Jen Leary, CEO of Top 15 Firm CLA, looks at the challenges and opportunities surrounding the accounting profession, and how her firm is navigating them.
Transcript:
Dan Hood (00:03):
Welcome to On the Air with Accounting Today. I'm editor-in-chief Dan Hood. It's both an exciting and a terrifying time to run an accounting firm with both challenges and opportunities arising on all sides and all kinds of exciting developments going on in the profession. And as we said, some terrifying ones as well. Here to talk about all that and how her top 15 firm is navigating it all is Jen Leary. She's the CEO of CLA. Jen, thanks so much for joining us.
Jennifer Leary (00:24):
Well, thank you so much, Dan. It's a pleasure to be with you.
Dan Hood (00:27):
This is the broadest possible subject, which is everything exciting and terrifying in the accounting profession right now. And we've got exactly 20 minutes to cover it. Now, it'll take as much time as we need, so three or four days as we'll cover it all, I think. Let's start with saying it seems like an endless procession of big changes coming at accounting firms from all different angles and affecting every different aspect of practice. What are the major ones that you're particularly keeping an eye on at CLA? When you look around, you say, "What are our priorities to deal with or to leverage or to make the most of or to protect ourselves from, et cetera, et cetera?"
Jennifer Leary (01:00):
You're so right, Dan. Major developments, I'll tell you, we have been tracking a number of developments for years. At CLA, we call them mega trends and we see four. So I'll run through them pretty quickly. Number one is industry 4.0, largely the impact of AI and technology. The second one is workforce of the future. We could talk a lot about that. Very, very important for our profession. The third one is the great wealth transfer in the US. Right here in the US, there's over a hundred trillion of wealth that's transitioning from the greatest generation, the baby boomers into the Gen Xers, the millennials, et cetera. And that is a really important mega trend we track. And last but certainly not least is globalization. The world is getting smaller. Our people are interested in global opportunities and our clients need us both inside and outside the
Dan Hood (01:48):
US.That's a solid four. That's a great set of things to focus on. And I want to dive into a couple areas of those, particularly as they impact accounting firms. Obviously, a lot of those trends affect everybody, affect the economy broadly, affect the economy globally. They affect your clients, businesses, that sort of thing. I want to dive into some of the areas where these affect the accounting profession. Maybe we could start with, you mentioned the workforce, the future. That obviously has, as you said, huge ramifications for everybody who's in the economy. But for accounting firms, there's some specific questions and issues and things going on there along the lines of the pipeline problem we've been talking about for several hundred years of not enough people coming into the profession, not enough people then staying and becoming CPAs and not enough of those staying and becoming partners and so on and so forth.
(02:32):
What's your take on that? Is the profession going to be able to get the people in needs? Is it going to have to look elsewhere? Is it going to have to look beyond just having people do things? What's your take on that, how that looks?
Jennifer Leary (02:42):
Well, it's an interesting topic and I've been passionate about the pipeline since I got into this profession. I would actually venture to say that I think the pipeline issue is maybe evolved. It's probably complete from where we thought it was years ago. We used to say, well, there's not enough accountants and the baby boomers are leaving and there's a huge brain drain. I mean, all of those things are true. We have a record number of retirements. That is true. We also have evolved as we've evolved through so many things in the decades and we've built great talent and firms have seen different ways to solve for that issue. And when you talk to other leaders within the profession, even things on your pod, we see the evolution of what we're talking about, which is a diamond sort of formation of the workforce, looking at opportunities to offshore, looking for opportunities to use technology.
(03:31):
That is definitely pervasive out there. As it relates to CLA, we do not offshore. All 9,300 CLA family members are here in the US. But I will say that we look at the workforce of the future in sort of three dimensions. So the first dimension is the largest, and that's the one that we've been the most proficient with, which is collegiate talent. So we continue to see the opportunity to get great students off campus. And I am excited to see that the numbers of students choosing accounting is up. The profession tends to do well when the job market slows. That's a trend we've seen previously, but the quality of the talent I think is really strong. The second dimension of the workforce that we see is the apprenticeship model. And I'd love to talk about that. Talk about creating more pathways into this profession means looking beyond the campus hires that we have.
(04:22):
So CLA has built the CLA Academy. We have a 12-week learn and earn program. It is a certified apprenticeship. And we're able to welcome people into this profession that may not have had an opportunity to get that college degree, to train them, to show them a new way and get them working in one of our shared service centers here in the US. And then the most recent, and I think pretty exciting is agentic talent. And that is something that we are starting to deploy. Other firms are doing the same. And so same thing, the workforce will evolve. It always has, but it's going beyond collegiate into apprenticeships and then agentic talent.
Dan Hood (05:01):
I want to just dive into the apprenticeship thing I was aware of that program. Where do you find the people for that? I mean, if they're not coming out of college classes, if they're not getting the sort of traditional internships, how are you finding those kind of apprentices?
Jennifer Leary (05:16):
I will tell you that this is ... So we're on the third year of it. So we have multiple cohorts going in different cities. It does take a completely different lens, Dan, to say, what is it that our clients need? What they need is people who are excellent at service, very responsive. To have a long career in this profession, you have to have grit. You have to be hardworking. All of those things are skillsets that we laddered up to say, okay, this is the profile of the individuals that we need. And then we work with certain strategic partners in the communities that we serve and say, how do we build a program that's meaningful and then how do we recruit the right talent? But we are near 100% turnover rate of the individuals that go into our program into those that get full-time employment. So it is a different lens.
(06:06):
It takes more time, but it's been really fulfilling to see. And I think that we're going to continue to see success because we are just willing to open our eyes to expand in talent basis.
Dan Hood (06:19):
It's a very neat idea because other things people talk about, oh, we might have to look beyond the accounting profession for talent. But I think when accounting firms talk about that, they're assuming they're looking at professional level talent. People who have already gotten expertise in an industry, for instance, or who bring a legal expertise or an engineering expertise or something like that. They're not thinking about going out and essentially sort of making their own talent, which it sounds a little bit like what you're doing there. Very exciting. You mentioned the Jantech AI. I want to dive a little bit into that. AI is sort of on everybody's mind these days. And I know you guys have been making some major investments in AI. What do you think the role there is going to be? How do you think it's going to change over time? What's going on?
Jennifer Leary (06:57):
When you say what's the role of AI? Dan, I see this word massive in my head. Absolutely massive. And anything that is this transformational is going to have massive opportunities, but also massive risks. And so it will be something that we will continue to wrestle with both as a profession as well as our clients. And we're willing to lean in and do the hard work. If I were just to be as pointed as I can, I think it's going to 100% elevate the work that we get to do for clients. And that is exciting. There's no doubt that AI is a force multiplier. I remember, I mean, I've been in this business, Dan, almost 30 years, and I remember I started as an auditor. I had those big heavy leather audit bags, and I remember doing everything by hand and footing the trial balance and all these things that anybody who's young listening to this is probably like, "I don't even know what she's talking about.
(07:47):
" That is a good thing. And then just thinking about what the next generation of talent's going to be able to do, really interesting things that are creative problem solving for clients, I think that's going to be phenomenal. So I think that's a force multiplier. I also think that AI is going to level the playing field. And so as professional services firms, we've largely thought of competition as other professional services firms. And now what you're seeing is that competition is coming in all different forms. They could be large firms, small firms, industry specific, they could be technology companies within the US, outside the US. So I do believe that AI is going to be an enabler to provide better service, but also to help firms or companies compete.
Dan Hood (08:32):
Right. So, well, I mean, it's fascinating. How many of these things we're going to be talking about are both opportunities and I don't want to say threats, but challenges, right? I mean, that's challenge. Suddenly huge, huge groups of people who couldn't compete with you are suddenly competitors and you have to manage them. It's about like that, keep going back to exciting and terrifying at the same time. I want to pick up though a little bit on what you're talking about in terms of all the young listeners who may not know what you talk about when you talk about big heavy audit bag or who won't be going into the things where they start their careers with two or three years of preparing 10,000 tax returns over the course of a season or going out and counting boxes in a dusty warehouse because we get AI or drones or whatever the case may be to do it.
(09:15):
But I want to go, you talked about that, the pyramid model, the diamond shape or pyramid model giving way to the diamond shape. We have a much smaller intake of inexperienced accountants, but a much larger middle of experienced accounts. And there's sort of a question I want to get your thoughts on it of, if we have this fat, some people call it the fat metal, we have all these experienced people, but we're only taking in small numbers at the bottom. Where do you get the experienced people? And obviously you talked about your apprenticeship program, that's going to be developing some of them, but where do we get enough people to fill that middle of the diamond if we're not training younger accountants? And then maybe a partnership question to that is, if people aren't doing all the grunt work, how are they learning or how do you teach them about accounting?
(09:58):
I realize these are three or four hours worth of questions, but- I
Jennifer Leary (10:02):
Love it. So let me just answer the first one, which is how do you create a strong middle when you have a smaller and smaller base? I think that's math that's really hard to make work, truthfully. So at CLA, we take a little different view. I always say we like to zig when others zag, but we actually haven't pulled back our new hires because we believe in building the pipeline. And again, we don't offshore. So we are building that talent here in the US. And so for us, the impact of technology, we see it as a net growth engine, not a reduction. And so that's something that we believe we have to continuously build talent. Now that talent will look different, whether it comes from college or it doesn't, I'll tell you what we prioritize off campus even has changed. I remember a time where GPA and CPA, how quickly you can pass the CPA, those were two things that we looked at pretty hard right now.
(11:00):
We need people that can build relationships, that can solve problems, that can use technology for interesting things. And I am seeing it coming off campus. And Dan, you ask a question that I hear a lot, which is, how are we going to train people if they don't have that sort of rote mechanism of just doing things over and over and over again? I'll tell you, and I'm blessed to have two daughters, one about to get into college and one that's a sophomore. And the collegiate talent right now, the high school talent right now is so smart. They are so tech savvy. I actually worry that they come into our firms and our organizations and they get bored because we are doing things right. So they will push us to be stronger, to use technology. When we give them an antiquated process, they will roll their eyes and say, "Why on earth would you do this?
(11:51):
" I've been using LLMs for years, so let's find a way to really invigorate that talent. We have to make sure that we do it in a balanced way so we don't sort of take our brain and put it on a shelf and just rely on the AI, rely on the technology, rely on the output, think creatively. But I think this youngest generation coming out, they can do that and they just need the coaching from those that have been there, done that about how to really consult with clients, how to deliver really strong advisory work. And that is something that I can see those generations working well together. Right,
Dan Hood (12:27):
Right. I mean, it's worth saying when we say, "Well, how are we going to train them if we don't do this? " It's worth saying that was probably the worst way to train people that there is. I mean, just doing a bunch of wrong work is not a great way to train people. Training people is a great way to train people, but that's the way the profession did it for a long time because the model made sense. It worked because you had a lot of unskilled talent to come in and they did that work and so on. Now we have other options for it. We just got to find more exciting ways to bring people aboard and get them trained up. Very cool. I want to talk a little bit about private equity and its role in the accounting profession. A lot of firms are talking about it.
(13:03):
A lot of firms are looking at it. A lot of firms are looking at other models in part because private equity has sort of opened up the Pandora's box and said you can look at other different ways of running an accounting firm, restructuring an accounting firm. When you look at that, what's your take on it? How do you think it's going to change the landscape of accounting, if it is?
Jennifer Leary (13:18):
Yeah. Well, I mean, as a fan of your podcast, I think the recent podcast that you did looking at the top 100 firms and the changing landscape was great. I'd recommend anybody listen to that to get sort of a good baseline of what's going on in the profession. But I agree with a lot of the things that you said. Private equity is creating the ability for firms to have more choice now, more than they did three to five years ago. And I always think that's a good thing. And then the firms can choose. Do we want to remain a partnership independently? Do we want to bring on a financial sponsor, either minority or majority stake? Do we want to have other investors? What is going to be best for our strategy overall? So there's no doubt that the numbers are proving to be true, that private equity is having a huge impact reshaping a lot of the profession.
(14:08):
And I also believe that the partnership model is still very, very strong. And it drives me bananas, Dan, when I hear the partnership model is dead. And I think, can we just take a beat here and understand what we're saying? There are a lot of amazingly successful, very large, very small, strong partnerships. What I think people might be insinuating when they say the partnership is dead is that let's all sit around a table and agonize over every single decision that can't sustain. That's really hard to do when you scale. So finding ways to build infrastructure and get people comfortable with doing things in a more governed model, that's important, but you got choice, that's for sure.
Dan Hood (14:52):
Excellent. Very cool. There's a lot more to talk about, a lot more things going on in the profession, and I want to talk a lot more about what's going on specifically at CLA, but we're going to take a quick break first. All right. And we're back and we're talking with Jen Leary of CLA about all the exciting and terrifying things going on in the profession. Obviously, CLA has been never sitting still a lot that's going on, a lot of different things. We've talked about some of them, the apprenticeship program and some other things.What are some of the things you're most excited about right now at CLA? When you look around, the many things the firm is doing, what makes you go, wow, we're great.
Jennifer Leary (15:33):
Well, I appreciate it. I think it's a great profession, but I am very proud of our CLA family, as we call it. If I think about the conversation that we have around private equity and the way CLA sees it, we are a very proud independent partnership by choice. We are owned by just under 400 owners that really have what I say. We have the stomach to be independent. What that means is that we have the drive and the ability to make great decisions, in my opinion, that aren't always popular, but that sustain our future. And we're also willing to fund our future. So our owners have put up a commitment of 500 million to invest in technology for the success of our clients and the success of our people. And I think that is an unbelievable thing, how united our awesome owner group is and how committed we are to independence.
(16:26):
So Dan, that's certainly one of them. Another one I will tell you is the growth that I see of our client base. So number one, you may know this about CLA, but I believe this to be true. You are the expert of the profession, but I believe CLA has the largest CAS practice in the country. And we've been doing it before CAS was even a thing, Dan. We've been doing this for almost 30 years now, but we have a number of great accolades around that practice itself and how integrated it is, serving clients as they need to be from small entities all the way up through major entities and integrating operational services alongside of financial services and then expanding into digital. So the service platform that we've built is quite special. As I think about earlier, we were talking about megatrends. The great wealth transfer impacts this country.
(17:23):
It absolutely impacts CLA. We are proud to serve the heartbeat of this country. We have a significant amount of clients that are going through wealth transfer events. And so building out what we call private client services is really important. So excellent tax advisory alongside of excellent wealth advisory, really partnered, not two groups, but really one integrated service model, insurance, investment banking. I mean, building the service platform that our clients need is really what's exciting. And then I would say on the M&A front, on April 1st, we were able to launch some really great news, two press releases that come out. One is that we are welcoming Meridian Capital. Meridian Capital is an investment banking firm. They're fantastic group. They're largely based in Seattle, but they serve the entire nation and it strengthens our ability to provide support to the heartbeat of this country that are going through some really important moments in their lifecycle, raising capital, executing M&A, planning ownership transitions.
(18:28):
And on the same day, we were able to welcome Answerport. So Answerport is a technology advisory firm. They are based largely in Wisconsin, but again, serve the nation. They have an expertise serving awesome private equity funds, but we are expanding the service platform to make sure we can help on the digital side, we can help on the managed services side. So whether it is the growth of our clients, the growth of our service platform, the growth of our people, I mean, I think it's a great time to be doing what we're do.
(Read more: "
Dan Hood (19:01):
If you're up for the challenge, it's a great guy.That's right. You've got the stubborn for
Jennifer Leary (19:05):
It, right?
Dan Hood (19:06):
Yeah, exactly. You got to have the strength to persevere. But you talked about some of the things you talked about are the keys to the structure of the firm with a partner group that's relatively united and can be nimble, but still is a large group of people who can also put aside the resources to invest in all the kinds of things that need to be strong and the thing. That's a big problem. I think when people talk about the problems with the partner model, those are two of the big issues. It's difficult to get everybody to agree and it's difficult to get people to reach into their pockets. So if you're able to get those going, you're in great shape. So one of the things you talked in your mega trends, you mentioned the globalization, the ongoing globalization of things that are happening all around the world.
(19:47):
And CLA in particular has established its own international network. I think started two years ago, maybe. Might've been a little more than that.
Jennifer Leary (19:55):
There's not
Dan Hood (19:56):
Free. It
Jennifer Leary (19:57):
Feels like yesterday though, Dan.
Dan Hood (19:59):
Everything feels like 25 minutes ago. That's as far back as I go. So it's either 25 minutes or somewhere in the distant midst of the past, but it's now been around for a good couple of years, good three years. And we've seen other firms recently in the last year or two, we've seen a lot of large firms establish strong international presences bringing in what used to be separate member firms of networks, mainly part of things. We've seen a lot of that. How international do you think the accounting profession is going to get? How global will it be? And for a long time, it was very much, I don't call it parochial, but it was very much national in its outlook. How international do you think it's
Jennifer Leary (20:32):
Going to be? Oh, I think it's going to continue, Dan. And I think it's going to be predicated on what individual firms decide is the best thing for their strategy based on what's the best thing for their client base. And so I think you'll see a continued progression of the larger firms moving more and more global because many of their clients need them too and many of their people need them to. CLA has a large US client base. We have global needs that have been increasing over the last five years, which is what took us down this path of creating our own global network. I will tell you that a couple of my partners have done an amazing job of really leading the charge to build the CLA Global brand outside the US. It has been just kind of beyond our wildest dreams that we've been able to partner with some really great firms.
(21:24):
It was co-founded with a really special partner in the UK, and it has grown to over 30 countries in three years, and it is continuing to grow. We are continuing to add more great firms, and we're just so very proud. It's a very surreal thing when you get to go to different parts of the world, and then you see your logo there, and it's a big launch party. And these are firms that are giving up their individual name that they've been using in country for 20, 30, 40 years. I mean, it's an amazing thing. So that we're very proud of, but also it's given us the ability to build a US alliance as well. And this is just starting, but we have about 40 US firms that are a part of CLA Global. And that is a really fun opportunity for us to collaborate with firms of all sizes right here at home and solve today's problems.
(22:17):
The reason that firms choose CLA Global in the US is a couple fold. Number one is about collaborating on talent and collaborating on technology. How can we help each other? And then also to the extent that we can help each other solve client problems. There might be services that these firms do that CLA does not offer and vice versa. And so we're able to share more and grow our respective businesses. So that's been a ton of fun. I had an opportunity to live overseas years ago, and it really changed my life and opened my eyes to the importance of culture and service. And so to see this CLA Global brand expand, it's just, I mean, in many ways it's a dream come true. And I honestly think that the best is yet to come on that piece.
Dan Hood (23:02):
Very cool. Very cool. You bring up your own past. I want to dive a little bit for our final question, but before we do that, a quick clarifier for US firms coming into the CLA Global, obviously for international firms, you're looking for strong firms that cover some country, our country or a group, countries, whatever the case may be. For US firms that might be candidates for CLA Global, is there a particular set of criteria you're looking for in firms that might join that, or is it just strong firms that do great work?
Jennifer Leary (23:32):
Yeah, there's no size requirement within the alliance today. The entry size is about a million and it goes up north of 40 million in terms of annual revenue, but really what we're looking for are firms that are willing to lean in and solve problems. It's not just about signing up and being a part of a club, it's about being a part of a group that is really engaged. So yeah, we're looking to build that and it's been a lot of fun.
Dan Hood (24:04):
Very cool. Very cool. All right. You mentioned having lived abroad, so I want to dive a little briefly into your past answer a question I'm trying to ask more and more accountants because I'm always fascinated by the results, but I want to find out, how did you get into account? How did you start becoming ... At what point did you say, "Hey, you know what? That's where I want to be.
Jennifer Leary (24:22):
" Yeah, I'll tell you, it actually came from my dad. So I was wondering what I should do with my life, as many high schoolers do as they're thinking about getting into college. And we grew up with very little means and money was constantly an issue. And my dad said, "If you had a skill like accounting and you were willing to work hard, you likely will never have to worry about having a job." And that was literally all I had to hear. It was all about financial stability, and that has been absolutely true. I mean, there is such strength in this profession, there's such longevity in this profession, and it has just been a really amazing run that I've been so blessed to be a part of.
Dan Hood (25:05):
Yeah. Yeah. Well, I mean, when you started, did you imagine someday you'd be running a billion dollar firm or was it just like, "Listen, I just want to make sure the money's coming."
Jennifer Leary (25:12):
Oh goodness, no. No, no. I just want to pay down my school loans, Dan, which took me 10 years. That's all I really wanted to do. So no, it's just being a part of a firm today, and I think we've got the most amazing team in the country. I mean, that's just something that kind of iterates itself into another opportunity and another opportunity. So there was never a flag that I wanted to plant on the ground to say this is at a particular role that I wanted to have. But for this season, I'm honored to have it and there will be another leader that comes up and then the tradition will continue.
Dan Hood (25:45):
Okay, very cool. I guess quickly, the reason I ask that question is that the answers tend to fall in two groups. One is my mother or my father or an uncle was an accountant or I took accounting 101 and it just clicked. It just made sense to me. Your answer is a very neat wrinkle on the, my parents put me into it and he had a clear vision of, this is what you should be doing. I'm not doing it, but you should do. That's
Jennifer Leary (26:11):
Great. That's right.
Dan Hood (26:12):
That's right. Excellent. All right. Well, Jenn Leary of CLA, thank you so much for joining us.
Jennifer Leary (26:16):
Thanks. It's been a pleasure. Appreciate you.
Dan Hood (26:19):
Yeah. Thank you all for listening. This episode of On the Air was produced by accounting today with audio production by Anna Mints. Rate or review us on your favorite podcast platform and see the rest of our content on accountingtoday.com. Thanks again to our guest and thank you for listening.
