Does Your Firm Have A Strong Bench?
It’s no secret that people are leaving the tax and accounting industry. They are either retiring or simply choosing another field. It’s also no secret that bringing new talent into the industry is not easy. This week, for obvious reasons, I’ve been thinking quite a bit about why this might be and thinking about the value of a “strong bench.” What happens when your team consists largely of highly compensated, aging superstars and you aren’t developing new talent?
Think about how long Aaron Rogers had to ride the bench behind Brett Favre before he got his shot at being a starter—and how long he has stayed in his role as starting quarterback. Think about what happens to other second-string quarterbacks or even young starters when Tom Brady decides to unretire—again. Is younger talent in your firm riding the bench behind aging superstars who can’t seem to let go to make room for the up and comers?
And what about compensation? Is the compensation for those superstars so far outpacing your firm’s “league minimum” that younger players are deciding on leaving the game for other opportunities because of the beatings they have to take daily knowing there is little or no chance of ever getting a starting position and the compensation that comes with it (making partner or otherwise advancing in the firm)? Near the end of tax season 2022 social media was filled with stories of partners leaving for vacation while expecting associates to remain chained to their desks doing a “two-minute drill” of multiple 60-to-80-hour weeks grinding out tax returns and filing extensions with the hope that they might make partner someday.
Logan Graf, a CPA in Austin, Texas, released a YouTube video after his first year as a solo practitioner that compared his salary at a CPA firm to what he made his first year both before and after expenses. It got even better for him the following year. His results may be atypical but they are also shocking. Shocking because entry level CPAs are routinely making less than $50,000 per year for a job that essentially requires a master’s degree to get hired.
To earn the CPA credential requires a bachelor’s in accounting and another 150 hours of post-secondary education in addition to taking a four-part test and, in some states, an apprenticeship in a firm. In other words, to be an “entry level” CPA requires a master’s degree and one to three years job experience for which you will be compensated roughly the same as a fast-food restaurant manager. And make no mistake, fast-food restaurant managers earn their money. It’s not an easy job. But getting that job doesn’t usually require the time and expense of obtaining a master’s degree.
Lori Hauck, CPA-owner of Run Your Wealth in Phoenix, Arizona, teaches tax and accounting to university students. She notes that her students are mostly entrepreneurship and marketing majors because they find the CPA credential’s required credit hours “daunting.” Many “accounting adjacent” majors lead to jobs that offer a lot more money for a lot less work (or much better work-life balance). Indeed, many experienced fast-food managers with an MBA can make more money more quickly than young CPAs who have secured jobs at mid- to large-sized accounting firms. It’s no wonder that talented practitioners are deciding to either start their own firms or to put their skills to work outside of the tax and accounting industry.
The lack of a strong bench is also evident in the large national organizations that represent the tax and accounting industry. This week, as these organizations began setting the speaking schedules for their summer conferences, I started hearing stories that experienced tax instructors who are considered experts in their fields (digital asset taxation, cyber security for tax professionals, real estate taxation) were being asked to work for no cash compensation, just a conference registration and some reimbursement for travel costs.
When cash compensation is offered it starts around $300 per “contact hour,” which sounds great until you do the math. A two-hour class typically requires a minimum of five hours’ worth of work (two in the classroom and three reviewing and updating material and making speaking notes). That works out to $120 per hour which goes down quickly when conference organizers demand unique material (an instructor can’t teach the same class they taught somewhere else) without a commensurate pay increase.
Tom Gorczynski, a nationally known tax speaker has been pushing back on offers he considers low for his experience level and ability to draw attendance. When he questioned travel stipends that in many cases would not cover the cost of airfare, let alone ground travel to and from a conference, he was told that “someone will do it” for the stated amount of the stipend. Combine low travel stipends with little or no cash compensation and you end up with talented instructors being forced to pay out of pocket to teach with the hope of getting additional teaching work that might actually pay their bills. It sounds like the plot for a bad reality TV show—The Grapes of Wrath: White Collar Edition. Many talented new tax instructors are opting out of teaching because the return on investment isn’t there (much as it isn’t there for new CPAs). The money is going to support the careers of aging superstars while high-quality bench talent is being replaced with less expensive and often less capable players (instructors).
What does any of this have to do with taxpayers? Ask a Rams fan. Last year the Rams bought enough talent to win the Super Bowl but made a dismal showing this year when injury prone starters and a lack of depth on their bench meant that they didn’t even make it to the playoffs (their record was 5-12). They also paid for their talent by giving up future draft picks that may prevent them from getting good bench depth for a long time.
Imagine that instead of being a Rams fan, you are the owner of a new business who made the decision in 2022 to invest in hiring a top tax and accounting firm in your area to ensure tax compliance and to provide tax planning and business advice. In 2023 the partners and skilled staff who were either providing your services or reviewing the work of less experienced staffers have either retired, moved on to other opportunities, or are clearly not playing at the same level they used to. And imagine that instead of a strong bench the firm’s staff now comprises only less expensive and less talented players or talented but inexperienced players the firm hasn’t bothered to prepare for a starting role.
Is your tax and accounting team still going to be playing at the same level? What if your business is struggling (getting behind in the game)? Do the players on your tax and accounting team have the right combination of talent, skill, and experience to help you mount a comeback? Will your business continue to be a playoff contender or will inexperienced players combined with poor coaching (those replacement instructors who are teaching your team the skills needed to play the game) result in suboptimal performance for one (or more) years to come?
No matter the organization, ignoring the bench means performance is going to suffer when the superstars are gone. Truly successful businesses think long term and never underestimate the value of a strong bench.