[IMGCAP(1)]I recently returned from a two-day meeting in New York City with many of the most influential consultants to the accounting profession, and without exception we all agreed that the impending talent shortage as the baby boomers retire will have a profound impact on the structure of accounting firms, which in turn will force accountants to change the way they practice.
According to recent AICPA demographics, over 50 percent of their members are currently baby boomers (1946-1964) or older, and as they age in place there are several challenges that must be addressed.
The Brain Drain
In almost every firm I visit the partners express these three concerns:
1. There is no one here that is qualified to do the work that I do.
2. We don’t have anyone here that wants to be the next leader in the practice.
3. The younger generation does not have the same work ethic that we have and as a result they will not put in the hours that it takes to be successful in the profession.
In fact in most firms these days the partners are working harder than anyone else in the firm to keep things going, and the younger accountants are seeing this and in many cases have no desire to be a partner if working like that is what it takes to be successful. Of course it’s short sighted, but in these days of immediate gratification it is certainly understandable. I want to share with you what I believe are the essential cornerstones of a human capital strategy for CPA firms.
Build the Appropriate Talent Base for Your Firm
In these days and times one size does not fit all. Just reflect for a moment and add up all the training and recruiting dollars you have spent over the years on individuals who subsequently left your firm. Let me guess: more than you would like to remember. Wouldn’t you rather spend the money on a person who is going to be a long-term employee of your firm? In most firms they are training people beyond the needs of the current job and at the same time cannot create opportunities fast enough to retain some of their best and brightest. Here are just a few examples of what I’m taking about:
1. “I got trained in valuations but we don’t have enough valuation work. I’m going to another firm that has a significant valuation practice.”
2. “I want to work on (bigger, smaller, public, non-public, audit, tax, etc.) clients, and you don’t have enough of these types of clients in your firm.”
3. “I want to be a manager, but I don’t want to manage people. I just want to do the work.”
I’m not suggesting that you quit developing your staff! What I am suggesting is that you develop your staff in ways that will be beneficial to the long-term success of your firm. If you train individuals in valuation, make sure you are getting valuation engagements. The same reasoning holds true for every area of your practice. Hire for the work you have or want to have in the foreseeable future and only promote people when there is a viable need in the firm. Otherwise you will end up with managers who don’t want to manage, staff who are dissatisfied because they are working below their level of expertise and staff who are not happy with the clients they are allowed to serve.
Strategies to Address Staffing Needs
1. Identify your needs and define your positions in advance of hiring or promotions. Processes have to be defined before an employer can determine the level of skill needed to accomplish a task. When systems and processes are built around people, the result is often an underutilized workforce, which is clearly the case in most accounting firms. If a “document management specialist” with a high school degree could create and file PDF documents, why would you use a manager with a six-figure salary to accomplish the same task?
2. Move lesser-skill jobs to the appropriate level. Many firms tell me they have a shortage of people with management, leadership and technical skills in their firms, yet they allow their professionals to work below their level of expertise. Create a firm initiative to have everyone delegate tasks that could be accomplished at a lower level. Start slowly to avoid creating a crisis and anchor each success.
3. Promote based upon firm needs, not entitlements. Many firms promote out of fear that someone will leave the firm if they are not promoted. Really? Don’t let your fears get in the way of your good business judgment. If you promote individuals to manager who do not manage, you will soon have no management in your firm. Unfortunately I have seen this play out too often.
4. Get new services to critical mass as quickly as possible. Once you decide to build a niche, get it to a level of critical mass as soon as possible. In my mind a service is at critical mass when it keeps several partners busy. An audit practice of $500K is not sustainable in the long-term, while there is no question as to the sustainability of a $3M audit practice.
5. Hire lateral partners and managers to jumpstart niche growth. This can often be accomplished at a fraction of the cost of buying a practice, and in addition to work you also get talent. Don’t be shortsighted when an opportunity presents itself because of a fee associated with the transaction. Do the math, and I think you will be surprised by how quickly it pays for itself.
6. Identify leaders and entrepreneurs early in their careers and start their development. You know who your best and brightest are, and the fact that you need to retain them by accelerating their growth and development. Failure to take action will put your firm at risk of losing them.
7. Create a firm culture that is built on individual success. Every partner and staff needs to develop a “success” plan at the beginning of every year. After-the-fact evaluations aren’t nearly as effective and in many cases are perceived as negative.
8. Adopt a coaching philosophy for the management of your firm. A coach is responsible for the success of every member of their team. Everyone in a supervisory position in a CPA firm should adopt a coaching mentality: “What can I do or say that will help this person be successful in this engagement?” Success is a block that can be built upon while consistent failure results in unhappiness and withdrawal.
Take Immediate Action
If your human capital situation is not where you would like it to be, you must take immediate action to successfully develop and retain the people that will be the future of your firm. I suggest that the partners hold a strategic planning session to get all of the owners on the same page followed by an “all hands” meeting to discuss these strategic objectives. Get everyone involved in implementing the changes that are necessary to make sure your firm will be successful and viable in the future. There is no time to waste!
Steve Erickson is a national consultant to CPA firms at Erickson Whitman LLC.
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