Recently, experts from the accounting profession sat down at Cili Restaurant in Las Vegas to discuss challenges facing Nevada, including workforce issues, retention, standards, outsourcing and competition. Connie Brennan, publisher of Nevada Business Journal, served as moderator for the event that, as part of the NBJ’s monthly Industry Focus series, brings industry leaders together to discuss issues pertinent to their professions. Following is a condensed version of the roundtable discussion.
Recruitment, Retention and Generational Challenges
Mark Bailey: From a firm administrative standpoint, what I am most concerned about in the near future is a staffing crisis. It’s the challenge of attracting and retaining qualified professional staff.
Dave Hall: We have similar challenges. We’ve done a lot of outsourcing which has been a great thing for us. It’s also a big challenge as we look to the future with the clients we’re building, how we’re going to make sure we man those jobs the way we should.
Michael Micone: The baby boomers who will be retiring will create a large vacancy in the workforce.
Bill Wells: Seeking staffing levels where we can sustain our growth percentages is a big challenge, as well as the new audit methodology coming into play.
Curt Anderson: We have to turn down work in some cases because we don’t feel comfortable taking it on, due to staffing.
Pat Thorne: Succession planning for a small firm is very difficult. Then again, we have to deal with the new generation of employees that have a totally different mindset and we don’t know how to do it. Our generation is very client focused and the new generation is very “me” focused. So we’re trying to reconcile that.
Peter Zofrea: I think it’s a matter of keeping up and training our professionals as it relates to the constantly changing accounting and professional standards. Beyond hiring quality people, it’s hiring quality people with diversity. We want to make sure that we have the proper balance within our firm of people with diverse cultural and ethnic backgrounds to properly serve our clients. We recruit nationally from a number of universities with respect to the entry-level staff. In addition, we also hire a certain number of experienced staff each year.
Bailey: We have not adapted as well to the needs of this generation, in terms of the work environment that they expect. Retention within the industry is a huge problem. We’ve done a lot of things in our firm to try and combat it. We don’t keep time sheets. Everything is on a fixed-price agreement. We have reduced our work time to something closer to 40-hour weeks, 2080 hours a year. We provide high benefits. We’re forced to benchmark our salaries against the bigger firms, in order to remain competitive. But we try to allow some flexibility.
Micone: Companies have asked us to come in and help them with their staffing plans and staffing budgets – making sure they’re competing with other companies with salaries, benefits and flex time. Many companies are starting to offer job sharing, which allows someone to work a half day and someone else relieves the person for the other half of the day. Companies are getting creative in order to retain employees. Well, the Army and Navy don’t send the guy who just got shot to the job fair. In my opinion, when I go to job fairs, sometimes I scratch my head and wonder, what people were thinking. How do you expect to recruit somebody with this person sitting behind the desk, eating a doughnut and not engaging in conversation. CPAs need to band together. There’s a definite coalition effort that needs to be done on a monthly basis to have a resource of where and when these job fairs are and co-op some of the dollars to recruit new talent to Nevada.
Anderson: The point is to make the individual’s career path and career important to him or her and make it clear that it’s important to us, the employer, as well. We’ve changed our entire process of career training for our staff people in the last couple of years. We’ve gone to what’s known as career coaching and stopped the evaluation process. We have mentoring coaching, career coaching and life coaching on a regular monthly basis with our staff and make it clear to them that there’s an upward path and they may or may not aspire to ownership. We have non-accountants who are involved in the operations on a day-to-day basis, and involved in the training, recruiting and mentoring process to get away from some of the industry attitude that we all are subject to. In turn, our turnover has dramatically decreased.
Thorne: We’ve kind of created our own monster. Years ago, we changed the requirements to become a CPA to 150 hours of college education to be certified. In Nevada, we have to have 150 hours before you can take the exam. We don’t have enough teachers or professors to teach and get the students into the programs.
Anderson: I remember reading a statistic that more than half of the CPAs in public practice are males above the age of 50. All these CPAs are nearing retirement in the next 10 years.
Hall: Some CPAs claim that 75 percent of our profession will retire in the next 14 years. So, in 14 years, we’re losing 75 percent of the people and we’re not filling that empty space fast enough.
Micone: A possibility might be to reach out to the undergraduates who haven’t designated a profession yet or haven’t committed to a degree, and educate them more.
Anderson: People think they don’t have to make a long-term commitment to public accounting, but use it as a training ground and become marketable to the next generation employer. So there is a false expectation that works against us. Most people come into this profession not intending to stay and that becomes a self-fulfilling prophecy because they don’t want to stay if it is too hard.
Zofrea: A large number of professionals within our firm leave and come back within a few years. There is an alternative work schedule where you work fewer hours, still become a partner, still have demands upon you, but we work around your schedule to make it more flexible. Doesn’t mean you produce less, it simply means that we will create flexibility within your life to do those personal things you need to do to be satisfied in both personal and professional life.
McKnight: In Las Vegas, it’s a little hard to track people because of growth. Most of our clients are at the same level as senior managers and there’s not enough people internally. If I hire somebody from you and you hire somebody from someone else, we still end up with a shortage.
Staying Abreast of Ever Changing Standards
McKnight: When I graduated from college, the standards were on Financial Accounting Standards Board (FASB) 13 and now, I think we’re on 160. The complexity of the standards has increased dramatically. It’s not a principles-based world as much anymore. It’s a rules-based world and very complex issues. There’s more specialization and you can’t just take one of the new standards and readily understand it.
Zofrea: There may be 160 standards that come out, but there are multiple standards that interpret the basic standards that exist and those are open to interpretation by multiple groups of people, whether it’s the firm themselves, the standard-setters which is the FASB and the Public Company Accounting Oversight Board. So there’s multiple people interpreting these standards and as a practitioner, you often run into situations where someone may interpret the standard one way and then a different group comes in and interprets it a different way. It creates a certain amount of confusion among companies and among firms.
Wells: The complication of the standards has a cascade effect. Not only does it impact people like us in this room, but also the staff. It’s a continuing process to keep current and even more challenging is the process of educating your clients of the changes. The educational process of the partners from the staff to the client adds increased costs to the work we do and it may not add value. The process is ongoing and cascades right down to the end-user.
Diversified Products and Services
Thorne: We would like to think we aren’t just a bunch of guys that put tax returns or financial statements together. We want to have an ongoing relationship with our clients throughout the year and help them with their business problems. We represent a valuable resource for the clients and in the small business environment, we can really offer much more than just tax returns and financial statements.
Anderson: I would suspect that most of us look at the relationships with our clients as a central focal point and a resource to help them find answers to questions they don’t have the ability to answer themselves. We may not even have the ability ourselves, but we know someone. It’s the idea of sitting down and assessing situations, finding out the questions that need to be answered, and then, finding the answers. More often than not, we don’t have all the answers ourselves, but we know someone who does.
Zofrea: I think we view ourselves as risk mitigators, as it relates to the financial process. Clients are thought of in terms of risk mitigation because of the level of service we can provide. That doesn’t mean we don’t advise them if they don’t have a risk.
Sarbanes-Oxley
Hall: Sarbanes shifted the marketplace, whether you were a large or small firm, because the amount of work a public company required increased dramatically and taxed the resources of those CPA firms that audited public companies. So there was a shift in clients, many CPAs moved away from the largest public companies and into the mid-sized firms. There has been more client movement in the past five years than the prior 25 years, largely driven by Sarbanes-Oxley.
Wells: I think the new audit methodology is clearly a by-product of Sarbanes and it directly relates to smaller clients. Again, it’s drilling down into the smaller client base and will impact those clients whether they know it or not. But from the methodology and procedural respective from auditing firms, it’s going to have a significant effect.
Micone: The compliance to Sarbanes created new demand, from a staffing standpoint, because companies needed internal audit departments again. There’s one place to get that from and that’s from public accounting. I’ve seen a tremendous amount of improvement from the last time we met on how public accounting firms are operating and adapting to their internal problems.
Outsourcing
McKnight: Concerning the shortage of people, some firms including Deloitte, have looked offshore to provide professionals in places like India and established offices to do work that we can’t find people to do here. A lot of our clients’ functions have been outsourced to India – and not just due to the shortage in Nevada, but the nationwide shortage of practitioners.
Zofrea: We looked to outsource a number of small accounting firms when we saw the shortage arriving but found it was too difficult to navigate the independence problem.
Thorne: We do provide some, at a lower level, but it just isn’t cost effective.
Bailey: One of the problems with outsourcing is that we have such diverse accounting standards from the rest of the world. We’re probably going to be close to international accounting standards in the next two years and need to outsource in order to be effective in the United States.
Zofrea: The difference between the U.S. and international standards is a fair-value principles-based approach versus a rules-based approach.
Competition
McNair: I think there’s plenty of business for us all. We just need more people.
Wells: That doesn’t mean it’s not competitive, though. We are still after the same clients to some degree, and we all compete against each other at some level.
Bailey: We probably receive more referrals from other accounting firms than any other source to assist in financial statement preparation. I would say the biggest portion of our growth is generated by referrals from other accounting firms.
McKnight: I think when you see the opportunities, where we really compete against each other, it’s a broader competition than it was five years ago. For publicly-owned companies, partners have to rotate off the job every five years. That’s usually one of the catalysts for companies, to change the partner so the clients are totally satisfied with all of the services and don’t go into the marketplace and see what other firms have to offer.
Thorne: Smaller firms like ours have to focus on what they do well. We are continually referring business that we can’t take and in return, other firms refer business to us. You have to specialize a little bit. Some firms just don’t have the staff or the expertise for all areas of the business.
