A surfeit of client work and high revenues are blinding the accounting profession to the work it needs to do to prepare for the massive changes coming its way, according to leading consultant Allan Koltin.
"Change and innovation only happen in our firms when the change is determined to be better than the status quo," Koltin, the president of Koltin Consulting Group, told an audience of accounting marketers at the Association for Accounting Marketing's Emerge Summit, held virtually last week. "And right now, the status quo seems pretty good. Too many firms have their heads in the sand, because the feeding at the trough is pretty good."
After a surprisingly successful COVID pandemic, firms have their heads down, focused on their current work — and are ignoring the major challenges that are coming their way.
"There's been more change in the past three years than in the previous 40," he said. "If you're not doing deep strategic planning in your firm right now, with all the things going on, you're in trouble."
"We're too busy being busy," he added, warning that firms need to start work now to address challenges like the war for talent, the move to a focus on advisory services, private equity's inroads into the profession, and much more.
1. The staff shortage. "This war for talent is not going to get better next year," Koltin said. "Loyalty used to mean that whatever accounting firm you went to first, you were going to be there your entire life. Loyalty now means, 'While I'm here, I'll give you all I have, but if something better comes along, I'm out.'"
Firms need to step up their game, not least by getting marketing and human resources to work together to create strong recruiting brands and programs. He cited a firm that has a database of over 10,000 people who work at other firms: "Every week, marketing is sending emails or podcasts or other things to those people — a classic drip marketing campaign. That's where firms have really stepped up, in bringing marketing into the equation."
One area where they haven't necessarily stepped up is in making it a smart priority for firm leadership.
"Partners complain about talent all day long, but they're not being the talent scouts they need to be," Koltin continued. "Private equity firms and other professional firms make fun of us — they say, 'You know when they ring the bell in accounting, it's when they get a big client, a whale — in our world, the biggest bell is when we steal a star from another firm.'"
2. The move to advisory work. With traditional compliance rapidly being automated and commoditized more and more, firms need to put more of a focus on advisory work, Koltin suggested.
"I see all kinds of partners who pound their chests and say they're their clients most trusted advisors, and I say, 'Really? Is that all you've got?'" he said. "We have to evolve from being the most trusted advisor. That's the basic level. We need to be the most valuable advisor."
"We've got to get into the business of making money unrelated to time," he added. "Making money unrelated to time — it's contingency work, it's managing assets, it's royalty and sales tax audits where you get a share of the savings, it's executive recruiting where you get a share of the comp, and so on."
3.The threat and promise of private equity. While Koltin was quick to point out that the vast majority of firms will not get involved with PE firms, "It's a disruptor. It's disrupting the M&A market. For decades, we've been getting away with mergers — paying out retiring partners over long periods of time. PE is giving stars a bite of the apple now. Rather than waiting 25 years to get a small amount of cash, they can get monetized in ways we never thought possible."
The cash that PE firms bring makes them more attractive as acquirers, and means that the firms they acquire will be able to reward top talent better and faster, and make the major investments in technology, skillsets, new service lines and more than they will need to make to be successful in the future.
Overall, Koltin expects a reckoning is coming, when firms are no longer able to ignore the major shifts in the profession by relying on their current model.
