A matter of trust: Melancon reflects on nearly 30 years as CEO

Barry Melancon, CPA, CGMA, was named leader of the AICPA when he was in his mid-30s. Now, in his final months as CEO of AICPA & CIMA, he discusses his background and upbringing, his unlikely path from rural Louisiana to speaking to leaders around the world, and why he puts extra emphasis on trust.

Part 2 of the conversation, recorded in July, will be published next week. Below are links to the previous two-part discussion with Melancon, episodes that were published in December and January:

• News and trends affecting CPAs
• Business model transformation, private equity, and more

What you’ll learn from this episode:

• More from Melancon about what he calls “a great journey.”
• His assessment of how the profession has changed since the mid-1990s.
• Some of the skills learned during his tenure as CEO.
• Why he says the world is “devoid of trust.”
• A preview of topics discussed in Part 2 of the conversation, scheduled to publish next week.

— To comment on this episode or to suggest an idea for another episode, contact Neil Amato at Neil.Amato@aicpa-cima.com.

Transcript

Neil Amato: This is Neil Amato with the Journal of Accountancy podcast. Welcome back to the show. Barry Melancon, the CEO of AICPA & CIMA, has been on our show several times over the years. We’ve talked about trends, issues affecting the profession, the way CPAs have adapted to transformative change. We’ve also talked some about some of the icons in the profession.

Today, Barry joins the show for the first time since announcing in May that he’ll retire at the end of the year. The focus of the episode is probably a little more reflection. Stay tuned for that conversation right after this brief sponsor message.

Again, welcome back to the JofA podcast. I’d also like to officially welcome Barry back. You’re a repeat guest, so thanks for joining the Journal of Accountancy podcast.

Barry Melancon: Neil, great to be with you, and, as always, good to be with the listeners that you have and the great work you do with the JofA podcast, and looking forward to our discussion. As you said, maybe a little bit of reflective, but hopefully a little bit about the future, too.

Amato: Exactly. I guess the word’s out, you’re retiring.

Melancon: That’s no longer a kept secret, as they say. December 31, it’ll be almost 30 years in this role. When you add the state societies CEO role that I had before, it’s about 37 years in one part or the other.

I like to say I began going to Washington, D.C., to represent the profession around 1984. That’s a long time from the standpoint of being involved and really focused on the things that matter in the profession and the profession being successful in the marketplace and within the regulatory constructs of our environment. It’s obviously much different today than it was back then, but it’s been a great journey.

Amato: You’ve talked some to me before about goals. You talked about having them written down in a desk drawer, that type of thing. But when you got the job as CEO of the AICPA in 1995, what goals did you have for the role?

Melancon: Well, it was clearly a transformative goal. That would be the overarching perspective. I was 36 when I was hired. The AICPA had been around for, I guess 100 years or so at that point in time. The reality was I knew the profession was changing. I entered the profession. I wanted it to be more reflective of all aspects of where the profession was and where the profession was going. By that, I mean the audit was the touchstone in the profession, the regulatory reserve service for our profession. That skewed to the importance of the capital market system, but where the profession really was, that was a piece of it, but it wasn’t the entirety of it.

The profession clearly was about smaller firms, men and women in corporate and business and industry, all different types of business enterprises that we’ve served.

The capital market system was the birth of the modern profession as it related to the failings of our capital market system in the late 1920s, was the birth of the modern audit and the modern profession, but by the time I joined the profession and the AICPA in the mid-90s, I felt it was clearly going to be different and that we needed the organization to reflect that and not to be so focused on the capital market system.

I don’t want regulators or whatever to say, “Oh my God, you weren’t focused on the capital market system.” No, we were, but it was an “and” point. The profession had a lot of other activities that are important to the success of the United States. At that point we were not a global organization. The free enterprise system, the entrepreneurial environment, and all of the services and the skill set that the profession could bring in that environment was really important. It was really building at that point.

I wanted the Institute to evolve, the profession to evolve, to really be multifaceted is the best way to describe it and not to be focused solely on the audit and the capital market system, and, obviously, people would say, and taxes. But, as we can see today, the breadth of services, the importance of those services and creating an economic environment that basically drives prosperity, I think is a very important aspect of the profession, and I think we’ve achieved a lot of that.

Amato: Reflecting personally on your tenure, what surprised you most about yourself?

Melancon: I grew up in a very small, rural southern Louisiana place. It was just as common to be literally dealing with alligators and other wild animals in a swamp because that was my backyard. I was very rural. My closest friends were a five-to-10-minute drive away in a car growing up. It was a very rural environment. Middle class, we were not poor by any stretch of the imagination, but we weren’t wealthy. My father was sixth-grade-educated, literally left school at the end of his sixth grade to cut sugar cane by hand. Obviously, this was pre-World War II. My environment was not a big-picture environment by any stretch of the imagination.

To think that you’d spend the bulk of your career in New York or with a global footprint. I’ve been to 40 different countries as it relates to this profession to deal with some of the people I’ve dealt with in the United States government, but also in governments around the world, meetings that I’ve been in, groups that I’ve been in, representing the profession literally in all corners of the globe. I think to be fair, you wouldn’t imagine that as a teenager or a high school graduate or an entry-level college student or a person even entering a career, that that would be an environment for you.

My history was always very heavily involved in different aspects. All through school, all through college, in my early days, I went to work for a small CPA firm in South Louisiana in a metropolitan area, but more so than just the town, of like 100,000 people. It was a smaller frame of reference. Then to be put into a different environment where one day you’re talking about international finance or international regulation of the profession, or multinational capital market systems but also, literally the same day, talking about the implication of some small, nuanced subparagraph of the Internal Revenue Code having an impact on a sole proprietor to someplace in the United States. That’s a big gap.

I think you put the question in the phrasing of me personally, but it’s hard to imagine all of the things that I’ve had an opportunity to experience. I’ve been truly blessed. I’ve been very fortunate. My passion for the profession allowed me to be in all of those places. I think my ability to handle all those different types of situations allow it to go as long as it has and to experience all the different things that I’ve been able to experience.

Amato: How do you explain being at HL Bourgeois High School and having the curiosity and the drive to get to where you got to today?

Melancon: I’ve been fortunate that people around me have always saw things in me, I guess. Not that I sought that, but there were always people in my life that had that environment. My father was one of the 13; my mother was one of six; and I was the youngest of all of those 19 families. The youngest, if you want to call it the first cousin around, and by several years, and so I was always in an adult environment, even growing up as a youngster. South Louisiana is very family-oriented, so you do a lot of things with family, but a lot of my peers, at least from a generational perspective, they were older than me, they were gone.

I had a sister and brother who were 10 and 11 years older than me, so I was always being the child and then nothing but adults. I think that environment maybe caused me to grow up earlier. There’s a lot of things I did first very early in life. I skipped a year in high school, skipped a year in college. I was a partner at 25. I was always driven by time elements. I think that environment of people around me, I know people that were around me in high school that saw things in me, certainly people in college that saw things in me, and they supported or they encouraged or they said things that always weren’t limiting but were opening.

This notion of excelling or being something bigger was always painted for me by other people. I was really fortunate from that standpoint. Now, I didn’t shy away from it to be honest, but that I think was probably one of the key components is those people around you and whatever they saw in me, and people saw different things, but there were always people willing to support me or to plant thought processes into my maturation and things of that nature, including being in a very small CPA firm. I tell this story in leadership groups where we do leadership groups with young CPAs. I was making $15,000 a year being in public accounting firm in 1980, and I literally had a job offer for $25,000, which is a huge increase. I had, I guess, the confidence that I went to the managing partner of the firm. It was a two-person firm at that point, and I said, hey, I have this job offer, $15,000 to $25,000, can we talk about it? Most people probably wouldn’t have done that, but I did.

Their reaction was, let’s go to lunch. We had a two-hour lunch. They painted a picture for me about the profession. They painted a picture about the firm. They basically said I would be a partner in the firm. I told them my goal was to be a partner at 25. They said if you continue to progress, you will. But they didn’t adjust my pay. They didn’t try to close that gap to keep me.

They tried to paint other factors into keeping me there, and they did. I stayed there, and I’d have never had the opportunities I had had I made the decision to leave and go do something else. There’s just so many lessons learned and impacts, and I guess my philosophy of talking through those things or being open about how I saw the future or what my goals were probably helped to pave that way a little bit.

Amato: In your tenure as CEO, you get the job again in the mid-90s, you’re in your mid-30s. What are some of the leadership skills you have developed along the way in that time?

Melancon: Well, some I had and some I’ve developed, and some were weaknesses that I had to develop around. I think there’s a bag of all of those things. I think I came into the position with confidence of being successful. There were people who worked for us at that time, the changes that I was making almost immediately in the first 90 days. I did a major reorganization, and I’ve got the input of a lot of people, and some of the people disagreed with those.

They were very open in saying I would be a failure, things of that nature because of those. But I had the confidence to do that. But then I think I learned how to really rely on other people and to be trusted in other people. When you’re dealing with a much larger organization than one I had came from, you have to figure out how you want to deal with the trust factor. Because trust is a really critical component of our profession, but it’s a critical component of a culture as well.

I quickly adopted a philosophy that I start with very high levels of trust with anybody I deal with. If someone we’re hiring or someone I’m engaging with from an outside organization, I’m going to start with the highest assumption of trust and work from there. I’m not going to expect people to have to build up to that in my mind because I want them to give me the highest level of trust. From there, you can erode that trust. Your actions can cause you to erode that trust.

But I don’t believe that, and this is clearly something I learned very early in this role, I don’t believe that it’s a prove it to me type of situation constantly. I think the fact is that people in our profession, they are incredible people, and if you start with that high level of trust, you can get a lot further a lot faster because there are only a few exceptions where people will degrade in that trust, and so that’s a pretty big part. I think later in my career and with the help of others and coaches and things of that nature and feedback that people give you, I had to always struggle with the balance of my confidence. I was very blessed with a great memory, and so, as a result, I can always pull history together very quickly in events and topics. But you have to supplement that capability with other things.

One of those things is not coming across as having the answer to everything, but really building the right group of people to get to the answer, to get the buy-in and the support, to make modifications. People would say that I might be difficult to get to change my mind. I actually think of myself as someone that changes his mind a lot. But, of course, people you’re dealing with can’t be in your mind and know where you’re thinking when you’re at that point. I’ve learned to ask questions. I’ve learned to not see everything as a big deal. Not every aspect is critically important. I think my skill set of seeing an end view and figuring out there are multiple paths to get there, are there deviations to a path to getting there, and still getting there is a really important aspect of what I’ve learned to be able to do, and I think that allows you to get there in the end quicker.

There is also an element of when you’re creating a lot of change, though, that you have to come back to those things that give you the confidence to do that: your knowledge, your ability to communicate about those types of things. Then clearly as my frame of reference changed, Neil, to be global, to be in meetings with government officials around the world and some that growing up in South Louisiana, you would never have possibly imagined leaders and countries like China and all over the world and in Europe, etc.

You have to be adaptive. But you have to have the confidence that what you’re bringing to the table is based on knowledge. I tell our volunteer leaders all the time because they go out and they make presentations. There’s always a notion people have a nervousness. What if I say something wrong, or what if I don’t know an answer? What I remind people, and I have to remind myself, is that you know a lot more about this fact pattern or the situation you’re dealing with than a lot of other people, so you have to have the confidence.

You may not be always right, and you need to listen to what other people are saying. But you need to not be fearful about the situation because you are investing the time and the energy and the know-how on that particular situation, and so it’s the balance of all of those things that I think is really important.

Amato: We’ll get back to one of the things you said, that deviation in the path and knowing how to adapt and just a little bit as it relates to the future. But I want to go back to one other thing you said, which was a focus on trust. Would you consider that word “trust” as a guiding principle you aim to follow, and if so, are there other guiding principles?

Melancon: No, trust is a critical component. It’s critical for our profession. Those of you who’ve heard me speak, you know I talk about we live in a world devoid of trust. Much of our institutional trust, whether it’s media, government, or companies or religious institutions, etc., the internet, social media, those things have created this cavern of lack of trust. Somehow, hopefully, some of the work that we’ve done has allowed the profession to bridge those caverns and still to be incredibly trusted, and I think that means individually that is the case, too.

There’s a lot of different aspects of trust. Trust is being consistent. Trust is being present. Trust is being willing to change. Trust is getting something wrong but not being shy about trying to make things happen. Trust is about communicating what you think. Trust is about delivering passion. All of those things in some form or fashion build, cultivate, support trust, and, obviously, knowledge and competency is an element of trust as well.

The reality is that you can be 100% trustworthy and not very competent, and you’re probably not very useful. Conversely, you can be 100% competent and not very trustworthy, and that’s a bad answer as well. All of those things sort of mash together, but I do put them in the bucket of trust because I do think it is something that our profession – when I talk about myself, I’ve basically led this profession for a long time. I think it goes hand in glove, and I think that’s really important.

But some people define trust only in the ethical component of trust. That’s obviously important. But trust is a lot of other things. It’s saying what you’re going to say, and all these things that I just said, that is a really important component.

I would say on an international stage, one of the things wise people have said to me about being an American on the international stage. There’s always this debate of the ugly American, and how does America play around the world and the dichotomy of the success of America and the hatred of America.

But showing up is a really important element of building trust on a global basis and being there. Showing up mentally and physically is a really important part of people understanding who you are and getting things done, and the profession is a global profession, so that is an element of importance that’s clearly there. I’ve put it in a big bucket of trust, but it’s not the narrow definition of trust. It’s the big, capital-letter trust that is about all of those aspects of trust.

Amato: Thanks to AICPA & CIMA CEO Barry Melancon for his time and his thoughts, including that focus on the continued importance of trust. For you, the listeners, there’s more to come with Barry. Part 2 of our conversation is scheduled to publish next week. Barry will delve into challenging moments of his tenure, lessons learned along the way, and, as he has often done in his time as CEO, he will provide insights into what’s next for the profession.

This is Neil Amato. Thank you for listening to the Journal of Accountancy podcast.