The CPA industry is undergoing profound change, reshaping the landscape of professional services. The traditional partnership model that has long been the backbone of these firms is facing unprecedented challenges in today's marketplace. Highly skilled college graduates are increasingly drawn to career options offering greater flexibility, faster advancement and earlier equity participation. To attract and retain top talent, industry leaders must adapt by reevaluating their organizational structures and value propositions.
This need for adaptation is evident even to those of us who entered the professional services world from nontraditional paths. The view from both inside and outside the CPA industry reveals opportunities for innovation that could reshape how companies approach talent management and service delivery.
The talent acquisition dilemma
One of the most pressing issues we face is the fierce competition for top talent. CPA firms are no longer just competing against each other or with consultancies like Accenture and McKinsey. We're now vying for talent with Silicon Valley tech companies, life science companies, innovative startups and established corporations across various industries.
These competitors often offer more dynamic career paths, allowing young professionals to take on varied responsibilities and participate in equity-related upside relatively early in their careers. The prospect of waiting 10 to 20 years to potentially become a partner, followed by another decade or two of building a "retirement asset," is far less attractive to today's graduates compared to the more agile and immediate rewards offered by other industries.
As a CFO, I recognize that highly skilled auditors can provide valuable services beyond traditional financial statement audits.There is a growing demand for professionals who can offer broader business insights and guidance. What's more, the increasing importance of technology in auditing practices has created a need for CPAs to evolve their skill sets. Firms that have been slow to adapt in this area risk losing ground to competitors who are more adept at leveraging technological solutions.
The consulting conundrum
Recent discussions in the industry and in academia have raised questions about potentially mandating the separation of consulting businesses from accounting firms and requiring top management to have backgrounds in assurance and audit. While these conversations are valuable, they may not address the core issues facing the profession.
Mandating the separation of consulting from accounting companies could potentially exacerbate existing challenges. Such a move might widen the wage gap between audit and consulting professionals and further diminish the pool of available talent for audit roles. This could lead to a decline in audit quality unless companies significantly increase audit fees to attract talent with higher salaries alone.
As for requiring top management to have an audit background, while representation from assurance practices is important, artificially limiting the talent pool for leadership positions could be counterproductive. In my experience, diverse perspectives in leadership often lead to better performance and, consequently, higher quality services.
Strategies for adaptation
To address these challenges, we've implemented several strategies at Sikich:
- Diversification of services: We've expanded beyond traditional CPA services into areas like technology services and industry-focused expertise.
- Investment in training and technology: We've allocated significant resources to enhance employee skills and leverage cutting-edge technology.
- Encouraging internal mobility: We support employees who wish to explore different roles within the company, fostering a more engaged and versatile workforce.
- Fostering collaboration: We encourage cross-disciplinary teamwork to enhance overall service quality and provide more fulfilling work experiences.
- Rethinking performance metrics: We've moved away from traditional measures like "book of business" or "total hours worked" toward more holistic evaluations of effectiveness, client satisfaction and quality.
- Alternative practice structure: We've implemented new organizational models that allow for more competitive compensation packages, including earlier access to equity participation.
- Reinvestment in the business: We systematically reinvest profits into the company to maintain long-term attractiveness for top talent and ensure up-to-date skillsets.
Impact on audit quality
While adapting to new market realities, it's crucial that firms maintain their commitment to quality and integrity. Audit quality can improve when firms have access to a broader base of subject matter expertise, maintain a more satisfied employee base with diverse career opportunities, operate with a clear company strategy and demonstrate a commitment to reinvesting in training, technology and employee wellness resources.
Looking ahead
The accounting industry is at a crossroads. As financial leaders, we must find ways to evolve while maintaining the high standards of quality and integrity that are fundamental to our profession. By embracing change and adapting to the needs and expectations of modern talent, CPA organizations can position themselves to thrive in an increasingly competitive and dynamic business environment.
The path forward will require careful consideration of how to balance innovation with the core principles of the accounting profession. As we continue to evolve, ongoing dialogue and research will be crucial to ensure that changes enhance rather than compromise the quality and reliability of our services.
While the challenges facing the CPA industry are significant, I believe they also present opportunities for innovation and improvement. It's our responsibility to guide our companies through these changes, ensuring we continue to meet the evolving needs of both our clients and our professionals.
