Technology investment is not enough for corporate tax departments to make-up for the onslaught of talent shortage they will face over the next few years
A plethora of converging factors around talent will put increased pressure on already-existing challenges among corporate tax departments, according to the 2022 State of the Corporate Tax Department Report.
Among the most pressing of these problems are:
- skill gaps in technology and leadership skills;
- feelings of under appreciation and lack of career progression as drivers of decisions to leave current employers;
- time constraints to invest in employee learning and development in the short term;
- flight risk of the next generation of corporate tax leaders; and
- a lack of succession planning.
These factors come on top of increased demands faced by corporate tax departments, which include managing increased regulatory requirements, supplying governments with tax data faster and more accurately than ever before, collecting and analyzing data across the enterprise, providing strategic intelligence, and finding new ways to extract value for the corporation.
The direct consequence of all of these additional demands is that the tax & accounting professionals doing the work in corporate tax departments are feeling squeezed — and this compounded by employees already being burnt out after the pandemic. Indeed, more than one-half of the responding tax professionals to this year’s survey said they did not have the resources they need to do their jobs. This could expedite trends already in progress, which include older employees retiring, mid-career professionals leaving their employers more frequently, and younger workers strongly indicating they want a better work/life balance.
All of this is a wake-up call for corporate tax departments and corporations across the board. They clearly need to find creative ways to retain existing staff longer and replenish their workforce with people who have the requisite skillsets to meet the variety of new challenges corporate tax departments are facing. Here again, technology is a major factor, but it will not be enough to solve all the industry’s talent problems and meet current and future needs.
Determinants constraining corporate tax talent
The “emergency button” is flashing red for many corporate tax departments, and leaders of these functions need to take action now to address additional constraints occurring in the near term. Among the most challenging problems they face are:
Flight risk — The threat of employee turnover looms throughout many corporate tax departments, while the power of the tight labor market remains in the hands of employees. This fact is even more acute for corporate tax functions. Flight risk sits at 28% on average across all corporate tax professionals, according to the report. Compounding this fact is that the flight risk of those next in line (between the ages of 41 to 50) to lead corporate tax functions is even higher, at 30%.
Without proactive efforts by corporate tax managers to address the top three drivers of employees’ decisions to leave employers —feelings of under-appreciation, lack of career progression, and dissatisfaction with corporate culture — the problem will only get worse in the future.
Skill gaps in technology and leadership — Some corporate tax departments are making investments in technology to increase efficiency. The challenge is, however, that current employees don’t feel they have the necessary skills to take advantage of such innovation. In fact, 43% of corporate tax professionals indicated that their current tax technology expertise is ill-equipped for success.
Time constraints to invest in learning and development — In addition, these same time and resource challenges for employees prevent them from having the necessary time available to invest in learning and development to close those skill gaps. Without exception and by a wide margin, “lack of time” was identified as the biggest obstacle to meaningful professional development, especially for under-resourced tax departments, where almost three-quarters (72%) of respondents said time constraints prevented them from improving their professional skills. Even more illuminating is that when companies had a better sourcing balance, more than half (55%) of respondents still said that finding the time for professional improvement was their primary challenge.
Investment in efforts to upskill requires a commitment of time and resources by management; and without that, the current state will only get worse unless corporate tax managers can proactively finding in ways to free up time beyond simply investing in technology for efficiency.
Lack of succession planning — Many tax departments are reluctant to develop a succession plan because would-be successors on staff don’t have the proper skillset. However, those who are next in line to lead corporate tax departments don’t have the time to develop the necessary skills — including leadership skills, technical expertise in global tax, and ability to communicate with senior executives — on their own. Interestingly, younger respondents — those under 40 years old — expressed interest in improving their leadership and people management skills.
Compounding the stark reality, however, is that the probable flight risk at companies without a succession plan is roughly 11-percentage points higher than at companies with a succession plan in place.
The constraints on corporate tax talent are currently large, but the challenges will only grow over time if efforts by management and at the corporate level are not made to fend off flight risk. The lack of time to meet current and future functional tasks, the lack of bandwidth to address skill gaps, and the already high flight risk poses a negative multiplier effect on talent within corporate tax departments. Without immediate attention, these leaders will soon fail at performing even their most foundational requirements.