This blog is the second in a five part series adapted from the AICPA White Paper, Becoming the Firm of the Future, which is available here.
What do CPA firms, Mark Twain, and most of us as individuals have in common? It’s the things we are sure we know for sure, that aren’t actually true, that gets us into trouble. As Mark Twain stated it: “It ain’t what you don’t know that gets you in trouble. It’s what you know for sure that just ain’t so.”
We all have to ask ourselves a hard question: Is bad logic blinding us to reality?
Today, most CPA firms are working and managing their businesses with a lack of urgency for change that says what got us here will take us forward. What else could explain the lack of transformation in how CPA firms are working and being managed? The reality is, what we are doing today is increasingly out of step with the demands of clients, the ever changing marketplace, and the needs of a new generation of CPAs. Chief Executive of CPA Australia Alex Malley stated a profoundly simple conclusion, “We have been SLOW to move with the times.”1
The future of our profession and our future relevancy is at stake if CPA firms don’t acknowledge and address these rapidly emerging trends and developments:
- Competition for talent is eerily similar to the free agency market in the sports world
- Transparency in compensation, culture and how we do business is demonstrated by the clout of internet sites like Glassdoor
- Millennials represent 40 to 60% of many firms’ professional staff today and that will grow to 60 to 80% over the next five years
- Millennials do not view our profession as “worth the sacrifice.”2 And when they leave a firm, they are not going to another firm—they are leaving public accounting altogether!
- 70% of Millennials want to be creative at work with accelerated development opportunities3
- A marketplace that is rapidly growing more diverse while our profession struggles to foster diversity and inclusion4
- “Our businesses are going to change dramatically. And that requires the accounting industry to change, because in many respects, it does not look like America, particularly at the upper tier.”5
- Listening to employee perspectives is critical to engagement6
- A global crisis of trust exists and the public does not trust businesses or business leaders to do what is right7
- Nearly 63.6% of employees rate their level of trust in their leaders as moderate at best8
- AICPA president and CEO Barry C. Melancon, CPA, CGMA, recently flagged employee retention – or hanging on to key staff – as a major issue for the profession going forward. Most firms believe talent recruitment will be an issue, too11
- Turnover in the profession is too high to sustain excellence and relevance.9 According to the 2014 IPA National Benchmarking Report, accounting firms over $75 million had an average turnover rate of 17.2%. Of those firms, 37% –over a third– reported turnover exceeding 20%! Even among the best of the best firms, the average turnover rate was 14.2%.
- Clients are demanding more proactive and anticipatory services that provide strategic vision, insights, discovery, opinions and thought provoking trends. Marketing research on professional services shows trend for clients to weigh ability to fix their problem and do you make my life easier higher than relationship.10
- An Oxford study featured last year in The Economist which had accounting and auditing as the second most likely profession to be disrupted, with a 94 percent probability.
- Over the next five short years, we will be transforming how we sell, market, communicate, collaborate, innovate, train, and educate. –Dr. James Canton, Digital CPA Conference.
A new study from CPA.com titled “Welcome to the Fast Future: Insight Into the CPA of the Future,” finds that new technologies, globalization, emerging innovations like the cloud and Big Data, and the growing importance of diversity are reshaping the profession before our very eyes — and that very few CPAs are ready to take advantage of these changes. A mere 8 percent of CPAs say the profession is future-ready today.
Whether the bad logic is “We have plenty of time” or “Our firm is different” or “Our clients love us” or … There’s plenty of bad logic that is slowing down our progress. What got us here will not get us where we need to go.
While 90% of CPAs believe they will need to change, we are not seeing the rapid changes and transformation that we need to remain relevant.
In “Leading Change: Why Transformation Efforts Fail,” change expert John Kotter says, “Change may be the ultimate test of a leader — no business survives over the long term if it can’t reinvent itself. But, human nature being what it is, fundamental change is often resisted mightily by the people it most affects: those in the trenches of the business.”
It’s time to shake the bad logic and take action.
- State of Accounting: A Need to Regain Control by Alex Malley
- PWC’s “NextGen: A global Generational Study”
- Deloitte: The Millennial Survey 2014 “Big Demands and high expectations”
- Bersin by Deloitte, New research reveals diversity and inclusion efforts well-intentioned but lacking.
- James Johnson, Ph.D, Urban Investment Strategies Center at University of North Carolina at Chapel Hill, AICPA Governing Council Fall Meeting 2014
- Quantum Workplace, 2014 employee recognition trends report
- World Economic Forum’s Leadership, Trust and Performance Equation Project 2015 Report
- 2013 Forum Global Leadership Pulse Survey
- 2014 IPA National Benchmarking Report
- Hinge Marketing
- CPA.COM in CPA of the Future Study