2016 was my 5th year attending CPA Practice Advisor’s Thought Leader Symposium (check out the tweets at #CPAPA_TLS) and it continues to be one the most educational events for me as a change leader in the accounting profession. The brain candy derived from being able to listen and contribute to discussions around the major challenges facing the accounting industry (yes, industry, not profession) is the biggest influence upon my firm’s strategy and my personal mission to change the accounting profession (yes, this time I actually mean profession).
To clarify my references above, when I say “accounting industry”, I am referring to all of the bookkeeping, accounting, and CPA firms who focus on bookkeeping, assurance, and tax-related services. Because that’s really what this symposium and its thought leaders are focused on; helping many of these firms or the vendors that sell to this industry. When I refer to the “accounting profession”, I am referring to the greater whole of the industry, plus all of the people in accounting-related roles in business, industry, government, nonprofits, and academics. Examples of these include: controllers, CFOs, business analysts, internal auditors, and accounting educators.
Accounting Industry Challenges
For the fifth year in a row, I felt like we were talking about the same challenges:
- Accounting firms are still very compliance-focused and not making the shift to advisory or consultative services.
- Firms are not adopting accounting technology that can improve their service delivery and firm operations.
- Software vendors are still not providing holistic solutions; most are focused on minimum required functionality and incremental development. App-partner integrations are not strong enough to meet business needs.
- The continued disenfranchisement of the next generation of accountants (discussions were usually focused on millennials for this topic, but I contend that much of Gen X should also be included in this)—resulting in many of them leaving the profession.
- The increasing number of “younger” accountants who don’t aspire to be a partner in the firms they start off in, but instead start their own practices to bypass the wait, burdensome financial investment, and legacy baggage of the “old firm”.
Already, last year I was feeling like this was a broken record. If the consultants and thought leaders to the accounting industry all seem to have the same message, that firms need to pay attention to the issues above, why aren’t the firms listening?
The Root of Accounting Industry Challenges
Well, this year some of the underlying problems to these challenges surfaced and brought clarity:
- Partners and firm decision-makers (usually older) are the biggest obstacles to making changes in accounting technology and firm service delivery. Fear is probably the biggest factor here. Fear that the staff will know more about the technology and changes than they themselves, and fear of looking inept if they aren’t able to grasp the new way of doing things.
- Lack of transparency. This surfaced in multiple ways: (1) lack of compensation transparency and the wide gap between many partners’ compensation versus staff compensation, (2) lack of transparency in the operations of the firm, and (3) lack of transparency in decision-making in the firm and flaws in the partnership governance model.
- Lack of understanding of performance. A continued focus on billable hours as a measure of employee performance, trying to measure advisory or consulting services performance using the same measures as audit or tax, and convoluted partner performance measures (often tied into partner compensation).
When talking about the partners and leaders underlying the problems above, many of the thought leaders were concerned that these poor people are going be left behind and that they would lose the value of the firms that they worked so hard to build during the course of their life. Well after talking about this for five years, I’m finally tired of it and asked the questions: Why are we so focused on these laggards? Shouldn’t we instead be focused on the innovators and early adopters to help them be more successful? The old adage comes to mind: “you can lead a horse to water, but you can’t make it drink.” Or “you can’t help those who won’t help themselves.”
Why are we spending so much time on these laggards?
If we choose to focus on the innovators and early adopters, we can help them grow their practices and expand the number of clients they serve. This will lead to employing more staff, and these firms will provide a better work environment with better accounting technology which results in higher retention.
Better technology should also help reduce the workload and inefficiencies present in so many accounting processes, whether bookkeeping, tax, or audit. That should then reduce the amount of staff needed to serve the same volume of clients— mitigating the public accounting “staffing crisis” and the workload that creates the work-life balance issues that drive people away from the accounting industry.
Some may take the view that, well these partners and leaders worked hard, it’ll be sad for them to not get the value from their firms. Yes it will be sad, but these are all successful professionals who should have done good financial planning for themselves. So it’s probably a pretty safe assumption that they have the financial resources and savings to still have a comfortable retirement, even if they can’t “cash out” on their firm.
Many of you who know me well, know that I rarely take this aggressive of a stance. When I go in to consulting engagements around organizational development, I follow the philosophy that I want to try and find the right fit and development plan for staff that aren’t performing. I believe in people and that if we can help them be successful, we should. But as with the problems facing the accounting industry, if those people don’t want to be helped or if they won’t follow the plan, well then we just have to let them go.
A sad goodbye for a better future
It’s sad, but it’s what we have to do to have the rest of the industry move forward and not get bogged down by the laggards’ inertia. I also don’t think they’ll be greatly harmed by this move. Many of them are heading to retirement anyway and if they’ve been running their firms “right”, they should still have a comfortable retirement. The innovators and early adopters can gain some momentum, improving both their firms and their clients’ businesses. This will help keep more people in the accounting industry, and inevitably in the accounting profession. Sounds like a win-win to me…let’s leave the laggards behind.