In this column I generally offer observations and suggest lessons to be learned from a particular industry or aspect of business. This month I’ve decided to turn my attention to an area close to all our hearts: the accounting profession. I have been a qualified accountant for 35 years, during which time I have seen some profound changes to the profession. But accountants haven’t always been quick to change their practices to adapt to the shifting business environment. So what must accountants do to remain competitive?
I am going to use the traditional industry analysis tool called ‘Pest’, which breaks factors down between political, economic, social and technological. This should encompass both past and future changes. The Pest breakdown for the accounting profession is as follows:
- Political: changes in accounting standards and regulation of the profession have put increasing pressure on accountants.
- Economic: riding out recessions has become harder and more precarious over recent, successive economic cycles.
- Social: with a growing number of knowledge-based careers on offer, competition for the best brains has increased, and the accounting profession is struggling to appear glamorous in comparison.
- Technological: with the advances in data analytics, there is less need for a huge volume of junior auditors, for example, and those who are needed are under pressure to show added value.
So what are the implications of these changes? For a start, this means there are likely to be increasing difficulties in securing the supply of top talent to resource the smaller number of commercially and strategically sharper accountants needed in the future.
At this premium level, we are likely to see more accountants obtaining MBAs, or at least getting part-way through an MBA. At the more ‘volume’ end of the spectrum, needs may be met by a combination of better IT and part-qualified accountants or accounting technicians, particularly in industry. Either way, we can expect some significant shifts in the balance of skills within the supply base.
If we look through the lens of three of Porter’s ‘five forces’ – buyer power, rivalry and substitutes – we can observe the following:
- Buyer power: we are likely to see the bargaining power of the buyers increasing; those that hire accountants are going to be a lot more discerning.
- Rivalry: with advances in IT – as it helps with basic reporting and planning (the ‘bread and butter’) and supports outsourcing, part-time and homeworking, and changes in employment contracts – the call is for more flexibility. This can be painful for accountants whose earlier careers were supported by secure contracts, full-time working and annual increments. Rivalry for the very best jobs may well go up.
- Substitutes: we will see more substitutes in the form of accounting – advances in decision-support systems mean that a really good accountant takes less time to cover more ground, potentially enlarging job scope. This adverse shift in the competitive balance will be partly offset by the continued high entry barriers through the exam system, supporting continued premium salaries.
The prognosis for all this is that accountants without speciality skills or particularly high commercial skills will face a more difficult employment environment.
In terms of competitive positioning, we still have the three strategic groups that we had 35 years ago when I qualified. A ‘strategic group’ in this context is a grouping of like-minded players who compete in similar ways. In no particular order, we have chartered management accountants, chartered certified accountants and chartered accountants.
To understand the changing bases of competitive advantage in the accounting profession, we need to look at the changing needs of the buyers of accountants.
A typical CEO of an SME might well use a financial controller in a part-time capacity and rely on an outsourced company to do the basic accounting, but they might look to a finance director to help with cash management, relationships with banks, and for strategic financial advice in general. This would require someone with an intimate understanding of the business and an energetic personality, and they would need to be able to act as a counterfoil to the CEO’s thinking – in short, an agile, commercially awake accountant whose technical skills are taken as read, but with sharp persuasive skills. Does that fit with someone whose first three to five years of training was in audit? Maybe not. This may be just one example, but it is equally applicable to accountants in much bigger corporates – with some additional political skills thrown in for good measure.
This leads us to the distinctive competencies that are increasingly critical for success for accountants in the future. These include:
- strategic skills
- commercial and negotiating skills
- corporate finance skills
- leadership skills
- cross-functional awareness and management skills (not just a ‘one-trick pony’)
- project management skills.
Unfortunately, with the mushrooming of reporting requirements, these distinctive competencies tend to fall down the pecking order. But with the changes to the profession ahead, we accountants need to move beyond being perceived as number-crunchers. No longer is it true to say ‘the role of the accountant is to wait until the battle is over and then to count the dead’.
Tony Grundy is an independent consultant and trainer, and lectures at Henley Business School
This article was first published in the July/August 2015 international edition of Accounting and Business magazine