The war for talent goes on, but there are creative solutions available for bold firms, according to Jeff Phillips, CEO of Padgett Business Services and co-founder of remote job platform Accountingfly.
Transcription:
Dan Hood (00:03):
Welcome to On the Air with Accounting Today. I'm editor-in-chief Dan Hood. Staffing continues to be the No. 1 issue for accounting firms of just about any size as well as for corporate tax and accounting teams. And it only seems to be getting worse or more difficult or more painful or however you want to phrase it. Here to talk about all that is Jeff Phillips who comes at the topic from two different perspectives. He's both CEO of Padgett Business Services and a co-founder of Accountingfly, a remote recruiting and staffing platform for accounting positions. Jeff, thanks for joining us.
Jeff Phillips (00:28):
Hey Dan. Thanks for having me.
Dan Hood (00:30):
Let's start by just start talking. What are the big trends you're seeing in staffing?
Jeff Phillips (00:33):
It's funny because I wanted to come in and be able to tell you things are getting better, things are getting worse, but they're staying about the same really, even though we're, when we're recording, there's a lot of news of our economy slowing down a little bit. The most recent job jobs report suggests that we're still creating jobs. So to give you a sense of perspective, I think q4 we had 3.6 overall unemployment on the most recent job report and what just last month, March 23 was about 3.5%. I mean, there was still two open jobs for every skilled laborer last year that came down to about 1.7%. So there's still this very hot market for skilled candidates in our industry. Accounting and auditing, Dan, it's still unemployment's around 1.8%, so that's leaving experienced accountants in incredibly high demand. So the trends are staying about the same. I will tell you anecdotally, owning a staffing agency, we're seeing firms have a little bit of trepidation of making that offer and closing the candidate. But generally speaking, across the board, hiring is still hot. It's very difficult. We're expecting over the next 10 years a 6% annual growth in the demand for the positions in accounting and auditing. So it's not going anywhere. We got to just deal with it. Right.
Dan Hood (01:55):
Well, and that growth in growth and demand is only going to make things because it's not necessarily the supply problems. We've talk, we've talked a lot on this podcast about all the supply problems, but they're, that pipeline of new accountants coming in is pretty low. And as you say, an unemployment in the accounting profession is, I think the number was almost exactly half, but it's usually half the national average for regular employment. So it's a tough environment. Maybe the flip side, the positive side is it's a great time to be an accountant if you're looking for work in accounting. Yeah, it's a great time. It's only if you're trying to hire accountants that it's terrible. So sticking with that, the hiring perspective, if you're looking to hire, are there any positive trends, any good news they can look to?
Jeff Phillips (02:34):
I think so. There's a lot of innovation happening. Challenges always bring entrepreneurial opportunities and there's a lot of exciting trends out there that I think if you're running a firm or as a hiring manager and a corporate team, you should be aware of, and we're going to talk about this some more I'm sure, but remote hiring is still hot. It's not going anywhere. I think I told you earlier that we only fill remote jobs at our staffing firm accounting fly, and we're seeing a massive amount, about 900 applications a week just for remote positions. All right. So we like remote. We're seeing a lot of growing demand for offshore positions, and I highly encourage people who own firms or in the corporate finances game to investigate offshore options. You can offshore a lot of positions, sort in pre-work up to doing a tax return, even work on payroll or monthly casts, counting, bookkeeping.
(03:37)
You can do that with professionals who are staffed in the Philippines fully, remotely. Another thing that just happened cause of remote work and freelancing, just freelance accountants hire folks who are part of the gig economy, who just want to come in, work for a busy season for you, that might be useful next fall in the next fall busy season. And one of the things that I'm seeing that's really interesting, and I'll have to follow up with you on is we're seeing a trend of a reverse offshoring. So firms that hire and train CPAs in India are, and as a backup real quick, a lot of larger firms in the US are already on the offshoring game now. They're hiring thousands and thousands of CPAs in India who are working remotely for these firms. One of the companies that I've been talking to is kind of reversing that and they're connecting these Indian based CPAs with American universities to get into a master's program to get some more experience.
(04:41)
And then connecting that with the jobs at American firms where they're an interesting way, they don't have to pay for a visa for three years. So you get the benefit of, so this is in very infant stages and I'm advising a company that's involved in this, and I see that as a really interesting way to fill some of these open jobs. So long answer to, but a very difficult question. But there are trends. If you're willing to be creative and to try new things to fill these jobs, it's not going to go back to what it was 10 years ago when we first, that's for sure.
Dan Hood (05:17):
Well, I do want to talk. Yeah, you mentioned remote work, right? Obviously it's a big trend and I want to talk a lot more about it cause it's got a lot of moving pieces obviously. I mean, they talk about firms jumped forward five or 10 years in terms of everything but remote work and their capacity to accept remote work. They were, because so many of their staff were working from home or working from someplace other than the office, they now have the technological capability to work with remote people. And once you can work with a person who's remote in your town, you can work with the person who's remote in Sheboygan or somewhere else or in, as you say, India. I hadn't really thought about that, but, and it sounds like that's continuing. If you say county client's getting us 900 a week new remote jobs listings, then it sounds like that hiring people are still open to hiring remote people. Is that fair?
Jeff Phillips (06:10):
Yeah. Think it's accelerating at a decelerated pace because I think people are having a second wave of trepidation about remote work because of the obvious what you lose in terms of teamwork and things like that. It's not just the easy fix that it used to be, but generally speaking, broad strokes, more employers in the accounting space are embracing remote work than ever before. And my definition of remote work, by the way, is you don't care where your next hire lives. So some people say, yeah, we do remote work. Our staff in Birmingham, Alabama all work from home. And that's not what we mean. It means a firm I'm close with in downtown San Francisco hired a tax manager in Philadelphia three years ago, and that person's going to be a partner in their firm. And did they have to rework everything about how the firm operates to make that higher sort of work inside their business? Yes, yes. There's a million different ways, but yes, remote work is probably more prevalent than ever before. We've got a lot of fun stories to share love. The larger firms are now going into smaller communities and poaching small town CPAs to come work for our firm remotely for a 20% paid month. And you work from your work home office and we're seeing that all the
Dan Hood (07:30):
Time. And that's still a huge savings for the larger firms, right, because if you're paying New York or San Francisco or Chicago salaries to someone in Binghamton, New York or I keep going back to Sheboygan, I dunno why we keep going back to Sheboygan just because it's fun to say. It's fun to say, yeah, but similar, everybody wins. The employees getting a job, they couldn't possibly get in the lockdown at a rate they couldn't get locally, and the big firm is getting staff they couldn't find anywhere at hopefully lower rates. Is that I arbitrage happening or are they just saying, we're just going to pay our local rates, but they'll be so overwhelmingly attractive in
Jeff Phillips (08:06):
So the bad news is that they're not getting at a discount anymore. Three years ago, if I were on your podcast, I would tell you you could hire remote and out of the spirit of gratitude for having a flexible job, I will take a less salary. But these large coastal firms are hiring middle of America remote CPAs and they're paying them the coastal wages. So that's driving up all of our costs for hiring accountants. Stupid coasts
Dan Hood (08:32):
Cause trouble all the time. All the time. I would've I That actually can be a serious problem for a lot of local and uneven regional firms. If your pay scales are built around what it costs to live here and suddenly you're competing, that can be in many cases when you look at different salary services, the difference between across the country is staggering sometimes how big a difference it can be,
Jeff Phillips (08:56):
It is staggering. But what I have seen in running an organization that we have 300 firms inside of pageant, there's room to raise prices in an equitable way across the board to help fund this. And that's what this is. That's the natural consequence of that. And the other point I'll make is that because the universe of remote employees is so large, there's a lot of opportunities for all firms to make hires remotely. So if you're in Birmingham, there's like, well, I don't know the number, but there's probably a 1500 CPAs in Birmingham let's say. So if you're searching for Birmingham and they have to come to your office, you're so limited in the number of people. But if you just expand that out to America, then your number becomes 670,000 CPAs and 1.4 million accountants and auditors that include those CPAs. So that's your hiring pool.
(09:54)
But then when you look globally and say, well, I could hire an accounting assistant in the Philippines for 20 cents on the dollar that I would pay some by the United States. What's interesting about how the pandemic really changed everything was that it flipped the switch for us to be able to be more creative in our hiring. And that's the exciting solution to all this is just start to think global about it. Even if you're a small local firm, you can find the people, you will have to rework your systems and you've got to prioritize culture at all costs, especially if you hire remote. But it's there. It really is.
Dan Hood (10:28):
Well, it's interesting. We we're about to run a story about an accounting firm in Long Island that had its split itself up into an alternate alternate practice structure, splitting off audit into one entity and everything else into another entity, which is usually about private equity money. But we were talking, one of the reasons why we wrote about them was because they didn't do it for private equity money. I mean, they're open to it, but they're not taking that on. The real reason they did it was so that they could make non CPAs partners because they wanted another incentive to grow. And I'm just thinking, taking on your idea of the creativity and the willingness to be creative is something that firms are going to have to do a lot more of. Given as you say, that demand is going to grow 6% a year and the supply is definitely not going to grow 6% a year.
(11:13)
It's already too low and it's not going to get significantly bigger. I want to dive into, you mentioned we've, a lot of these trends have either been accelerated or in some cases created by the pandemic. When you look out, what sort of long-term impact do you think the pandemic's going to have on how firm staff, if at all? Or is it going to fade as soon as the pandemic fades into memory? Or do you think what sort of changes do you think we're going to have there are going to be with us for a while?
Jeff Phillips (11:40):
I think the pandemic unlocked the value of work from anywhere and it unlocked the demand from candidates of the candidates are saying, I want to work where I want to work and I want to work when I want to work, but if you can meet me there, I'm going to give you my best. And the employers that chose to do that are really having a good time right now. And the employees that employers that chose not to are going to have a hard time. And obviously just from a dollars and since cent standpoint, the rates to hire people went up during the pandemic because our industry grew. I mean, one of the best years of growth for the profession was the year after the pandemic certainly was one of our best years. So I don't think we go back from that. And I think what it did is unlocked the opportunity of a digital employee where you can have a new org chart. Gone are the days where you have to hire as much administrative staff. We don't have to hire people to type in information from the bank into an accounting software anymore. You should be that. You can automate these things, but some of the things that our admin can be offshore for a much lower cost.
(12:59)
We've crossed the ribon on that. It's not ever going to go back. And that's a good thing. That's the good thing about globalization, and I think I'm seeing firms starting to real prioritize the customer facing tax, senior accounting senior person and really pushing the chips in and hiring that position, staffing up really, really well there. You're going to pay a premium, but that's the key position side, the firm, but you can bring freelancers in to support them. You could bring offshore to support them. You can be remote staff to support them. And so I don't know, I see firms reimagine their org chart because of what unlocked during the pandemic. And the last thing I see is get creative as outside of who you're hiring, but overhire on college campuses. If you get to a local campus, there's always this narrative like, oh, the big four, hire everyone from the college. That's not true. I mean, there's some colleges you're probably going to have a hard time at, but maybe overhire at your college, maybe go into the finance department at your college and try to bring in people and train them this. I always just see exciting opportunities and things like this. And there definitely are out there. And I think it happened because of what happened in 2020 and sort of forced us all to change our game.
Dan Hood (14:12):
Well, as you say, the need to be creative has hopefully unleashed, has created the talent to be creative or the ability to be creative and hopefully they'll stick with it because it seems like certainly over the next few years, even the firms that haven't embraced remote work are going to have to eventually it's going to be just a commonplace of the work environment for everybody, not just accountants. And the longer you put off adjusting to it, the longer you're not going to be able to leverage it and make the most out of it. Cool. Well, there's a lot more. I want to talk about how our accountants are hired and so on, but we got to take a quick break.
(14:52)
All right. And we're back with Phillips of pageant business services at account client. We're talking about all things, staffing, trends, what's going on. And I want to talk about, obviously we've touched on this in a lot of different ways or you've touched on this a lot of different ways and the way accountants are hired or found or the way firms look for them. But maybe we want to talk a little bit more about that, the way accountants get hired over the next five years or so. What sort of trends and changes do you expect to see in that?
Jeff Phillips (15:19):
Something I'm worried about is how we onboard talent and how if we're having more hybrid and remote workplaces, it's really incumbent upon the leaders, the owners, the partners or the CFOs and controllers of the world to prioritize culture. We see a, so we obviously see a lot of remote hiring, but we see a lot of failed hires because they aren't onboarded properly. And so this is where you want to spend money is if you're hiring remote or if you're not hiring remote, no matter who you're hiring. I have a great onboarding system because the paint, what we are seeing more often than not is hires not last 90 days. So that, I don't have a statistic to give you Dan, but we're seeing this failure of a new hire happen more often than ever before. And so I think where the solution there is how we treat people when they join an organization.
(16:21)
So if you're hiring a remote person, fly them into your office and spend time with training, they need to do their paperwork before they show up to the office who wants to join your firm and trade all their time to work for you and then fill out a government forms all day on their first day on the job, you can do that online, get buy-in on the vision of the organization from the key leader is a big deal. One of our favorite things that we do in our onboarding checklist is we have the team members who are going to work with this person, reach out to them on social media and make calls before their start date to build some social connections so that people leave. I, I've learned that people leave in the first six months for three reasons. They don't understand their job clearly enough. They don't have the tools to do their job or they're lonely. And so it is depressing as that sounds like we can address this just by being proactive. So just have a good onboarding system.
Dan Hood (17:19):
But they also, I mean those are all good reasons to leave, but they also have options. They can, that's part of the problem there is that they can go and say, I don't like this one. I'm, there's plenty of other places that will hire me. Hopefully one of them will have a better onboarding system, as you say, will connect me with people so I have somebody eat lunch with and don't feel lone me or whatever. All those things. We definitely, we've heard this from some leading firms that they're looking at their onboarding and they're revamping it, but I don't know that we're hearing it from anywhere near enough firms to overcome that because as you say, it's those, that first period is pretty critical and then they can go anywhere they want.
Jeff Phillips (17:52):
You've made a great point about they have options. And then I think a trend that I advise firms and corporate teams on is to budget for pain, you're going to have to recruit, you're going to have to fill this position that's open two or three times to fill the position. Does that make sense? We just have so many people dropping out of a job search the last minute. You have to look from their perspective, numerous recruiters and numerous employers are hounding them for options and they're just throwing more money at 'em, right? So you're one of those options and you're just an economic option.
Dan Hood (18:27):
And there's certainly, there is no shame or stigma associated with being like, I got a better option going, I was only here for three weeks. That's fine. I got a better job elsewhere. No, not to say that there ever should have been, but there was, right? 20 years ago, no one would ever have thought of showing up for six months and then going,
Jeff Phillips (18:48):
So you're seeing are that turnover happen before someone accepts a job. Cause they're getting multiple options there and you're seeing the turnover in the early stages of the position. But I do believe that the more careful an employer is about really guiding that employee the first part of their journey, the more they are paying attention to that. I see a direct correlation of firms who do that, who are not experiencing that as much, but put into your business plan, put into your finance plan that your turnover's going up and even to just get the position filled on day one when they show up to work, you're probably going to have to get close with three candidates just to have one three that you want just to have one that shows up on the first day of work. And that sounds horrible, but if you understand that is the lay of the land, it's how we're going to run our business going forward. You can make a plan for that, you can budget for that. You can anticipate dealing with it.
Dan Hood (19:47):
And I'm imagining this also sort of puts a priority in the hiring process on speed. I mean, the longer you leave a person dangling, the more likely somebody else is to pick 'em up, right?
Jeff Phillips (19:57):
Yeah. So I've got a great story of a big firm, big firm as it were, who is talking, I think this is fascinating. So they're allocating partner time to interviews, and so a recruiter, we'll get in touch with you, you're a cpa, we'd like to talk to you about a job at X, Y, Z, big firm. Yes. All right, so you've got a partner interview on Monday, you've got a partner interview on Wednesday, and you get a job offer on Friday, and that job offer expires one week from Friday, take it or leave it. So these firms have built this rapid fire recruiting machine. I think that is too fast for most of our listeners, but okay, how can you make use of it rush, but don't break things? This is too serious of an endeavor. It's a too expensive endeavor to screw this up, but you get an email or a text or a call from a candidate, you're going to want to return it. It is your top priority.
Dan Hood (20:57):
Well, and you say those big firms, right? They've got entire HR departments that can move all the things you need to move a hiring process forward, and of course of week they can handle that speed. But as you say, most firms, but it still means, as you say, answer the email, be responsive, keep give them, certainly give 'em a clear sense of, Hey, here's where we are. This is what is how long we're going to be what we're waiting on. Keep them informed. You can't just sort of figured, well, they need a job and I've got 'em. So
Jeff Phillips (21:25):
We are in a candidate's market and even if our economy slows down, you were not, I don't think that changes because of the long-term growth outlook of our industry. So your behavior has to be built for speed. Just don't go fast, don't break everything. That's my advice.
Dan Hood (21:43):
Well, it's just funny. We're talking about 3.4% unemployment, 3.5% unemployment. In other times that would've been considered full employment effectively, that's full employment. And we're like, huh, that's pretty high or that's terrible. That's terrible. It's fantastic. It's amazing. And even if it doubled, 7% unemployment would be from the nineties, 7% unemployment, people would've said, that's not so bad. That's fine. This is fine. I mean, it's amazing how you get used to different environments and start to say, wow, this is normal. That's right. But it's not. It's really, it's astonishingly low.
Jeff Phillips (22:19):
I started thinking about interest rates when you were talking about that and how high they were when we were coming up and how low they've been. Now everybody that wants a job has a job. So if your firm is growing or you have to replace somebody who has left, understand that the strategy is, I mean, I used to work in the job board industry and that you're not going to post a job on a job board and get candidates. Everyone that has a job, everybody that wants a job, has a job. How are you going to set yourself up and be different and differentiate yourself so that one of those people, they leave that employer and come to you
Dan Hood (22:58):
And then, oh, well, the reverse of that is you should be thinking is what are people telling my current employees to try to lure them away from me?
Jeff Phillips (23:05):
It's happening. I hate to tell you. Yeah.
Dan Hood (23:08):
Well, yeah. Well, and this is the whole other half of, right, we've been focusing on hiring and new people. We could obviously spend days and days and days talking about the importance of retention and the crucial, as important as onboarding is, keeping 'em on board for the next 25 years is as important, and many ways just as difficult if not more.
Jeff Phillips (23:27):
Oh gosh, absolutely. I mean, the firms under 25 million are experience seeing a turnover about 20% a year. So that's 20% of your accounting staff is voluntarily leaving every year, but you're growing, so you got to backfill and grow it. It's a lot going on here to have to fill all these positions. For sure.
Dan Hood (23:48):
You had mentioned, you talked about tax seniors and accounting seniors who demand demand for those and firms are focusing on those. Are there other positions or skill sets or types of employees that you see in high demand these days? Is there, obviously I obviously we're in tax season. Well, we're close to the end of tax season as we record this, so tax season tax employees may be a little less pressing in the next couple of weeks as we move out of tax seasons. But still in general, are you seeing any areas of high demand or lower demand
Jeff Phillips (24:14):
Tax is going to continue to be in absurd demand. In fact, our
Dan Hood (24:20):
New scale is high to absurd. That's the
Jeff Phillips (24:23):
Season of, we used to want to hire tax seniors and managers around October. Now you need to begin your job search for these tax professionals on May the first. It is too late in October, so the timing has just gone six months earlier into the year. So you get with without tax season, your recruiting team needs to be, you turn over lots of rocks to go and find tax professionals. That's definitely in the highest demand. We're seeing increased demand for cast positions because firms are making the jump to advisory, and that's really exciting. The demand for college students is always very high. If you have kids, tell 'em to get a degree in accounting, it's always going to be a good time to get a job. It's a great education. I wish I had gotten a degree in accounting, Dan. I have an economics degree, so a lot of good. That did mean well.
Dan Hood (25:17):
Yeah. You can fake it though with an economic history. You fake it with a history degree. I got nothing. I have no, no.
Jeff Phillips (25:23):
Probably learned a lot of interesting facts though. You probably teach us. We could turn this into a history podcast if you wanted to. I
Dan Hood (25:28):
Keep suggesting that, but the sponsors are like, wow, so that's a problem there. Would quick question about the tax in the hiring early. Is that because the talent is getting snapped up so early or is it because there's also mean tax season has really sort of spread throughout the year. The October 15th deadline has sort of become its own whole mini tax season. So is it that or as you said, is just that the talent gets snapped up so quickly? You got to have 'em squared away right away.
Jeff Phillips (25:59):
It's the gold rush for talent. Yes, and remember the story I said a second ago about how fast these larger firms are going through a hiring process. That tempo has created scarcity, and so you want to get out ahead of that. There's just so much demand for these tax positions. Not to mention we're losing people, right? Yeah.
Dan Hood (26:25):
People aren't just leaving firms. They're leaving the profession as well.
Jeff Phillips (26:27):
They're leaving the profession. I say that, but every time we start a tax search, we find a great person, and I know that because the demand, especially for remote work, but also for really good employers that are offering more flexibility, that are paying a market right wage and that are paying attention to culture and getting people really invested in the life of their employer, that is still a winning strategy that still wins.
Dan Hood (26:57):
Excellent. Well, that was going to be my last question is what's your advice for firms that want to have, but you've just summed it up. Any final thoughts mean everything we've been talking about, there's been a ton of great advice for firms looking to hire, but that summed it up neatly. Any final thoughts for verbs that looking to hire?
Jeff Phillips (27:12):
It's always comes back to me for the three things that people leave early in their employer. They were not clearer in their job role. They did not have the tools they needed to succeed, or they did not feel socially connected or they were lonely. If you think about those things first, you can always address your retention issues and you can close hires. There's a lot of creative ways out there to staff your firm right now. I'm always available to talk to anyone. It's a passion of mine and love to talk about it, and we'd love to have that conversation.
Dan Hood (27:43):
Fantastic. All right, Jeff Phillips of Padgett Business Services and Accountingfly. Thank you so much for joining us.
Jeff Phillips (27:48):
Thanks, Dan,
Dan Hood (27:49):
And thank you all for listening. This episode of On the Air was produced by Accounting Today with audio production by Kevin Parise. Rate or review us on your favorite podcast platform and see the rest of our content on accountingtoday.com. Thanks again to our guest, and thank you for listening.