AICPA chair Carla McCall talks about the opportunities and challenges facing the profession, and how accounting firms need to work together so they can all thrive separately.
Transcription:
Dan Hood (00:03):
Welcome to On the Air with Accounting. Today, I'm editor-in-chief Dan Hood. With so much change going on in the profession, it's useful every once in a while to sort of step back and take stock of everything that's going on in the field and where it's headed. I'm here to help us do just that today as Carla McCall. She's the chair of the AICPA, which is so often at the forefront of the profession's approach to changes like all the ones that we're facing now. She's also head of AAFCPAs, a Top 100 Firm based in Massachusetts. Carla, thanks for joining us.
Carla McCall (00:29):
Thanks, Dan. Pleasure to be here.
Dan Hood (00:31):
I want to jump in. Like I said, there's a lot of changes going on and many of them, it's always worth pointing out. Many of them are very positive. There's a lot of opportunities out there for accounts. What are some of the biggest ones you're looking at?
Carla McCall (00:43):
Yeah, there's a lot of change happening in our profession right now, and I think it's all for the better. Quite frankly. We are in a period of significant transformation with new technology. Our artificial intelligence now gen AI automation. And so we have a real opportunity today to change the way we work and work in a much smarter way. And a lot of my focus has been leading innovation and change when it comes to technology. In my own firm. I'm a big proponent about sharing what we're doing and having firms share with one another with how we're approaching this opportunity. And I also think it will play a role in attracting the next generation of talent because they grow up with technology, and so they expect us to be at the highest and best use of it. And so this really gives us an opportunity to think about our businesses, our business model, and how we can evolve with everything that's coming at us today. So I'm really excited about it.
Dan Hood (01:56):
Awesome. Well, last thing, I mean, they're amazing that you listed a bunch of the different ones that are coming in and making it easier for accounting firms to do their work. And also, as you say, to change though, change can be difficult. So I'm going to pivot a little bit. I like to start with the positive, with the opportunities. What's going on there? It's too easy to get mired down in the challenges, but there are challenges, and many of them are the flip side of the opportunities. You talk about AI and the many technological innovations that are coming along, but right. The flip side of those is you've got to figure out how they work in your firm and you've got to implement them, and you've got to train people on them. Similarly, there's tremendous opportunities for people joining the profession, right? There's never been a better time to be an accountant in the sense of there's lots of cool things you can do, lots of more service areas you could be involved in. There's more money coming around, which is always nice. But on the other hand, the profession is facing some challenges in terms of pipeline and so on. What are some of the challenges you look at?
Carla McCall (02:49):
Yeah, I mean, certainly pipeline is a challenge. I think there's multiple reasons for that. Some of it is just sheer hard trends like demographics. I do think that there's ways that we could be better at attracting the next generation, really talking about what we do as accountants. So you said it's an exciting time. There's lots of exciting time to be an accountant. There's lots coming at us or use of technology, but we're not good promoters of that. So one of my platforms is promoting the value of sustainability of the profession, not just in how we work today, but the opportunities for young professionals to lead in a lot of these areas. And they can be leaders in all of this change that we're going on. A challenge is change management with all of this transformation going on. Change management is a real issue inside companies, but I do think it gives us this opportunity to promote ourselves, to help the pipeline challenge in value sustainability.
(03:49):
What's our image? How do we really work? What are the problems that we solve? And the diversity of work and entrepreneurship. I don't think that we've talked about that enough historically in our profession, in public accounting. And I'm coming from a public accounting lens because I'm managing partner of one. You can be an entrepreneur inside a firm. You're building a business inside a business. There's a lot of power in that because you're around bright minds. You have an infrastructure, but you're building a reputation, a practice, clients developing people, and there's also opportunities in matching accounting with other skill sets. So you have account accounting and financial planning, accounting and technology. There's all of these different paths that you can take, and I think we could promote that in a much smarter way.
Dan Hood (04:40):
Absolutely. Absolutely. And there's so many more of them now. It used to be there was pretty much you could be, could be in audit, you could be in tax, you could be in, but really those, if you wanted to go into bookkeeping, you could, but I don't know. But now, as you say, there's a million other places you can be involved in forensic accounting and wealth management and all those other sorts of things you mentioned. So there's a lot to promote, but as you say, the trick is to promote it. And it seems like that's, I don't want to say difficult, but it's something, as you say, the profession doesn't do enough since you're talking about your role as the leader of a firm. I wanted to sort of narrow down on that. And what are the specific things that you think firm leaders should be doing or can be doing to help with the pipeline challenge?
Carla McCall (05:23):
Well, one of the biggest focus areas I have is in our own business models. I mean, the world of work has changed. The expectations of human capital have changed, especially in the last four years. So how we have worked, which is beholden to the billable hour, is not attractive. So we're smart people. Our focus here at a EF, we have written in our vision plan that it's our goal to not rely on the billable hour. We want to get to a point where we are pricing differently. We're managing productivity differently. We are relying on different KPIs because billable hours is an input on an output. You have inefficient hours, efficient hours. You have too low hours because people don't put 'em in. You have people who, pat, I mean, they're never real. So we're running all our businesses on a statistic that is almost never accurate.
(06:15):
And so how do we get to the point where we are looking at profit per person and productivity? And what is someone contributing to the value of the firm that is beyond the billable hour? And how can we be better at building our muscle of pricing and pricing based on value? And then how do we build our muscle on understanding how to scope work so we can manage that without an hours report telling us that? So there's a lot to be done here, but I've met other firms who are on this similar journey. And the nice part is I think we're in an environment now where firms are more open to sharing with one another and collaborating on things like this. And so in my role as chair of the AICPA, I have an opportunity to encourage that. I share liberally what we are doing, what we're building. I share what we've created, and I encourage others to share with one another so we can really make change in the profession.
Dan Hood (07:15):
That's the thing. It seems like to reap the value of all these things, to build the pipeline by changing the way the value is measured, it is going to involve some change management going on there. You've got to actually make, it's not an easy, it's not an on off switch.
Carla McCall (07:33):
No, there's definitely change management, and it's not just one thing. And we could talk about the business model and everything, but we do need to increase our starting salaries. Our firm is modeling that. Now, what does that look like? What's it going to cost the firm? We were to sort start at a higher to salary, and then the trickle up effect from that. What does that look like? What do we need to do? I mean, every company's goal should be how do we make more money and less time? So if I was going to boil it down, Dan, that's how it would be. How do we make more money and less time, right? Yeah.
Dan Hood (08:07):
Well, and it's funny because that's exactly the opposite of the bill of hour. I want a six minute increment that's worth a hundred thousand dollars. I don't need 40 hours that are worth 150 hours each. I need that six minute to make somebody a hundred thousand dollars.
Carla McCall (08:22):
Yeah. It's just finding that balance. Because we live or die by productivity of our people. It's our biggest cost labor. So how we utilize our team members, we got to get that right. And so you can't flip a switch, in my opinion, on how to manage that productivity. We need to figure out, okay, what are the drivers? What does that look like? Let's pilot it in a group. Let's test it before we have wholesale change. So it's going to take some time, but I think the more that we talk about it, the more that we collaborate with one another and we share results. I think the more successful the profession is to evolve. And I'm a firm believer that we have to all be strong in order for the profession to be strong. Our profession is not run by the big four. It's not run by just the top 100, I dunno, 44,000 firms in the United States or something. We all need to be strong and do well.
Dan Hood (09:19):
And definitely the sharing thing is crucial there because one of the things I've noticed over time is that accounting firms, you can tell 'em they should do something and that you can give 'em all layout, all the most compelling arguments for, but really what they want to see is some other accounting firm has done it. They want to be sure that some other accounting firm has done it and it worked for them, which makes perfect sense. You're not going to tear up a business plan based on me telling them to do it. But if you see three, four, or five a dozen other accounting firms that are doing it and being very successful, then you start to say, aha, these guys think like me. They know what I know. They understand my business the way I understand my business, and if it works for them, then it could work for me.
Carla McCall (09:54):
I mean, you have people all over the spectrum of change. You have the early adopters, you have the leaders, and you have the laggards on the other end, and where do you want to be? The one thing that I've learned is if in this evolution of change, I am not sure the laggard will be that successful. I mean, yes, you want to see that it's successful, but to wait until it's actually in practice for a period of time, it feels a little late to me. That's why I'm encouraging this collaboration so people could sort of work together. And it's not just falling on one firm to figure it out, but people are sharing ideas. We're going to move much quicker if we're aligned in the same goal and we're sharing with each other along the way. At least that's my belief as a leader, and I practice with our
Dan Hood (10:42):
Makes perfect sense. And I would throw out that it's also important because you can take all the time you want to adopt to this change, but there's another change coming behind it and another one behind that and another one behind that. It seems like change these days is now constant new things are popping up all the time. So if you're still stuck on a change that was up three changes ago, you're just getting further and further behind.
Carla McCall (11:02):
Oh, for sure. And things are moving quick, right? I mean, I talk about blockchain, right? Five years ago, I would've been telling you blockchain is going to, we heard from Barry it's going to change the audit. It's real time verified ledgers. They won't need to rely on the audit report anymore. And here we are in a hockey stick curve up on gen AI and AI that there's a spectrum of AI. We probably do a whole podcast on that. But for gen AI, yes, it has a lot of power and it has a lot of good, but it also can be used by bad actors. So we have to be careful. We need responsible policies, and we also need to then think about what that new technology also does for risk within our firms and how are we managing that risk. Right.
Dan Hood (11:45):
I'm glad you sort of brought us back beautifully to my next question, which was you talked about innovation and technology at the start of our conversation, but I wanted to dive a little bit more into it, and you've done a little bit there telling us about how things will work with AI and the need to be careful with it. But I sort of wanted to ask you a little more broadly about innovation and technological transformation broadly. How can accounting firms make sure they're making the most of the new technologies, the new innovations, the new things that are coming along? How can they position themselves to make the most of those?
Carla McCall (12:18):
Yeah, that's a very good question. And I think it depends on the size of the firm. I think smaller firms are going to have to probably lean on their associations that they belong to or their state societies and things to sort of help them along with that. I think larger firms that have more resources are probably going to be leading this effort, but it's really about strategy in my opinion. I mean, if I had a nickel for every email or LinkedIn paying of the next software that's going to change my life, I could retire Dan. And so it's a combination of creating, it's an investment. It's an investment in creating the right diverse team inside your firm or your company that can look at the solutions. And you have to look at, okay, what's the problem we're trying to solve? And what does the future hold depending on where we sit in the profession?
(13:14):
What's our book of business? What's our people? What market are we in? What's focus? It's going to look a little bit different for everybody, but you also need people in the user community as well as the technologists in the room together. The technologists are not going to lead change here because they don't know all the time how we do our work. So you kind of need that diverse skillset along with leadership that sort of has the vision of where we're going. And you all need to be around the table, but you need this group to have some, you have some leeway. And so we just talked about the billable hour. They can't be straddled with a billable hour requirement because evolution and technology takes r and d. You need ability to fail and learn. And so their focus really should be on that transformation. And so you need a group that's really focused on that with a strategy.
(14:04):
Where are we going to start? What does that look like? Do we need, because you want to build a culture around this transformation and technology, especially AI. When I sat in on the CPA.com and AICPA AI symposium in December, what really stood out to me was the speaker that they had that came in that talked about developing a responsible AI policy. So not just, yes, you can use it. No, you can't. It's really about how do we create cultures where we're all aligned on the definition of it, when we use it, how do we implement it, how do we govern it? How do we have accountability and monitoring and all of this, the bigger the firm, the more effort that it's going to take to have us all aligned around that. So we're using it in a responsible way.
Dan Hood (14:58):
There's a lot of group efforts going to, we need to go on there. And a lot of thinking behind the thinking. I think that, which is fascinating, but it's going to take, as you say, it's an investment. It's really an investment of time, curiosity, and interest and a lot of laying groundwork.
Carla McCall (15:14):
And I do think that everybody in the firm needs to know what's possible with technology today, including gen AI because they have to understand the power. So just, they don't have to be experts in it, but understand the power so they can connect the dots within their own practice areas. What we have our internal team do is track, well, they do a lot of, when they're developing use cases, they're sharing them, they have monthly meetings, anybody can join. So they're sharing sort of use cases where other people might think, oh, we could use that over here. What does this look like? But they're also trained to look at what's the highest and best use, where's the biggest bang for our buck? So you could do a lot of things, but you want to make sure what you're focused on first as priority is going to have the biggest bang for the buck for success of the firm. So we've sort of put together a template with them of how they manage that. So you never want to say no to somebody when they're all excited and they want this really good idea, but you need to sort of build that into your strategy. You can't do everything at once. Where do we start? What does it look like? Who are the stakeholders at the table and how do we understand how to prioritize? Because there's a lot that we could do.
Dan Hood (16:24):
And in the end, it's about the success of the firm, not the success of the technology. You can implement something that's great and we could work perfectly, but if it's not driving us forward as a firm, that's not, shouldn't be our focus.
Carla McCall (16:36):
Yes. And it's funny, I always wonder why firms individually spend all their money creating something and every firm replicates it, and they don't join forces more together because clients don't buy our services for the technology we use. It's a relationship business. We're a trust business. It's about the relationship. And so we really should sort of break down those walls and collaborate more on this evolution, which is why the dynamic audit solution that CPA.com and AICPA is putting together is great because it is going to be available for the profession, which I think is really important.
Dan Hood (17:17):
Well, and it That's a perfect example. I was thinking about that when you're talking about why has everyone reinventing the wheel, right? It was, I want to say 60 or 70 firms working on, I mean, actually they were reps from all those firms or a lot of those firms in on the planning sessions and coming up with features and stuff like that. So it's a perfect example to sort of collaboration you're talking about. We can obviously dive a lot more deeply into this and it would be great, but unfortunately we have to take a quick break.
(17:48):
Alright. And we're back with talking with Carla McCall of AAFCPAs and also chair of the AICPA. And I want to pivot a little bit. Like I said, we could keep talking about innovation and technological transformation, but I want to pivot a little bit to talk about a little something about the AICPA. It's in the midst of a major transition with the impending retirement of Barry Melancon who's led the AICPA and really the profession for three decades. So this is a major issue to change. I think for most people. He's been the only head of the AICPA they've ever known sort of thing. What do you think his legacy is going to look like?
Carla McCall (18:24):
I don't know.
Dan Hood (18:26):
I realize this comes as news to a lot of people now.
Carla McCall (18:29):
Yeah. So Barry's legacy, listen, I credit a lot of the success of our firm from me sitting in council, having a front row seat, to listening to him talk about the future. He is anticipatory. He can connect the dots with what's happening outside of our industry, understanding the impact of our industry or how we can harness the power of it in order to be at the leading edge. It's a skillset, right? But when I think about the broader part of his legacy, it really is about his, it is anticipatory, but the way he brought public accounting and management accounting together through the AICPA and CIMA, joining forces to really be the leading accounting body in the world and promoting our profession and thinking about our profession on a global stage as a gift to the profession. I mean, it couldn't have, I think his doing this several years ago was sort of setting us up for everything that we're facing today and where public trust is at the center, and it's so important that we get it right in all of the aspects that we do. So to have alignment between public accounting and management accounting, I think is really valuable and very powerful. And for me, that is huge and such a gift to the profession, in my opinion.
Dan Hood (19:59):
Yeah, I should say they sort of broadened everybody's horizons to the whole world in a way that maybe they hadn't had before and set us up for the much more global world we live in now. Yeah. Very cool. You talked about his anticipatory skills and his ability to look to the future. Are there any other characteristics of his or that you think will be important in the candidates that people are looking at for his, I won't say replacement, he can't be replaced, but for his successor,
Carla McCall (20:33):
He has, he's strong in leadership and vision. I think if you're looking at any leader of any organization, they have to be a visionary. They have to be strong leaders. In order to be strong leaders, you have to build influence and you have to inspire other people. And I think he has influence on a global stage. I think he has inspired countless people. Those are really specific skills, vision, strategy, influence, inspiring others. Those are really important when it comes to leadership. Now, it's super helpful that he let us stay society. He understood our profession. He was in a firm. So understanding our profession I think was really important. But what sort of rises to the top for me are those intangibles in leadership that you earn, quite frankly. Yeah, you earn those.
Dan Hood (21:27):
And a lot of those are the hallmarks of a great leader, as you said, sort of in any organization, but also specifically in accounting firms, right?
Carla McCall (21:34):
And in firms, because a lot of large firms are more than just compliance firms. They have other practice areas, wealth management and outsource account and technology. They all work differently. And I think what Barry has done as a leader is he's always so cognizant, admire this, and then balancing the views of all the stakeholders. So we have this sort of stakeholder visual that we use, and he may have seen it in some of the presentations, but there's a lot of stakeholders around the table, public accounting, private, nonprofit, government, academia, students. I mean, you could go on and on. And anytime that we are leading change or conversations, he is so astute about making sure he is thinking about all the stakeholders around the table. And it really just takes that kind of mind to really think that way in such quick way.
Dan Hood (22:33):
And to have a big part of it is the depth of knowledge of all the different stakeholders. I mean, when you even went through that list, I was like, oh, I forgot them. I forgot them. I forgot that. So I mean, it's to bear those in mind and have that broader picture of the whole equation of the accounting universe is pretty rare. We hope they can find someone with an approximation of it for, yeah,
Carla McCall (22:54):
And he's pretty good about, because I'm the chair of the AICPA, but my world is public accounting, and he's really good about making sure I'm not just solely focused on public accounting. We have so many stakeholders, and he's very kind about it, but they're very good lessons. So still in leadership, I'm learning from him. Good.
Dan Hood (23:15):
Well, at no point should a leader stop learning, no matter who they are. That's got to be a clear thing, but very cool. Excellent. Unfortunately, as he said, all of these topics would be worth four or five hour long podcast, but we have to limit ourselves. I'd like to just, we had talked about what a great time it is to be an accountant and the opportunities that are available to everyone in the profession, whether you're an individual or a firm. But I'm just curious about, for people looking to enter the profession, what sort of advice would you give someone who's looking to make a career in accounting? Just as a sort of a sign off?
Carla McCall (23:49):
Yes. So I would say, I tell our new, we hire, I dunno, 25 to 35 people a year. I talk to everybody who enters our firm no matter at what level. I have a meeting with them. And the one thing I said, it's to say to the new people, entering accounting is where you start. Might not be where you end up and grant yourself some grace to find your meaningful work because there's so much diversity. You can be in audit or tax or tech or accounting or wealth. And then there's, so there's services, forensics and advisory, but then there's also an
Dan Hood (24:23):
ESG. The list goes on. It's amazing.
Carla McCall (24:25):
Yeah, the new services coming up. And then there's industry specialists. We have healthcare and education and real estate. So it's really allowing yourself to explore the profession. And you could be in public, private, nonprofit, government, academia. I mean, there's so much choice. Allow yourself, grant yourself some grace to explore a little bit, try different things and really find the work that you're connected to. And I tell everybody the work that you really connected to, try and isolate those moments where you're working and your adrenaline is up. You're enjoying it, you're having fun. Try and pause and reflect. Is it because I'm working in a team individual with a particular client? I solved a problem? Try and isolate those moments and then try and do more of whatever that is.
Dan Hood (25:14):
Excellent. Fantastic advice. Carla McCall of the AICPA and AAFCPAs, thank you so much for joining us.
Carla McCall (25:21):
Thanks, Dan. Pleasure.
Dan Hood (25:22):
This episode of On the Air was produced by Accounting Today with audio production by Kelly Maloney. Ready to review us on your favorite podcast platform and see the rest of our content on accounting today.com. Thanks again to our guest, and thank you for listening.