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Expect The Unexpected: Employee Departures Are Never Sudden
Contrary to the title of the post, employee departures are never sudden. Whether you are a CPA firm owner or an accounting function leader at a large enterprise, you will concur. In any industry, irrespective of the size of the firm or business, employee turnover is always a culmination of several minor issues boiling beneath the surface. Higher employee turnover can be attributed to any of the aforementioned issues, from unhealthy work culture to uninspiring work to poor career trajectory. It especially holds true for the dynamic and demanding world of accounting.
Inherently, accounting is a volatile profession, with a plethora of unseen factors that can easily disturb the clients, the finances, and the operation of even the most established accounting firms. Add to that the gruesome task of managing risks during sudden employee departures, and you are staring at the worst nightmare of any accounting leader or CPA firm owner across the globe if truth be told, as per the AICPA’s 2022 PCPS CPA Firm Top Issues, “managing risk” has consistently ranked atop the concern list of CPA and accounting firms.
All of this clearly makes it imperative for the CPAs and the accounting leaders to stay vigilant and have a robust risk mitigation strategy to cope with the threats, seen and unseen alike. In this post, we will predominantly focus on the threat of sudden employee departures. We will discuss some of the effective strategies that might not help you predict and brave the threat of sudden employee departures but certainly can help you mitigate the associated risk.
We will also be taking a closer look at some of the proactive measures in the form of technology, transforming the nature of work, and other strategies that can be brought in place to minimize the impact of sudden employee exits. A deeper understanding of the problem at hand, along with the effective measures to mitigate the risk, can be instrumental in helping CPAs navigate the “unexpected” while safeguarding the reputation of their firm and ensuring business continuity during challenging times.
Understanding The Risks Associated with Employee Departure
Employee departures, whether planned or sudden, have a cascading effect on the organization’s overall operation, irrespective of its size and nature of work. In the accounting and finance industry in general, though, employee departures can be extra challenging to deal with, considering its wide assortment of associated risks. While CPA firms face the standard challenges that come with employee departures, such as disrupted operations, entangled client relationships, and eventual financial losses, some other risks are tough to quantify.
Here are some of the most significant risks associated with employee departures.
Compliance & Regulatory Risks
Most accounting and CPA firms operate within the bounds of complex regulatory guidelines that they are expected to adhere to at all times. There are custodians to safeguard the compliance and regulatory policies at all times. However, in case of the sudden departure of key personnel responsible for enforcing those regulations, the business gets exposed to external threats that come in the form of data breaches and non-compliance with prescribed regulations, resulting in hefty monetary fines and irreparable reputational damage.
Depleted Knowledge and Skill Pool
When an employee leaves the organization, the valuable expertise and skillset they have developed/acquired during their stay with the firm goes with them. This loss of knowledge and skill exerts extra pressure on other employees, forcing them to take up additional responsibility and disrupting the overall operation of the team. This depletion of expertise and skill pool directly impacts the firm’s overall productivity.
Delay in Fulfilling Client Commitments
Every employee carries the onus of fulfilling the commitments made to the client by the firm. In case of sudden employee departure, your commitment can be put under jeopardy if there is no prior resource planning. Every employee working with the client carries the wealth of knowledge and expertise required to fulfill the client commitment. In case of sudden departures, there is a huge void which can be difficult to fill if not planned properly.
Risk to Intellectual Property and Confidentiality Clauses
While all the employees are bound by a moral code of ethics that prevents them from harming the intellectual property and confidentiality clause of the firm they are exiting; it is not assuring enough. This is why most CPA firms require employees to adhere to confidentiality and non-disclosure agreements.
Risk to Client Relationship:
If the departing employee has a strong rapport with the client they are working with, the firm can risk losing the client with the employee’s departure. This is why, as an organization, you need to invest smartly in cultivating a relationship between the client and the firm instead of just having the employees take care of the clients.
Lower Overall Productivity and Team Morale
Every employee departure significantly impacts the overall productivity and team morale. It not only raises questions about the general culture of the firm but also lowers the team’s overall morale, especially if the employee had a significant role within the firm.
While these are just some of the risks associated with employee departures, you need concreted risk mitigation strategy to counter them. So, let us have a look at some of the most effective strategies for CPAs to mitigate risks during sudden employee departures.
Effective Risk Mitigating Strategies for Proactive Business Continuity Plan
While employee departures significantly impact the business’s overall operation, there are risk mitigation strategies to counter its impact and ensure smooth business continuity. As a proactive business leader, you must have these risk-mitigating strategies in your arsenal to ensure your business faces the minimum effect of a sudden employee departure.
Here are some of the effective strategies for CPAs to mitigate risks during sudden employee departures:
Cultivate A Culture of Positivity & Transparency
Employees appreciate when they are recognized for their contribution towards the firm. As a business leader, you must cultivate a positive and transparent work environment. A culture that acknowledges every contribution, small or big. You must encourage transparent communication and promote a healthy work-life balance. It’s highly beneficial to have a regular feedback mechanism that promptly addresses any possible issue the employees might face.
Empower Employees with Training & Upskilling Opportunities
Employees are the most valuable asset for any organization. It’s always beneficial to invest in your employees, whether it is through upskilling programs or aiding them with technological power that can help them execute their duties more efficiently and promptly. You must have active mentorship and training programs to demonstrate your commitment to upskilling and your employees’ career growth. Employees who see a clear growth path in their career are less likely to leave and look for opportunities outside your firm.
Adopt Advanced Technology
Technology is a great way to empower your employees. Technology cannot only significantly reduce the burden on the employees by automating mundane tasks but also help them give them enough opportunities to actively contribute towards the strategic growth initiatives of the firm.
Conduct Regular Risk Management Reviews
You must have regular reviews for your risk management strategies and make necessary amendments. Routine amendments in the risk management strategies will not only prtect your firm from any sudden impact of employee departure but will boost the firm’s resilience to withstand any potential employee departures in the future.
Create a Robust Knowledge Management System
Knowledge is the hardest to replace when an employee leaves. Thus, it is imperative to create a system that captures and protects valuable knowledge that departing employees have. You can have a process to document all the processes, tools, and technoloies they worked on, a list of all the clients they worked with, and a comprehensive detail of various stages of projects they were working on. This will result in smooth transitioning for the incoming employee and prevent the work from any possible disruption.
By leveraging these proactive risk mitigation strategies and practicing a vigilant approach to risk management, CPA firms can easily navigate the aftermath of sudden employee departures while safeguarding their everyday operations and protecting their business reputation.
Risk Mitigation for CPA Firms is Continual
The accounting industry is ever-evolving, thanks to the constant technological advancements, the frequent regulatory policies, and the turbulent socio-economic landscape we live in. This constantly imposes new threats to the established processes and working of the CPA firms and the accounting industry. Thus, to survive and safeguard themselves from any imposing threat, CPAs need to be on their toes continually to address any possible risk that might come their way. From growing cybersecurity threats to the increasing complexity of tax regulations, your risk mitigation strategies must handle everything that can and will come your way. Should you need some help in safeguarding your business operations from imminent employee departures, or if you want to boost the overall efficiency of your operations, click here to book a 15-minute no obligation call with one of our experts or write to us at [email protected], and we will have our experts reach out to you with a solution tailored to just for you.
