The growing pressure that labor issues are exerting on the accounting industry are being keenly felt even as firms are simultaneously trying to create a positive work environment and minimize burnout in order to retain top talent
A consistent concern running through the latest edition of the Rosenberg Survey, an annual study of the financial performance of accounting firms in the U.S., is the pressure labor issues are exerting on the accounting industry.
“The labor shortage in the accounting profession continues to have a major impact on nearly every firm,” the study reports. “Firms have to balance getting good utilization out of staff while simultaneously creating a positive work environment — and minimizing burnout — to retain top talent.”
Charles Hylan, lead author of the survey and a managing director at The Growth Partnership, a consulting firm that publishes the study, says labor issues are weighing heavily on the minds of accounting firm leaders. “I have facilitated a dozen retreats (with accounting firms) this summer and, without exception, firms are trying to understand how they can deal with the labor shortage in the profession,” Hylan writes in the report. “Unfortunately, this issue will only get worse before it gets better, and firms need to think outside the box about how they will get work out the door.”
The study found that revenue at the average accounting firm increased just 5.7% in 2020, the slowest growth in eight years – and suggests that the labor shortage played a role in that. “Looking forward, firms are much more interested in how they will handle the work than they are in finding new revenue,” the report states. “We would not be surprised if there is a continued downward trend that is intentional: culling clients and limiting growth in order to deal with the staffing shortage.”
To address this challenge, accounting firms are exploring a number of strategies to recalibrate workload, recruit and retain staff, maintain operational stability, and re-assess expectations regarding sustainable growth, revenue, and profitability, according to the study. Some of these strategies include:
- Culling clients to reshape the firm’s book of business. “The severe labor shortage… allows firms the opportunity to systematically — and kindly — reduce the number of clients that fall outside their ideal client profile and clients who are difficult to deal with,” the study notes.
- Increasing the use of outsourcing. “I am seeing more and more firms research and use offshore, and some onshore, resources to augment their limited staffing,” Hylan writes.
- Hiring non-traditional professionals and graduates.
- Investing more resources in recruiting, retention, and staff development.
- Pursuing mergers and acquisitions to help with leadership succession issues and obtain more resources.
- Adding administrative staff and rethinking internal roles and responsibilities, including an increased emphasis on delegation.
The Rosenberg Study includes commentary from 16 accounting industry consultants, many of whom addressed the implications of the labor shortage.
Jennifer Wilson, Convergence Coaching — Business clients have needed more guidance during the pandemic, which increased pressure on firms’ “brightest minds,” Wilson observes, adding that this left firms overwhelmed, “because the brightest minds were already pretty busy with their ‘normal’ work and also short-staffed coming into the pandemic. So, today’s profession is filled with people who are struggling with burnout, feeling overwhelmed, and even potentially hopeless as demand for help remains high, and the labor resources to fulfill those services remains low.”
Wilson says the Great Resignation has been a “nightmare for the already resource-strapped accounting profession, and firms are now scrambling to retain their team members with stay-bonuses, record raises, promotions, and other perks.”
She advises firms to:
- Cull clients that no longer fit their “ideal target.”
- Provide a flexible workplace. “Implement a completely flexible work program with work-from-home, work from the office, blended work, work from anywhere, work anytime, unlimited [paid time off] PTO, and more,” she says.
- Assign their best career advisors to manage their best staffers.
- Conduct “stay interviews” to understand what team member are happy with, what they’re struggling with, and how to help them thrive.
- Conduct a salary study and make market adjustments. If the necessary increases are too big to achieve at once, Wilson advises firms to award some of it as a performance bonus based on specific, measurable goals.
- Go after talent in any geography.
Art Kuesel, Kuesel Consulting — “We cannot risk additional fatigue and burnout, and so firms are reassessing what constitutes an ideal client,” Kuesel writes. “They are strengthening their filters, raising their minimums, and questioning the client acceptance criteria. Often this does translate into culling of existing clients, as well. I suspect this will create a small cascade of client movement from larger to smaller firms.”
Carl George, Carl George Advisory – George suggests accounting firms should:
- Be more creative with flexible work arrangements, and train young staffers to succeed and supervisors to lead in the new model.
- “Stop giving lip service to client culling. Cull to create capacity for higher-value clients and simultaneously improve firm morale.”
- Re-evaluate all operational and client service practices and adopt methods to maximize efficiency, timeliness, and profitability.
Tamera Loerzel, Convergence Coaching — “Make changes to smooth out the big peaks and valleys that come with deadlines and compressed busy periods,” Loerzel notes. “Rework your organizational chart and innovate new positions, such as a ‘tax client coordinator’ to manage clients and take some of the many tasks from your CPAs.” She also suggests running pilot programs involving fractional employees, offshoring, or temporary positions, and assign one person to own this process when people come on board, treating these special-position workers like an employee for onboarding, training, and managing. “Invest in more digital, technology, or business analyst roles to expand your data analytics internally and for clients,” Loerzel adds.
“With remote [working] here to stay, examine your recruiting strategy to allow for the borderless reach it offers for talent acquisition. [This] allows you to find talent outside your local geographic market, especially for those specialty technical skills or industry experience you’re probably looking for,” she observes. “It also allows you flexibility as your team members have opportunities to move away, too.”