5 strategies for managing the coming talent crunch

If your firm isn’t short of capacity yet, it probably will be soon. An astounding 10,000 Baby Boomers are retiring each day from the U.S. workforce. In the accounting profession, the Baby Boomer exodus means that a talent shortage is almost certain—because Generation Xers are too scarce to replace the Boomers and while Millennials are plentiful, they are not yet licensed in enough numbers to fill the gap. So, what is your firm planning to do about the coming capacity crunch? The column explores five top strategies to help you better manage your firm’s capacity issues.

1. Raise your fees! This is my No. 1 recommendation, and it’s also the one that meets the most resistance. Starting salaries are projected to increase an average of 3.8% this year and experienced CPA increases are likely to average closer to 5%. If the cost of labor is increasing at 4% to 5%, the cost of your services has to increase at least that much just to (barely) stay even. And while your partners will have many reasons for resisting fee increases for their clients, you still have to find a way to drive an overall average rate/fee increase at your firm of at least your average cost increase. Start first by raising rates/fees for all new clients and for all new engagements for existing clients, too. Then, for recurring engagements, sit down with your existing clients and explain the labor shortage to them—they’re smart and they understand supply/demand. And they aren’t finding great accounting talent easily either. Share your rise in costs and the need to raise fees to offset it with them. Good clients will support you. For those that don’t, see strategy No. 3. It’s that simple.
2. Be super choosy. Define your firm’s ideal target client for each service you offer. Be as specific as you can be, defining the ideal by industry sub-segment, size, need, culture, engagement size, and other criteria, like valuing your services, paying bills on time, and other relationship attributes. Then carefully scrutinize your sales opportunities where your capacity is tightest and don’t pursue those that aren’t ideal. While the temptation and rewards for selling make you want to pursue everything, please don’t. Avoid filling up your schedule, and people, with jobs and clients that are not ideal, so that when the ideal comes around, you’ll have the capacity to serve it.  If needed, establish a mandate that engagements sold to clients outside of a service line “ideal” require a concurring partner sign off, so that another leader must agree with the business reasons for pursing new work that isn’t in your sweet spot.
3. Cull your C and D clients. Identify your clients who do not value your firm’s services, those who don’t pay their bills on time (or at all), those who treat your people poorly, those whose work your people resist doing or whose environment they groan about working in, and those whose realization is really poor but whose fees you think you can’t raise. For those clients who have one or more of these red flags, consider whether this is the year to do yourself an enormous favor by moving them to a competitor. There are ways to nicely “break up” with clients, and explaining that your firm is experiencing capacity issues is one of them. But for those spring busy season clients you know you should no longer serve, you have no time to waste! Open up capacity for your firm, win the respect, admiration, and appreciation of your team members and improve firm profits by culling some of your C and D clients today!
4. Supplement your resources. Look for places where non-CPAs can support your service delivery processes, and supplement the team with others who can lighten the load. Invest in quality administrative talent to aid in scheduling and other important management functions to free up technical talent for client-facing work. Invest in technology to simplify and speed processes. Explore lean and other efficiency efforts, and then follow through with the changes you identify to learn to truly do more with less.
5. Relentlessly recruit. One of my biggest frustrations is firm leaders who say they cannot find good people, but who aren’t putting a continuous, full-court press on the job of doing so. Instead, they are allocating a portion of a person to recruiting (if that), and they are spreading that person thin with many other tasks that distract him or her from the job at hand. Don’t let your firm’s recruiting be event-based—focused on campus recruiting seasons or the emergency openings you need to fill. Instead, elevate recruiting to a strategic business process that has a ton of firm energy, momentum, and talent behind it. I truly believe that the firms who become best at attracting and landing the right on-campus and experienced hires will have the best competitive advantage for years to come.

Don’t let the talent shortage throw your firm off track. Pull your leadership team together and put plans in place to offset rising costs, remove the “wrong” kind of work from your schedule, accelerate the “right” kind of work coming in, and develop a relentless recruiting engine. When you do, you’ll be the kind of firm that smart, strategic people want to work—ending your talent shortage for good!

Jennifer Wilson is a partner and co-founder of ConvergenceCoaching LLC, a leadership and marketing consulting and coaching firm that helps leaders achieve success. Learn more about the company and its services at convergencecoaching.com.