overall lifecycle of the individual through our work. Unlike many other professionals, accountants can care for many aspects of an individual/organization.”
“Very well put, Ron. Accountants can impact the entire lifecycle of an individual/organization.” Hitendra responds. He adds, “While that’s a very profound thought, I still have a specific question for you. When we talk about a subscription model, what exactly will the customers subscribe to? We will still be producing what we produce in the form of the balance sheets, the tax returns, the advice, Etc. So, what will the customers be subscribing to? Will they be subscribing to our resources and capabilities, or are they subscribing to the expertise we have built in our head?”
Ron responds, “Well, the great thing about a subscription is the recurring value you deliver to your customer. Accountants are needed throughout the year, not just during the tax season or when the financial statements are due. And that’s what the subscription model offers. Customers will have access to our services in all its capacity throughout the year by subscribing to our services.
We are trying to transform the entire business model with the subscription model, just like Amazon transformed our shopping habits. Yes, there will be times when you will not have the capacity or expertise your customer seeks, but that’s fine; that happens to the best of businesses. What we are trying to do with this subscription model is to allow customers to have all their accounting needs addressed with just one click.”
Hitendra responds by saying, “That’s very interesting. I agree with making accounting an impactful profession instead of just a financial handyperson business. Over the last two decades, I have realized that accounting has a bigger impact on business than just being a service-based profession.”
“With that, we move towards the next section of our discussion,” Hitendra continues.
Talent crisis – How are firms dealing?
Hitendra opens the discussion by sharing an anecdote from his conversation with various organizations. He says, “I have been asking many firms whether they have a talent shortage. While most of them deny having any, a majority of them agree to it. And throughout my discussion, I have found that thriving firms are doing something differently –
- Recognize and reorganize workload patterns
- Embrace and respond to shifts in the hierarchical needs of staff
- 3 in 4 firms considering remote staffing, outsourcing, and offshoring
So, I would like to ask you a couple of questions based on the same observation that I had–
- When the client goes on to the website of a firm thinking that this firm might help me, what exactly are they buying?
- And if the firms transform their business model into the one where they sell impact, how do they motivate their employees to embrace this change?”
Ron answers both questions, saying, “I think the employees will embrace this change. The simple reason is that it will make them realize that they are not just solving an immediate problem for their customers but are making a long-term impact. It will work well if the firm is niched and focused on the services that they are offering. Firms need to realize that they cannot be everything to everyone.”
Hitendra responds by returning his earlier mention of the significance of “work-life balance,” “I think you are right. The subscription model gives the accountants the sense of making an impact, which gives a lot more sense of accomplishment than just delivering a job they are asked to do.”
Continuing his statement, Ron says, “I believe goods and services are outside of us, but the experiences and expertise are inside us, and that’s what we should try to offer to our customers through business transformation. To do so, organizations need to invest in people more often than they already do.”
How to overcome the talent shortage?
To conclude the discussion, Hitendra and Ron agree that outsourcing and offshoring are the most effective answers to the ongoing accounting talent crisis. If you want to add value to your firm or your clients, outsourcing is the way to do it. If you need any help getting started into the world of outsourcing or offshore your services, book a 15-minute no-obligation call with one of our experts, or write to us at email@example.com, and we will have our experts reach out to you with services/offerings tailored specifically for your needs.