2023 state of the tax professionals report: Talent

Strategic priorities for tax professionals

In 2023, as businesses are trying to reclaim some semblance of normal operations after several years of pandemic-related uncertainty, accounting firms are also rethinking their priorities in order to meet customer demand better and position themselves for future prosperity.

While overall goals for tax firm owners and leaders remained consistent in the latest “2023 state of the tax professionals report,” efficiency reasserted its primacy as a top strategic priority, client service moved up in importance, and the search for quality talent — last year’s top priority — slipped to fourth place, behind growth.

Priorities are aggregated by the number of mentions from surveys of more than 500 tax leaders worldwide and grouped by theme. Going into 2023, the conversation in accounting is a bit different than it was in 2022:

Main priorities, 2022 vs. 2023

When evaluating these survey results, you should note 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. As a practical matter, all of these priorities are interrelated. For example, the statistical difference between the top three priorities is only a few percentage points. 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 a top priority at large firms.

Indeed, firm size is an essential factor in these findings as well. At large firms — those with 30 or more people — recruiting, developing, and retaining high-caliber talent remains the highest priority. In contrast, midsize firms (between four and 29 people) focus more on efficiency and client service. Talent isn’t as much of an issue at small firms (one to three people), where there is more focus on client service and growth.

Priority 4: Talent

As the pandemic began to wane in some parts of the world and many businesses sought to get back to some semblance of normal, tax leaders were so concerned about recruiting and developing qualified talent to meet this demand that they cited it as their top strategic priority in 2022. What a difference a year makes.

In 2023, efficiency and client service reasserted themselves as the industry’s top overall priorities, and concerns about talent fell nine percentage points to show that just 21% of respondents in this year’s survey felt talent was a top concern, bumping that category back down to the fourth overall priority, where it was, interestingly, before the pandemic struck.

Talent priorities

This statistic doesn’t mean, of course, that talent no longer matters. What the reprioritization of talent reflects is a re-alignment of priorities at midsize and small firms as they focus more on retaining and developing existing talent. Indeed, searching for qualified talent remains a top priority at large firms, particularly when filling senior and mid-level tax professional roles.

Accounting’s labor shortage

Though talk of the “Great Resignation” has subsided — if it ever really lived up to its hype at all — the labor shortage in accounting continues to be a real thorn in the side of the industry. According to the Wall Street Journal, more than 300,000 accountants and auditors have left their jobs in the past two years, many lured by higher-paying jobs in the finance and technology sectors. Many college students — even accounting majors — are foregoing traditional career paths through tax and accounting firms and instead opting for higher starting salaries in banking, tech, and consulting. This trend continues to deplete the talent pipeline for the industry.

This year’s survey results confirm that recruiting, training, and retaining qualified talent will remain a key challenge for many firms in 2023. When asked about their ability to recruit new employees with the skills and experience necessary to thrive at their firm, 67% of tax firm leaders said the task would continue to be either “highly challenging” or “somewhat challenging.” Almost two-thirds (65%) of respondents said the same about the training and development of existing employees, and 47% said they anticipate that retaining existing employees will present some difficulties in 2023.

Who’s hiring?

Job hunters should be aware that larger tax and accounting firms will be in hiring mode for a wide range of positions in 2023. Almost 90% of large firms surveyed said they would hire junior, mid-level, and senior tax professionals this year. Data scientists and financial analysts won’t be so lucky, as only 24% of large firms said they would be hiring for these positions, and almost no midsize or small firms said they have plans to hire for those roles. Roughly half of the midsize firms also say they will be hiring for junior and mid-level positions, and fewer (38%) said they would hire senior tax professionals.

Larger firms plan to hire a range of tax professionals

When asked which roles will be the most challenging to fill, about two-thirds of firm leaders said they anticipate difficulties in hiring for senior and mid-level positions.

The search for experienced tax professionals is especially acute at large firms, where 74% said they anticipate challenges in hiring for higher-level positions. Small and midsize firms share similar concerns but are more likely to struggle to find promising junior talent, mainly because the recruitment network for larger firms is more extensive and well established, leaving small and midsize firms with a depleted pipeline of younger talent.

Hiring difficulty by firm size

Turning to tech

If firms cannot hire the talent they need, they may pursue alternative strategies to address their talent challenges. Increasing automation is the option most often mentioned, with 41% of firm leaders saying they might invest more in automation technology. More than half (56%) of large firms say they may lean on technology to fill certain gaps, while slightly fewer midsize and small firms (40% and 34%, respectively) say they would consider adding more technology to their firm’s professional toolkit if they can’t find the right people.

Challenges will be addressed through more automation, outsourcing, and freelance employees

To this end, outsourcing is the second most often mentioned strategy, followed by the recruitment of freelance contract workers. Indeed, the willingness of firms to pursue these alternative strategies is yet another indication that the overall hiring pool is conspicuously shallow.

Training for 2023

In the face of a continuing labor shortage within the accounting industry, developing and retaining talent has become extremely important. Not surprisingly, a majority of firms are offering training programs of one sort or another.

According to our survey, teaching the latest tax rules and regulations changes will be a major focus area for training in 2023. In fact, two-thirds (66%) of firm leaders said they will offer such training to everyone in their firm. The use of tax technology is the next most-popular topic, with a little more than half (52%) offering training of this type to all employees. Other popular training topics are technical tax training and the use of non-tax-specific technologies.

Interestingly, 42% of firms also plan to offer communication skills training — another indication that advisory services and face time with clients are becoming an even more important part of a tax professional’s job description.

Addressing talent-related issues

Because accounting firms of all sizes are having difficulties finding and keeping quality talent, many are asking: what can be done about it? Tax leaders and employees have their opinions, but they have somewhat different perspectives about what is working and what isn’t. For example, firm owners clearly like working for themselves — and the flexibility that comes with it — and interacting with clients. However, they would like to grow their client base and improve their firm’s efficiency by investing in technology.

Other leaders are satisfied with the degree of flexibility their firms provide and value both firm culture and their people. But, aware of the talent competition, they also indicated that compensation was an area of improvement worth exploring, as well as their firm’s investment in automation and other technologies. Leaders at larger firms also felt that their level of collaboration could improve, likely because of perceptions that increasingly popular remote work does not foster the same cultural bond as in-office participation.

Those not in leadership positions have slightly different priorities, however: most like the flexibility their jobs allow and the degree of fairness and respect they receive. They also value the people with whom they work and the support they receive from colleagues. While they agree that compensation and remuneration could be improved, work-life balance is a factor that also strongly drives their overall satisfaction — much more so than for owners and leaders.

This disparity is worth noting because, according to the Wall Street Journal, a grueling work schedule, especially during tax season, is one of the top reasons many college graduates give for shying away from the accounting profession. Newly minted college grads simply don’t want to put in the hours of arduous, repetitive work that previous generations of accountants had to — and because today’s graduates can find higher-paying jobs elsewhere, they don’t have to. We also asked survey respondents to list their top tips for a successful recruitment strategy. Not surprisingly, among the top reasons listed were a good-fit work culture, competitive compensation, and job flexibility.

Respondents’ top 10 tips for successful recruitment strategy

1. Assess whether candidates are a good fit for your firm on both a professional and personal level
2. Ensure the salary offered is genuinely competitive
3. Offer flexible working arrangements — hours, hybrid, variety of tasks, etc.
4. Highlight the firm’s work environment and culture
5. Have the patience to find top-quality candidates; don’t rush to fill seats
6. Offer attractive benefits and incentives
7. Set clear expectations with a transparent interview process
8. Offer learning and training opportunities
9. Make use of recruiting agencies
10. Advertise across multiple and diverse recruiting channels — in-person, online, social media, etc.

When tax leaders were asked which retention strategies they intended to use to keep their quality talent, their top two responses were increasing salaries and incentives, and providing more opportunities for personal and professional development.

Key takeaway: Finding, developing, and retaining quality talent will continue to be challenging in 2023, especially for large tax and accounting firms. However, better technology, targeted training, and respect from leadership can go a long way toward addressing skills gaps and increasing employee satisfaction.

Conclusion

While concerns about talent were dominant in last year’s survey, those have now given way to an increasing desire for greater efficiency, along with a renewed commitment to expanding and delivering client services.

Heading into 2023, tax and accounting firm leaders reported that their top overall priority is now driving operational efficiency, which may reflect a need to contain costs ahead of a potential recession, as well as a desire to squeeze as much productivity as possible out of existing processes, systems, and personnel.

Yet, despite the importance of efficiency as a stated strategic goal, more than half of all firms report that they do not have a designated person responsible for driving efficiency. This lack is unfortunate because firms without leadership and a detailed plan will likely see their desire for greater efficiency remain little more than a wish.

Similarly, the expansion of client services gained some momentum in 2023, primarily in response to ongoing client demand for more advisory services, particularly in the areas of tax strategy, financial planning, and general business guidance. Small and midsize accounting firms are also interested in improving the client experience by providing more responsive, personalized service. Indeed, if there is a trend to watch in the coming year, it’s the extent to which firms are willing to change how they do business in response to client demands for more advisory services. More flexible pricing models and additional business guidance above and beyond basic tax preparation.

Growth is another strong general goal for firms in 2023, but strategies for growth differ somewhat depending on a firm’s size. The growth strategy for small and midsize firms is typically focused on trying to expand their client base. In contrast, large firms are more likely to focus on acquiring new clients, getting higher-value work from existing clients, expanding client services, and leveraging technological efficiencies.

At the same time, more automation and improved tax software are also changing how work is apportioned and prioritized at many firms, opening up opportunities for tax professionals who want to build a broader portfolio of skills.

As the industry moves through 2023, adaptation, evolution, and flexibility are likely to become the watchwords — for both accounting firms and individual tax professionals.