If We Believe This Report, Talent Is No Longer Firms’ Number One Priority

According to the recently released Thomson Reuters 2023 State of the Tax Professionals Report [PDF], talent is no longer firms’ most important priority. This is a significant shift from last year (see also: Finding/Retaining Staff and Challenges Working With the IRS Are Top PITAs for CPA Firms, Says AICPA Survey) that could mean the so-called accountant shortage is over or it could be that firms have had long enough to figure out how to make things work with the existing resources they have that they don’t care as much about talent. If recent layoffs and delayed start dates are any indication, it’s likely the latter.

First, the chart. Priorities are aggregated by number of mentions from surveys of more than 500 tax leaders around the world and grouped by theme:

Here’s another. Ignore that we skipped Figure 2, it’s coming.

The report clarifies that just because talent slipped to the fourth spot overall it doesn’t mean firms no longer care about it. Big firms absolutely do.

“It should be noted that although the order of priorities may have changed, this doesn’t necessarily mean firms care any less about any given priority, it’s just that respondents’ primary focus may have shifted,” says the report. “As a practical matter, all of these priorities are inter-related, and the statistical difference between the top three priorities, for example, is only a few percentage points. And although finding and developing talent did drop from the top spot to the fourth spot overall due to input from small and midsize accounting firms, the hunt for talent is still very much a top priority at large firms.”

For firms with 30 or more people (Large firms in Figure 2 below), recruiting, developing, and retaining talent is still the highest priority. But at what the report defines as Midsize firms (between four and 29 people), the top priorities are efficiency and client service.

With talent out of the way, let’s talk about client service. “The prioritization of client services is especially evident at midsize accounting firms, where both individual and business clients are asking their accountants to play a more active advisory role,” the report says. “Midsize firms see expanding their services into areas such as tax strategy, financial planning, and business guidance as a key growth strategy, both to differentiate themselves from small-firm tax preparers and to compete with larger accounting and auditing firms, most of which already provide such services.” Three years ago we might say you need talent to expand into advisory areas but the report reminds us that technology and a seemingly unlimited supply of overseas accountants can get at least some of the work done. Too bad there isn’t actually an unlimited supply of overseas accountants.

Wrapping things up here:

Overall, the results of our 2023 report suggest that in the face of a possible recession, accounting firms are looking for ways to streamline their operations — through both process re-evaluation and the adoption of new technologies — and doing what they can to position themselves for growth in 2023.

To be sure, tax leaders are still dealing with a serious labor shortage, but they are also pursuing alternative strategies to achieve their goals, including greater investment in tax technologies, better training on existing systems, outsourcing, and even freelance contractors. Client demand for a broader range of advisory services and more flexible pricing models is also driving decision-making going into 2023, as is competition for higher-quality clients and the need to hire, develop, and retain experienced tax professionals at all levels.

RIP workers’ market, we hardly knew ye.

Thomson Reuters Institute 2023 State of the Tax Professionals Report [PDF]