What’s keeping firm leaders up at night?

Sometimes a problem is so big that you can only really grapple with it by breaking it down into smaller pieces, and that’s certainly the case when it comes to the single biggest issue facing the accounting profession: staffing.

In a recent survey of leading firms conducted by Accounting Today, they tended to break staffing down to its subchallenges — recruiting, retention, rising compensation costs, and the need to develop staff over the long term, among others — so that the biggest challenge facing the profession begins to seem like the biggest five or six challenges.

The staffing hydra

It’s worth remembering that the many-headed issue that is staffing in accounting springs from a common source.

“The most critical issues facing firms of our size, and really firms of all sizes, center around recruiting and retention of staff,” said Jill Shaw, managing partner of Arizona-based Heinfeld, Meech & Co. “The pipeline for accounting students has been decreasing in size for many years, therefore there is greater competition within the accounting industry.”

That inability to draw new people to study accounting, graduate with a degree, get their CPA license, and stick with a public accounting career is bad enough on its own — but it is breeding a whole host of other woes.

“Inflation over the past year as well as increased competition for employee talent has increased our costs quite a bit over the past year,” said Brian Fischer, operations manager at San Francisco-based Realize CPA. “In conjunction with this, we have had to implement a larger than normal billing rate increase to try to share some of these costs with our clients. … Keeping a balance between paying our employees a competitive salary in the current market environment, maintaining an acceptable level of profitability, as well as maintaining our clients’ expectations will be key during the next year.”

“Another component of the war for talent is the compensation battle,” explained Brian Davis, managing partner and CEO of Maryland-based Clearview Group. “Our observation is that in response to the intensified war for talent, the international firms are becoming increasingly willing to lure talent with unsustainable compensation packages. We believe that trying to compete based solely on compensation would be a catastrophic mistake for a firm of our size. We feel strongly that team members are loyal to a culture, not a salary.”

Culture is also a major concern for many firms. “We must be thoughtful and strategic to balance between remote, hybrid and in-office employees; and still maintain our company culture when we are not all in the same place,” said Heather Perry, MP of Indiana-based Dauby O’Connor & Zaleski.

“We’re laser-focused on how relationships and culture can be cultivated and maintained and how we help people coming into the firm feel welcome, that they’re doing work that matters, that we care for them as a person as well as a professional, and that they’re part of something larger than themselves,” added Jay Rammes, managing director of Cincinnati’s Barnes Dennig. “It’s a big challenge.”

Even as firms struggle to recruit and retain staff for the long term, they still have to face day-to-day capacity limitations. “With a firm that grew by $18 million in 2022, finding the right people to do the work and/or designing teams with on-site, remote and international members, will continue to be a top-of-mind issue,” said Donna Erbs, partner + strategic growth at Anders CPAs in St. Louis.

Worse yet, the staff that firms already have are feeling more and more stressed. “Firms are busier than ever. There is more work, and clients are in greater need, but it is becoming harder to hire and retain staff,” said Jeffrey Weiner, chairman and CEO of New York-based Marcum. “In this environment, benefits and incentives are more important than ever, but it is equally important that we do what we can to make sure our teams aren’t burning out under the pressure.”

Two final challenges remain in the staffing arena, both with major long-term implications.

“Developing the next generation of leaders through exceptional learning opportunities and a variety of work experiences” is the first, according to Jacqueline Wiggins, principal and chief strategy officer at Baker Tilly US.

Of course, it’s difficult to build bench strength and form a set of rising partners with the new skills firms need if you can’t hire top talent to begin with, but it’s critically important given the mass exodus of veteran baby boomers.

But wait — there’s more!

Firm leaders are also concerned about two particular aspects of technology: keeping up with it, and paying for it. “Keeping pace with technology is crucial,” said Suzanne Forbes, MP of Florida’s James Moore & Co. “New products and services are developed almost daily.”

“Technology is changing everything about our business at a rapid pace,” said Greg Crochet, a director at Houston-based EEPB. “Artificial intelligence, blockchain, data analytics — how do these items change not only what we do and how we do it but what services we will provide, and what new skills are needed to continue to assist our clients in being successful?”

As digital transformation sweeps across the profession, the associated costs will only go up, warned James Cordova, the president, MP and CEO of California’s Windes: “Technology spend will continue to increase as a percent of revenue.”

“With constant technology innovation, it can be challenging for firms our size to determine which solutions to invest in,” said Dave Hinnenkamp, CEO of Minnesota-based BerganKDV. “Having a solid strategy in place that outlines the innovations and digital transformation our firm is hoping to achieve is crucial.”

Those investments are often going to support new practice areas — a major consideration in the next big area of concern for firms: managing their clients and their needs.

“It’s important that firms of our size are able to grow their service offerings to meet businesses’ ever-evolving needs,” said Katie Abraham, director of strategic project development at Frazier & Deeter in Atlanta. “CPA firms will succeed in the current marketplace by having a proven ability to expand services beyond a traditional accounting offering and partner strategically with clients to grow their businesses.”

Knowing who — and who not — to work with is a critical question for many firms. “Firms such as ours receive numerous calls from prospects to find out if we are taking on new work and trying to figure out which ones to take on versus which ones to pass up on,” said Rusty Mosca, president of New Hampshire-based Nathan Wechsler & Co. “The opportunity cost of making these decisions can be quite tricky because the firm does not want to pass on work, but the lack of staffing makes it difficult to add this additional work.”

This shades into another preoccupation of many leading firms: the move to higher-value-added advisory services. “Our goal continues to be that we act more like client advisors than purely compliance-driven accountants who monitor tax deadlines,” explained Brian Fischer, operations manager at San Francisco-based Realize CPA.

Barnes Dennig’s Rammes agreed: “The transition from compliance to consulting — in our view, this is the most critical issue facing firms of our size. … Two major factors are impacting us: First, as our firm grows, so do our clients. They’re larger and more complex than ever and need consulting and advice to help them grow — a critical need which is outside of our traditional core services. Rapidly advancing technology makes compliance more and more of a commodity, so providing value-added services to clients is critical for us as well as for them.”

There are a number of themes that connect the top concerns of the country’s leading firms, but there’s only one that truly unites all of them: They all require that accountants make significant changes in almost everything they do.

“The ability to embrace new methods — automation, business intelligence, people and project management — is critical to future success,” said Blain Heckaman, CEO of Miami-based Kaufman Rossin.

Getting everyone ready for all the new models, methods, workflows, approaches and business structures coming their way is a major challenge facing the profession — and may well be key to successfully face all the other challenges.

“Helping everyone at the firm adapt during this period of rapid change within the industry, our firm and the world overall” is a key concern, noted Steve Thompson and Chris McElroy, co-CEOs of Pittsburgh-based Schneider Downs & Co. “The ability to extract opportunity from the challenge of change will define success for firms of the future.”