Tax executives need to develop tax-technology playbooks and hire more tax technologists to keep pace with the board and C-suite’s changing expectations. Today, it’s imperative for tax leaders to consider new talent management approaches in response to what is becoming a long-term tax — and tax-technologist — talent crunch.
Competition for technology-proficient professionals across industries and organizational functions has never been more intense. The constrained supply of highly skilled talent has stubbornly persisted in the face of aggressive interest rate hikes and declining macroeconomic conditions, and it appears more systemic than temporary.
Fewer undergraduates are becoming CPAs, a profession that represents a primary source of future tax talent. In the U.S., the gap between open positions and available job candidates remains wide; it is even wider for jobs requiring technical proficiency (i.e., tax management) and technological expertise (i.e., tax technologists).
This talent chasm requires tax leaders to become more thoughtful and innovative in the strategies and mechanisms they deploy to source, develop and keep tax talent.
Creating and continually updating a tax technology playbook remains a top tax leadership priority. Now, tax leaders should also review and update their talent management playbooks.
A practical way to do so involves three steps:
1. Monitoring the factors making tax talent management more difficult;
2. Recognizing the new and innovative mechanisms leading human resources functions are deploying to recruit, hire and retain employees; and,
3. Taking action to strengthen the tax group’s ability to recruit and retain top tax talent.
Troubling talent trends
Rising tax compliance complexity and other factors are ratcheting up demand for strategically minded, technologically proficient tax professionals, especially those with substantial ERP experience, advanced tax automation familiarity and the ability to perform simple queries and basic coding. Other factors are making it difficult for tax leaders to hire and keep tax talent, as the following trends indicate:
1. Hiring and retaining tax professionals qualifies as a long-term problem. Since the pandemic and the so-called Great Resignation, finding and keeping tax talent has grown more difficult. That explains why a Big Four firm invested nearly $160 million in salary increases just last year. It is also difficult to hire and retain finance, human resources, treasury and operational professionals with data analysis and technology skills. A staggering 97% of North America-based executives express concern about a potential shortage of qualified workers over the next 10 years, and 83% of global executives identify retention and turnover as a top concern today, according to Protiviti-Oxford survey research.
For tax leaders, a long-term tax talent crunch heightens the urgency of replacing manual work with automation. It also increases the importance of recruiting and retaining tax professionals, especially those with technology aptitude. And it places newfound value on developing tax professionals to become more technologically skilled.
2. Finance transformation requires tax transformation. As most tax leaders know firsthand, CFOs are transforming their finance functions, often by treating ERP upgrades and cloud migrations as the central driver of these long-term journeys. Leading tax functions tend to be involved early, and throughout these upgrades and cloud migrations. They are ensuring that advanced tax technology — integrated with ERP, procurement and e-commerce systems — mark key components of the project.
More than eight out of 10 companies are currently transforming their tax and finance operating model, according to EY. That’s an eye-opening figure, and one that supports EY’s point that tax transformation “is not necessarily a ‘need’ or ‘want’ anymore, but a ‘must.'”
Although each finance and tax transformation is designed in accordance with unique organizational needs and characteristics, EY’s research highlights two widespread similarities across most transformation efforts. First, tax groups are becoming more strategic: The survey indicates that 95% of participating organizations plan to reallocate some of their tax and finance budget away from “routine” processes (those primarily focused on tax compliance) to “strategic” activities (including tax policy, planning and controversy and scenario planning) during the next 18 months. Successfully executing those strategic activities depends on whether or not tax functions have access to the talent needed to perform the work.
Second, advanced tax automation is pivotal: Seven in 10 survey respondents report that their companies plan to invest an average of $2 million or more on advanced tax technology during the next three years. Maximizing the return on these tax automation investments depends on getting the right talent in place — tax professionals with the skills and experience to optimize the company’s tax automation and the way it works with other finance and accounting systems.
3. Employee expectations also are transforming. A mix of workforce trends requires leaders throughout the business to adjust their approaches if they are to successfully hire and retain employees while keeping them engaged and productive.
Generational differences among different employee demographics have required attention for decades, but these varying, and at times oppositional, preferences and expectations have grown more acute in recent years. For example, significantly larger portions of millennials prefer to work remotely compared to the portion of baby boomers who want to do so. More recent organizational attention to environmental, social and governance matters and diversity, equity and inclusion issues play increasingly pivotal roles in recruiting and retention efforts.
The global pandemic has rewired how many employees think about remote and hybrid working models. The “past few years have shown [employees] exactly what they don’t want for their work lives, while illuminating what they find most important — and that’s not just a flexible work schedule,” according to Deloitte research on the finance workforce. “Heightened employee expectations of trust, well-being, and authenticity at their job and in their work are continuing to drive the Great Resignation, giving workers new priorities and reasons to take a job — and reasons to keep looking.”
Tax leaders seeking to recruit, retain and get the most out of their staff need to be aware of these expectations, as well as how they vary among different segments of the workforce.
4. External volatility tends to intensify tax compliance complexity. Inflation, rising interest rates, global pandemics, wars, energy crises, trade conflicts, supply chain disruptions and other forms of external volatility eventually trigger tax policy adjustments from governments and tax authorities. Tax rate changes, temporary exemptions and other policy adjustments require changes to tax compliance processes and supporting automation. Additionally, many of the strategic moves senior leadership teams make in response to external disruptions — moving operations from one country to another or restructuring capital, for example — can have major tax compliance repercussions. As a result, tax leaders need to have the right talent and skills in place to manage tax compliance complexity as it materializes.
Tax talent management efficacy also has impacts on the value of tax technology and tax transformation progress. Tax transformation and the advanced tax automation that drives it may be suboptimal unless tax functions have the right tax technology skills in place.
Five steps to better tax talent management
Given the shortage of technologically skilled talent, organizations are deploying new and innovative recruiting and retention methods. McKinsey research indicates that leading organizations seek to provide employees with more meaningful assignments, new career advancement options and better training and development opportunities. Some companies are streamlining hiring and onboarding processes to fill open positions faster; others are loosening traditional hiring requirements to expand the candidate pool.
Tax leaders should consider making similar adjustments to their own talent management practices. Here are some actions to help them get there:
1. Update your talent management mindset. For decades, “talent management” in many companies effectively translated into hiring during periods of growth and cutting costs and jobs during downturns. That no longer suffices amid a systemic talent shortage and during declining economic conditions when the demand for digital talent remains robust.
A 21st century talent mindset recognizes the importance of organizational culture and purpose as well as ESG. Diversity, equity and inclusion considerations are top of mind, along with leadership development and succession planning activities. As tax leaders seek ways to strengthen their recruiting, retention and leadership development processes during the talent crunch, they should work closely with HR and DEI colleagues to ensure their approaches to talent management are as effective and inclusive as possible.
2. Partner with HR. Tax leaders should add HR leaders to their lists of key collaborators. Many chief human resource officers emerged from the pandemic with heightened credibility due to their success in leading the workforce through a massive shift to remote and hybrid working models and maintaining employee engagement during a strenuous 24 months. HR executives are now leveraging their success to improve the alignment between talent strategy and corporate strategy, conduct more frequent and comprehensive talent and skills inventories, and deploy more innovative recruiting, development and retention strategies. Tax leaders can learn from these cutting-edge approaches, including the use of new talent metrics and the integration of reskilling and retention processes.
3. Consider new sources of tax talent. The ongoing digital talent gap has inspired leading HR functions to rethink how and where they source talent. Tax leaders should be aware of this development so that they can leverage it as needed.
“To expand the sources of labor available to their organizations, more HR leaders are instituting a flexible labor model consisting of a diverse talent pool of full-time employees, contract and temporary workers, expert external consultants, and managed services and outsourcing providers,” according to Protiviti. “Leading organizations now leverage contingent labor to achieve more strategic returns, including the development of new capabilities, rather than relegating contract workers and external experts to discrete projects and largely task-based assignments.”
4. Manage the employee experience. Of the top five reasons employees provided for quitting between April 2021 and April 2022, only one of them involved money or benefits. The most commonly cited reason was a lack of career development and advancement opportunities, followed by adequate compensation, uncaring and uninspiring leaders, and the lack of meaningful work and unsustainable work expectations, respectively. These reasons underscore how important it is to manage the entire employee experience.
“Evidence also suggests that improving workers’ emotional experience on the job can do more for retention than employers might expect,” according to McKinsey surveys of managers and employees that show that employers often misinterpret the causes of attrition. “In particular, employers tend to overrate ‘transactional’ factors such as pay and development and underrate the ‘relational’ elements — a feeling of being valued by managers and the organization, the companionship of trusting teammates, a sense of belonging, a flexible work schedule — that employees say matter most.” Tax leaders should strive to offer a differentiated employee experience.
5. Get the right tax technology and the tech talent in place. Besides the efficiency, accuracy and analytics-related benefits it delivers, advanced tax automation can strengthen recruiting and retention. Sought-after tax professionals are more likely to accept a role in which they spend less time on repetitive, transactional tasks and more time honing their strategic contributions. The opportunity to develop and sharpen skills and expertise related to current business systems and advanced tools also offers recruiting and retention benefits.
Motivational job math
Tax leaders will not be able to let their guards down anytime soon when it comes to other companies attempting to poach their best and brightest. The U.S. Bureau of Labor Statistics’ October jobs report crystallized the current talent management challenge: This past fall there was, on average, only one unemployed worker available to fill every two job vacancies. That math should motivate tax leaders to update their talent management playbooks.
