For years now, firms have listed finding and/or retaining talent as one of their top issues. Before COVID. Before The Great Resignation. Before M&A activity even started going completely off the charts.
The talent acquisition and retention landscape firms are facing now is more rugged and uncertain than ever. First, consider all the activity in mergers and acquisitions; any firm that’s gone through the exercise will likely tell you it was followed by departures on both sides. That was a complication when the workforce wasn’t disaffected and out there looking for new jobs.
Next, consider the Great Resignation itself. Workers, burned out and egged on by changes wrought by COVID, are increasingly looking for new jobs or, in some cases, leaving without even having something else lined up. Toss in rising inflation and a totally Twilight Zone housing market, and you have yourself a perfect storm of hiring and retention difficulties.
What’s driving all the firm M&A activity?
Depending on who you ask, you’ll get a number of different answers to this question. But there are a few items most experts agree are driving increases in firm M&A activity.
Across the country, many traditional accounting firms are helmed by seasoned pros who are rapidly approaching retirement. Especially in the smaller versions of these firms, there is just no qualified staff to take the reins. Unfortunately, finding qualified talent outside the firm right now is challenging at best.
While many of these firm owners or principals would like to look into a potential merger or being acquired, the sad truth is the market is replete with these kinds of firms. Without some rethinking and reorganizing, traditional accounting firms are likely to be overlooked.
A need to up the ante on services
Many of the traditional firm accounting services have become commoditized. Tax and bookkeeping in particular are difficult to make profitable without substantial volume, and many clients are electing to use self-service options for both. This doesn’t mean clients are no longer engaging with firms, of course.
Instead, they are approaching firms looking for the “trusted advisor” the profession has aimed to be—someone to provide more insights and advice. Financial planning (both personal and business), cybersecurity, pension planning, forecasting… the list is long and growing. When your firm doesn’t offer in-demand services (and hiring is a nightmare, as it happens to be at the moment), a merger or acquisition is an attractive option.
Sorry to bring it up, but: COVID
Firms that were exploring or actively pursuing a merger or acquisition prior to COVID often put those plans on hold. And many that weren’t exploring M&A at all found their circumstances changed drastically during the pandemic.
As things have begun to ease, the floodgates have opened. There’s a realization that perhaps warnings about the rapidly accelerating pace of change weren’t oversold; firms need to think more deeply today about their staff composition, service offerings and technology if they want to be positioned for the future.
There are of course innumerable other reasons a firm might choose to look into a merger or acquisition, including looking to expand their client roster in a particular niche, covering a larger geographical area or combining efficiencies among others. As the activity continues to heat up, one thing is certain: competition will only get more fierce.
Resignations are going to slow down, right?
I can confidently report: maybe?
The real answer is a bit more complicated. While it DOES seem like attrition has slowed modestly as of January 2022, it’s worth noting that many people will hesitate to quit a job in the weeks before and during the holiday season. What we’re witnessing could theoretically be a blip. But job openings continue to greatly outnumber available talent, and most employers are reporting significant difficulty in filling their open roles.
So short term, the smart money is on resignations continuing to exceed historical averages. But every market is a pendulum swing; just a few short years ago in the aftermath of the Great Recession, workers (especially graduates) were lamenting the dearth of available work. So we can count on an eventual return to something that looks a bit more “normal,” whatever normal is.
For now, the math is pretty clear: nationally and across all industries, there are roughly 5 million more available jobs than available workers. So not only are firm positions going to be harder to fill, they're also going to cost your firm more. Add to this that workers are understandably using their newly found popularity to negotiate better work/life balance and as many ancillary benefits as they can muster, and it’s not too hard to see why this is a truly challenging time to find yourself understaffed and overworked.
Automation addresses these issues, at least in part
Especially for traditional firms, accounting automation can rescue them from a bleak-looking hiring environment. Firms are reexamining their tech stacks and finding new efficiencies that can reduce the amount of administrative and low-return work their staff does. As the widely reviled and unstimulating work such as data entry is handled by computers, existing staff can be redeployed to attend to more of the services clients are now expecting from their firms—happily, services that offer far better margins and much more opportunity to interface with clients.
There’s good reason to believe firms that make smart use of technology are more successful in the M&A space as well—think about it—if you are on either side of a merger or acquisition activity and it comes down to two firms that are otherwise equal, which would trend better: The one with up-to-date technology run by a competent staff, or the one still struggling to upgrade to Windows ME?
The more cynical among us question the automation trend, asking if it means fewer accounting jobs. The short answer is “no.” In fact, the Bureau of Labor Statistics projects demand for accountants will increase by 7% between 2020 and 2030. The anxiety over replacing people is a very old tale that goes back even before the Industrial Revolution; yet workforce demand has multiplied exponentially since that time.
Are your employees qualified to take on advisory and other non-accounting work?
This is where things get a little more intense. Any good HR professional will tell you the cost of retaining an employee is less than the cost of finding a new one. But that doesn’t mean retention is without investment on your part.
The good news is, if you invest in your employees, you’re also satisfying a big ask of workers in this challenging atmosphere: continuing education. Your staff wants to know that their skills are being kept relevant, and that they’ll continue to be in demand well into the future. If your firm can’t afford to cover the cost of professional certifications or other forms of education even in part, consider providing reasonable paid time off to study and earn certifications, licenses or other forms of professional credentials, or allowing your employees to study on the job at designated times.
If you start an automated accounting journey now, you’re buying insurance for better outcomes in hiring and retention, as well as any future M&A activity. You’re also making the best of challenging times and building a road that leads to success.
Want to learn more about automated accounting?