WebCPA has posted answers to the three questions they posed to the Accounting Today’s recently released Top 100 Most Influential People in the Profession list. They will post the answers each week throughout November.
What will the accounting profession look like in five years: What will be its major concerns? Its challenges? The hot new service areas? What shape will the firm landscape have taken?
Anyone who has seen the VeraSage Institute’s slide show, set to The Who’s Revolution song, knows how perilous it is to predict the future. In fact, an excellent book has been writes, The Experts Speak, which is a collection of quotes from prominent people who predicted the future with laughable inaccuracy. You can read a review here.
Some of the responses to the above question reminded me of this book, and I thought it would be humorous to display some of the most outlandish quotes from these “Influential People” so we can record them for posterity, and have a good chuckle years later.
Full disclosure: I’m on this list, and I’m quoted as well. But I know my crystal ball is broken, and I’ll let our readers decide regarding the validity of all the following predictions, including my own.
Jay Nisberg, Nisberg & Associates: Jay is a prominent consultant to the profession whom I’ve crossed swords with many times. This was probably the most amusing prediction:
“Sole practitioners may greatly decline, if not become extinct, as it gets nearly impossible for them to recruit staff, or afford health or liability insurance.”
This is another comical one:
“404 work will be gone. The SEC will assign public section audits to CPA firms capable of doing the work and will require rotation every three to five years depending on size. Additionally, the SEC will determine the fees to be charged by each CPA firm.”
I wonder what his evidence is for this trend? I certainly don’t see it. He also says:
“Structure of firms will change over time to more of a corporate entity.”
I hope he’s right. We at VeraSage think the partnership model is a disaster, and needs to be discarded as much as the billable hour and the timesheet. Unfortunately, I don’t see the evidence for this prediction.
Stuart Kessler, Managing Director, RSM McGladrey Business Services, wins my award for the most ludicrous prediction:
“The major challenge that all firms are facing today—recruitment—will be solved within the next five years by the current resurgence of accounting students. The ongoing challenge after that will be retention. As this new group of recruits meets their five-year mark in the public accounting profession, they will question more than ever what their future is. This group’s desires are radically different than those of us that came before them. One of the real challenges of the next five years is how to live with this new generation and how to make them productive.”
I’m not sure how he thinks recruiting will be solved because of the uptick in accounting majors. That doesn’t necessarily translate into graduates in accounting, CPA exam passage (which is down), or selecting public accounting as a career. He’s right about retention, though, and how the new generation is radically different than those that came before them. How so? They are knowledge workers! And they know it, and they don’t want to be treated like union employees.
L. Gary Boomer, CEO, Boomer Consulting returns with his Performance³ model, which completely ignores intellectual capital and focuses on efficiency, rather than effectiveness. I’ve posted on the defects of this model previously.
But he also makes this comment, which I found quite baffling:
“Innovation requires a perceived increase in value with a decrease in the cost of production.”
Really? So when BMW or Lexus come out with a new car, the cost of production has to decline? This confuses costs with value, a common mistake of the consultants to the profession.
Barry Mealancon, President and CEO, AICPA, pointed out:
“The profession is aging. Over the next 15 years, around three-quarters of the AICPA’s membership will reach retirement age…In 1998, we developed the CPA Vision, which identified five key service areas: Assurance, technology, management consulting and performance management, financial planning, and international services. In 2005, the AICPA’s Strategic Planning Committee and senior management determined these services areas still offer enormous potential for the profession.”
This directly contradicts Kessler’s prediction above. I also agree with Barry about the prescience of the AICPA Vision Project.
Jimmy Williamson, Chair, AICPA discussed the 360 Degrees of Financial Literacy campaign. VeraSage Founder Dan Morris was also involved with the launch of this program, but is much less sanguine than Jimmy about its effectiveness. Jimmy said this:
“A personal goal of mine as chair is to encourage more CPAs to join the 360 Degrees of Financial Literacy campaign. It’s no secret that America is in a crisis. Americans have a negative savings rate. We’ve seen a record number of bankruptcies. This is where the CPA profession can really make a difference.”
Sorry, Jimmy, but you’re wrong about this. America is not in crisis because of a negative savings rate. That all depends on how that number is measured. College students have negative savings, so what? They are investing in their future. Also, a record number of bankruptcies is a sign of dynamism and economic vibrancy, not crisis. Countries with lower rates of bankruptcies have lower growth and innovation. To think the CPA profession can do anything regarding financial literacy on a macroeconomic basis is to believe our own press.
Doug Meyer, President, Small Business Division, Sage Software made this curious statement:
“The implications for CPAs are that they will be able to attract clients across a much broader geographic territory than has been historically the case and that client acquisition will less often be based on a face-to-face relationship. …[This] also means that competition is likely to increase, as firms that specialize in the online world will expand their reach, often with aggressive prices due to their ability to achieve economies of scale.”
What economies of scale? There are no economies of scale in a Professional Knowledge Firm. There are economies of scope, and the ability to leverage intellectual capital. Economies of scale is Industrial Era thinking. One would think, of all companies, Sage Software would understand this.
Joseph Wells, Founder and Chairman, Association of Certified Fraud Examiners made this statement, the first part being correct, the second part is simply absurd:
“First, if we believe that Sarbanes-Oxley is the magic bullet to sound the death knell to all future occurrences, we may as well believe in the tooth fairy, too. The root cause of most financial statement frauds is the pressure to show short-term earnings in the market and the near-obscene compensation packages awarded to top executives who can boost the stock price. Unless and until that changes, we should continue to see large financial statement frauds.”
As if no financial statement frauds existed before “near-obscene” compensation packages? Just look at the history of audit failures: Continental Vending, Ultramares, Penn Central, to name just a few. These occurred before stock options, and enormous compensation packages. Enron is simply the continuation of an enormous audit failure once a dcade. Greed has been around a long time, and Wells is ignoring the impact of the tax law limiting deductions to $1 million, which gave rise to companies relying more on stock options. And unless he’s spending his own money, what gives him the right to say someone else’s compensation is “obscene.” That’s socialism, not capitalism.
Carl George, CEO of Clifton Gunderson said this:
“In five years, the profession will continue to be a leader in advising the public (including Congress) on what is correct in regulating corporate America. The SOX legislation will have gone through revisions that more truly align the intent of the legislation. Our profession will contribute significantly to that alignment by Congress.”
Is he kidding? SOX was rammed down the profession’s throat precisely because the profession lacked the political capital to stop it. To think the profession, which has lost its self-regulation, is going to be a major player in future governmental regulation is delusional.
He also stated:
“Our significant challenge in five years will be to develop enough ‘new age’ leaders, arguably the first generation of leaders raised with technology as a second language. That will present new challenges, but will offer innovative leaders that will elevate the status of our profession, to the point that all service professions will model their future organizations after ours.”
Until the profession gets over its love affair with the billable hour and timesheets, it will not evolve into the Professional Knowledge Firm of the Future, let alone be a model for other organizations. If you were knowledge worker, would you rather model yourself on KPMG or Pixar?
John M. Sharbaugh, CEO, Texas Society of CPAs repeats the conventional wisdom that “people are our greatest resource,” as if knowledge workers are plucked out of the ground like oil, but at least he’s recognizing that the increase in accounting majors doesn’t replace the drain of people leaving and retiring at the other end of the upside down funnel:
“The profession will continue to be challenged in identifying and recruiting its most valuable resource—people—although conditions will improve somewhat due to increased enrollments in college accounting programs. While the number of accounting grads will increase, they will be offset by the retirement of CPAs from the Baby Boomer generation.”
And finally, your humble servant wrote:
“As Samuel Goldwyn once remarked, ‘Only a fool would make predictions—especially about the future.'”
“One major concern that will continue is attraction and retention of human capital to the profession. Even with the increase in accounting enrollment, there will continue to be shortages in this area. Also, SOX aggravates the problem, since SOX work is dull, repetitive and rote—like a surgeon piercing ears. It’s a gross misallocation of intellectual capital, and firms need to delegate this work to paraprofessionals, not assign their young team members to this equivalent of digging ditches busy-work.
“The billable hour will continue to come under strain, as more enlightened firms begin to charge for the value they create, rather than the time that they spend. Moreover, the young talent entering the profession understands that the value they create is not related to the time that they spend, and will demand to monetize a portion of the value they create, as do other knowledge workers, rather than being paid as if they were union employees.”
I would love to hear your thoughts on these so-called “experts.” In total, I think they give witch doctors a good name. Groucho Marx reportedly said he wouldn’t join a club that would have him as a member, a sentiment I could relate to as I read these prognostications.