Lessons learned, future in focus: Melancon looks back and ahead

Barry Melancon, CPA, CGMA, was named the leader of the AICPA when he was in his mid-30s. Now, in his final months as CEO of AICPA & CIMA, he discusses the events that challenged the profession, risks that could be obstacles in the future, and why he’s optimistic about the role accountants play.

In this conversation, the second of two parts, Melancon challenges the notion that the profession is slow to change, explains why trust will continue to be important, and emphasizes the importance of speed and competencies in continuting to evolve.

Listen or read part 1 here.

What you’ll learn from this episode:

• A quick summary of the topics in part 1 of the conversation.
• Why Melancon believes the word “passion” would be used to describe him.
• What Melancon called “the most tumultuous period” of his career and how he viewed the profession’s emergence from that era.
• Why speed will be important in the continued transformation of the accounting profession.
• His thoughts on the “competency evolution” of accountants just entering the profession.
• Melancon’s contention that it’s “naïve” to think artificial intelligence will not affect jobs.

Play the episode below or read the edited transcript:

— 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: Hello, Journal of Accountancy podcast listeners. Welcome back to the show. I’m Neil Amato with the JofA. Today’s episode is the continuation of my conversation with AICPA & CIMA CEO Barry Melancon. You’ll hear it right after this word from our sponsor.

To remind listeners, Barry Melancon announced in May that he would retire at the end of this year. So that’s why we’re having this two-part conversation. Part 1 published last week, so if you missed that one, give it a listen. We’ll have a link in the show notes, or you can find it in your favorite podcast app.

In part 1, Barry focused on the importance of trust for the profession. That remains a theme in part 2, when he addressed a period that he called “tense” and “tulmultuous.”

Also, he reflects on things he’s proud of, things that could have gone better during his tenure, what he thinks is the biggest risk to the profession going forward, and the implications of technology in the future. Starting off this segment is a question on how he thinks other profession leaders would describe him.

If I asked a state society leader or an AICPA chair or CIMA president to describe you in a few words, what do you think they’d say?

Barry Melancon: Well, you probably ought to ask them instead of me. But I think people in general would say “passion” would probably be the first word that people would assign. The passion for the people in the profession, the profession itself — I believe that I have that passion. I talk about waking up every morning and worrying about the profession, and then the people in the profession and then the organization. Because frankly, the organization isn’t very important unless we have a successful profession and the people in the profession are successful.

I think passion is there. There are just so many little issues that I know in meetings or in discussions or in negotiations that I have fought for over the years that I think are really important to the profession. No one, not even me, can remember all of those and having lived through those, but it’s that frame of reference that I think people would put in there.

I think people would attribute communication skills is tied to that. I do believe, and people have said to me, I have ability to communicate. I’m not sure where I got the ability, but I have the ability to communicate some pretty complex things that are happening in relatively simple ways that people can relate to them. I don’t get bogged down in all the technical nuances that are part of the profession.

But it’s important to keep, I think, our eyes on the bigger picture of what we’re trying to accomplish as a profession. Yes, knowing sometimes those details are critically important, but way more important is the vision and passion of the profession. I think people would say those couple of things about me and probably some other things and probably a lot of negative ones as well.

Amato: Well, for my research for this episode this morning, I was watching a 1996 C-SPAN video of you speaking about potential tax changes. I don’t know if you’ve ever seen that video or you remember it, but I will say that I think you’ve evolved as a public speaker over the years when I compared it. Not saying it was bad, but it was just a different style than you have today.

Melancon: Well, I hope I’ve evolved. Shame on me if I didn’t evolve. I’m not a big one that goes back and listens to the recordings of myself, but I do remember C-SPAN and all of those things I’ve been on over the years. I remember some pretty heated interviews as well, particularly during the Enron, WorldCom, Arthur Andersen time frames that were pretty tense. So, yeah, we evolve. Thank goodness I evolved.

Amato: Do you want to talk about going through that time frame, Enron and such?

Melancon: Well, there was a lot of injustice in that. It was very tense. It was probably the most tumultuous period of my career. The profession came out of that fantastically as I knew they would. I think there were a lot of lessons learned.

I think one of the things there was I didn’t overreact because there were people at me at the Institute on a whole lot of different issues, and passion was flowing in a lot of different directions, so it was difficult.

There were a lot of things we were for that we never got credit for being for — like, essentially, what became the PCAOB — a model of it, not exactly PCAOB. We were generally in support of that, but people didn’t want to give the profession credit of being in favor of some of those things.

A lot of individuals who were hurt that were just great people. Again, thinking about how great people are in the Andersen firm, that was very unfair to them. Without that and then without the second shoe that drops, which is WorldCom, we’d probably never have a Sarbanes-Oxley [Act], and some of the changes would have still happened through regulation, not legislation, and they probably wouldn’t have been exactly the same.

But when you look at the profession five and 10 years after those events, the reality is, like many times in our history, the profession adapted incredibly well, was very successful, the trust was very high.

I think one important part that gets lost in history is that all of the data during the midst of Enron and WorldCom, if you surveyed people, entrepreneurs, businesspeople, Main Street performers, and Main Street USA, they actually never really lost confidence in the profession during that time. The data showed very clearly. That was driven because the CPA they knew, whoever that was, their small business, at their civic organization, at their church, is in a neighborhood, whatever, they knew the quality of the men and women who were in this profession.

Despite a lot of noise in the media and the legislative process, that trust level related to the individual CPA actually never suffered during that process. When I talk about the greatness of the men and women in our profession, that’s what allowed, I think, the profession to succeed through that process the way that it did. I think there’s a lot of lessons to remember as the next challenge comes about.

The fact of the matter is there were subsequent challenges to Enron that we don’t talk about nearly in the same element — the Madoff element or the Madoff era that produced some negative situations with frauds and things of that nature and had a lot to do with the 2006 and 2008 periods of time and the liquidity element of the capital market system. The profession had a total different makeup during that process.

You can think about COVID — totally different environment for the profession in those situations, and so it was difficult for a lot of people in the profession, but we made proactive changes. Some things that government did as well, and the profession adjusted beautifully to Enron and WorldCom era. Today, the profession is more successful than it’s ever been, and the reliance and that trust factor in the profession is more comprehensive and more successful than at any time in history.

Amato: Thank you for that reflection. Tell me this: What are you most proud of?

Melancon: That’s a hard question, Neil, because I’m proud of so many things. I’m proud of the profession, and that includes now with AICPA & CIMA of the management accounting professionals in our organization around the world. There’s just tremendous people in our profession. I’m proud of that.

I’m proud organizationally of the dedicated volunteers and the dedicated staff we’ve had over the years. Just incredible people. Sometimes when a major issue happens that doesn’t get the profile, I’ve been known to send a note to a staff person or to a volunteer and say, “History was never going to actually record all you did in this particular process but this was a big deal. I know it and you know it, and I just want you to know that I know it was a big deal.” Some of those things were little but very important.

I’m proud of the people, our staff through the years, the passion that they’ve had. The bulk of our staff are not CPAs. They learn the passion and love for our profession. I think that is very good, and I’ve seen it on the global stage and the management accounting side as well. The passion that the staff has for the profession.

Organizationally, I’m proud of the fact that we’ve been an enabler organization. We created CPA.com and people said, why are you doing that? Today, no one would ask that question, right? We were ahead at the time. We gave permission to the profession; we weren’t an organization that’s tried to stop things from happening.

Yes, we’ve made mistakes, but we made them in the context of trying to do the right things. I think, fundamentally, we shifted as an organization, as a profession. That was about rules that prevented things to environments that allowed the profession’s skill set and competency to be utilized in a wide variety of ways for the betterment of people and businesses and investors and capital markets and prosperity of people. I think we were enabling that.

Some of it was attitudinal, and some of it was very specific. We created CAS services, as an example through cpa.com. That was very specific, but some of it was attitudinal about, look at all the opportunities, figure how you fit into that as an individual or as a firm or as a company, and do it with the right ethics and commitment and trust, and you’ll be very successful in doing it. There’s a lot of things in those buckets, I think, that I’m very proud of.

Amato: Then if you had one thing that you could do over, what would it be?

Melancon: Well, I’m a big believer in if you give me anything to do over, I would do it differently because always you’re going to be more informed about results or fact patterns into the future. We could go back every step of 30 years, and if we could live every day over, I would do some things differently.

To me, though, the strategy component is, as I’ve always believed, it sort of goes to that last answer about the giving permissions. What does the profession own? Own, I don’t mean it in a literal sense but what is the profession known for? What is the profession capable of delivering into a marketplace, whether you’re in a corporate CFO world or whether you’re a government accountant or whether you’re in public accounting?

There are some things that we tried to have sort of in the element of the profession, like some of the evolution of the internet, that we didn’t quite get right and we could have probably done differently. There were some branding things that I think we could have done better and certain evolutions that we could have done differently or better.

But there’s a lot of them that we did really well. The footprint of the profession is very broad. But if you could go back in time, I think there’s some opportunities out there that we could have done better, that we would have had an even more successful profession, is the way I would say it.

Amato: Thank you so much for this time in reflecting. I want to give you an opportunity to look ahead for the sake of the profession. We talked about being able to divert from the path and adapt. What do you think is the biggest risk to the profession five years from now, and how is the profession positioned to handle it?

Melancon: Well, I’m going to give you two answers, but they actually connect.

One is on the competency side, and one is on the speed side. I think the evolution of our competencies, just like every other aspect of society, has to be forefront. The person who’s got 20 more years to work in this profession, their competency evolution in that 20 years is going to be dramatic. Obviously, someone entering the profession, they come to the table with a different set of skills. But even that evolution over 40 years is going to be phenomenal, and that ties to speed. It’s not just the evolution of those competencies, it’s the pace in which the world is changing, the speed of that, that requires it to be done at a much different pace.

Oftentimes I get, “Oh my God, I can’t deal with any more change” or “When are things going to slow down?” or “Can’t we just stick to our knitting?” or whatever the case may be in this terminology, and the answer to that is really no. The answer is that the profession won’t be successful and the individuals in the profession won’t be successful unless they are adaptive and unless they change.

And “adaptive” is probably a bad-sounding, slow word. It’s much quicker than that, and we have to constantly move as a profession. Because if we’re going to be the deliverers of trust and capabilities, we’re going to have to stay really abreast of that very fast. I think the profession actually does a really good job about that. The stereotypical element that the profession doesn’t change, I think it’s total bull. I think the profession adapts really quickly. But it’s going to have to be even quicker, and that provides a lot of stress.

I remember a few years back, I was on a panel at a big conference on capital markets, and we were talking about the role of the profession in the environmental space. What I like to say is, I get that people think environment is the most important thing to ever be addressed in the history of the world, and I get the other people believe it’s crazy or whatever. That’s your personal perspective on it, but as a professional perspective, it is a notion of measurement and reporting and reliability of business information, that broader footprint. Therefore, we need to embrace that, whether we’re in the corporate or we’re in the world. This is just one example, Neil.

Anyway, during that session, we were using technology and people were writing in questions. One of the questions that people could vote up in a poll was, “I’m so busy today. Why do I want to take on this? Just let somebody else take it on.” It goes back to that notion of where’s the world headed and where is the value of what we are as a profession? Do we think about it in the past tense or the current tense, or do we think about it in the future tense?

The reason why you take those things on that are evolving — even if they end up on a dead end, some will — is that for a profession to be incredibly valuable and to deliver on its public interest mission and its trust mission, we have to align with those things that are happening in society as a whole. That’s why you do it. If you just sort of don’t claim those opportunities, then that’s not going to be a net win for the profession.

To me, it’s about the speed and competencies. How do we evolve? How do we think about ourselves in a bigger way and not just financial or tax? That has been the case, but we need to continue to do that. And how do we evolve those competencies quick enough to be in a unique position in the marketplace. Because when you’re in a unique position in the marketplace, you are incredibly important and valuable. When you add our trust quotient to that, then you’re probably the most successful group when you can put all of those pieces together.

Amato: In the style of JofA editor-in-chief Jeff Drew, if he was hosting this, he would then say, “Well what have I not asked you that I should have?”

Melancon: What do I think about, at a macro level, the profession for the future? I think in today’s AI world, what are the implications? I think it’s naïve when people say AI is not going to impact jobs. AI is going to impact jobs. Just like the internet impacted jobs and just like the typewriter impacted jobs and a spreadsheet impacted jobs, every one of those things in history impacted jobs. And all of these people are running to the media to say, “Aw, AI is really not going to impact us” or “What we do is different.” The reality is, is that it’s going to impact the number of entry-level jobs.

It’s going to impact how people get experience. It’s going to impact, for managers and partners and CFOs and organizations, how do they move people up quicker? Move entry-level people up quicker from a skill set perspective. It’s not a fatalistic statement to say it’s going to impact jobs; it’s an opportunistic statement. I think the world is going to go through a period of time of — we’re seeing it. There’s political unrest, there’s clearly physical conflict unrest today, sort of the voting and democracies, people have not figured out what they want to do, and the polarization is extreme.

I think that the reality is all of those things add up to be a very bullish notion for our profession to help sort through that. But to say it’s not going to have any impact would be wrong. It’s how do we manage that impact, and how do we leverage that impact? How do we create a profession of tomorrow, just like we have been for the last 30 years? How do we create a profession of tomorrow that embraces all of those things? Then in five years and in 10 years, the same discussion will be taking place with something new that’s evolving at a very rapid pace in the world.

I think that’s the question that people are afraid to ask, “Will it affect?” — I don’t think any one person can say it won’t affect my job. Whatever “my job” is for that person, it will, just like all these other things in the past have. And so, it’s just really getting on whatever. It’s not a train, it’s not a boat. It’s something moving a lot faster than that, although there are some trains in Asia that move pretty doggone fast. The reality is that it’s on something moving very, very fast, and for the profession to succeed, particularly the diversity of our profession, to succeed, we have to be on that moving element and be embracing that. If we do, we’re going to figure it out, and the profession’s going to be really, really successful.

Amato: Barry Melancon, definitely a friend of the program. Thank you for being on.

Melancon: Thank you, Neil. Good to be with you, and hope to be with you again. Take care.