The AICPA would like to thank the Pennsylvania Institute of Certified Public Accountants, authors of the report More Clients, More Talent, More Revenue: The Business Case and Toolkit for Diversity in Accounting, for contributions to this article.
Five years ago, Baker Tilly Virchow Krause LLP bid on the audit and tax work of an association affiliated with West Point. In the middle of the meeting, an audit committee member asked, “What is the diversity of your firm?”
Julius Green, CPA, tax partner and regional tax leader for the Philadelphia tax services group and an African-American, was elated. “It was all I could do not to jump out of my seat,” he recalled. “It was the first time I recalled ever receiving that question directly from a prospective client.”
Thankfully, Green, who is also the president of the Pennsylvania Institute of CPAs and former chair of the PICPA’s Diversity Committee, had the “right” answer for this client. The team slated to do the audit and tax work for the association consisted of one African-American man, two white men, and two women, and Green had just recently been asked to sit on Baker Tilly’s newly formed diversity committee.
The deal was closed.
Most managers agree that diversity is good for business. It can be difficult, however, to prove or quantify its impact on a firm. But evidence is mounting, both anecdotally and by the numbers, that diversity and inclusion is a profitable business strategy. Here are some reasons diversity and inclusion make good business sense for CPA firms:
Having a larger talent pool holds down the cost of finding new talent. Finding qualified candidates is an important issue for CPA firms. But the talent gap is lessened when they welcome candidates of all backgrounds. “The bigger the pool of people you have to draw from, the more likely you will find who you need at the price you want,” said Richard Levychin, CPA, CGMA, who is Caribbean-American and a partner with New York-based KBL LLP, and a past member of the AICPA’s National Commission on Diversity and Inclusion. “For us, diversity equals ROI.”
It’s a recruitment tool for other top candidates. Levychin says that when impressive candidates of all kinds, whites included, realize a firm is diverse, they are eager to get on board. “We not only get people of color who want to work for us,” he said. “We get the white guy with the black wife. We get the white couple who has adopted a child of color. We get the guy whose brother is gay.”
Levychin recalls interviewing a Muslim woman for a job several years ago. She was so impressed with KBL’s commitment to diversity that she referred many of her highly qualified Muslim colleagues to the firm as well. “She said she was happy to recruit all of them for us,” Levychin said. Hiring a diverse workforce may be challenging at first, but it may actually become easier as more diverse employees join the firm. As a result, the cost of finding talent falls.
Access to a wider array of clients leads to more revenue. There is no question that the world is becoming more multicultural. The U.S. Census Bureau predicts that by 2044 minorities will become the majority of the population in the United States. In addition, multiracial Americans are a fast-growing segment of the population, according to a 2015 Pew report.
Therefore it stands to reason that potential clients are becoming more diverse as well. Between 2007 and 2012, the number of minority-owned businesses in the U.S. grew by 38%, according to the Census Bureau. Having diverse employees can help attract these clients. “Whether a CPA firm works with auto mechanics, clothing designers, or medical professionals, clients want to know there are some individuals within the firm who have similar backgrounds—whether that means diverse heritage, education, or community engagement,” said Genevia Gee Fulbright, CPA, CGMA, president and chief operating officer of Fulbright & Fulbright, CPA, PA, in Durham, N.C.
Fulbright, who is also a former AICPA Minority Initiatives Committee Chair, says that clients will be more likely to support a CPA firm if they feel it supports and advances people who share their backgrounds. Indeed, a 2013 Harvard Business Review study of 1,800 professionals found that “a team with a member who shares a client’s ethnicity is 152% likelier than another team to understand that client.”
Diverse hires can have a significant impact on a firm’s bottom line as well. A 2015 McKinsey study found that “companies in the top quartile for racial and ethnic diversity are 35 percent more likely to have financial returns above their respective national industry medians” and that “companies in the top quartile for gender diversity are 15 percent more likely” to outperform their industries.
Diverse teams are more innovative. Jerry Maginnis, who recently retired after serving as KPMG’s Philadelphia office managing partner, remembers forming a diversity council at the firm for minorities, women, and the LGBT community. “I would find it fascinating to sit in on the meetings and hear some of the ideas. I would think, ‘Wow, I never would have thought of that,’ ” he said. “I believe that these different ways of thinking were a function of different backgrounds and experiences.”
Research bears this out. The 2013 Harvard Business Review study on diversity found that companies that have 2-D diversity—meaning a combination of ethnic and sexual diversity and those who have diversity of experience working with different kinds of people—are “45% likelier to report that their firm’s market share grew over the previous year and 70% likelier to report that the firm captured a new market.”
It is findings such as these that convince Levychin that CQ—or Cultural Quotient—will soon be used throughout the industry as a measurement for hiring people, promoting people, and hiring firms to do business with. “The Millennial (generation) mindset is more socially conscious,” he said. “It is not enough to be diverse as a person; you need to know a little about other cultures, too.”
Anthony Newkirk, senior manager for diversity and inclusion at the AICPA, says that it’s becoming increasingly important for CPAs to develop their cultural intelligence. As the profession grows more globalized, he said, “the practice of diversity and inclusion will become a competency that is essential to the success of accounting professionals’ interactions in multicultural environments.”