Whether through headlines, data or our own personal experiences, the past two years have provided a near-daily reminder that life is fragile. We have collectively renewed our focus on the importance of time with family and friends, as well as personal pursuits.
This is a good development for us all personally, but it’s made business more challenging as people reevaluate their work life.
Add to this the fact that families were better positioned to absorb the costs of a boomerang child living at home and our government’s economic response to the pandemic, and you have a recipe for an economic paradigm shift of many prime-aged workers. Although we can be hopeful this shift will correct itself in the long run, all these factors have created a challenging recruiting environment. Without a doubt, business owners and hiring managers must learn to navigate this new labor landscape shaped by the “Great Resignation,” which some feel is more accurately described as the Great Reshuffle.
Studies have shown replacing an employee can cost an organization up to two times a person’s annual salary when factoring in recruiting, onboarding and lost productivity. Direct costs include rising wages and benefit costs due to an inflationary environment and the tight labor market. It’s likely going to cost more to hire a new person of relatively equivalent skill or experience level as the person they’re replacing.
Some so-called hidden costs can be directly measured, such as overtime pay or the cost of recruiting, e.g., a headhunter’s fee. Other hidden costs are more opaque but costly nonetheless: errors, untimeliness and the sunk cost of continually onboarding and training a new employee for a position you cannot keep filled versus investing your time in growing your business.
Many of our clients are developing a solid recruitment and retention strategy in response. They are focused on defining and enhancing their cultures, recognizing that engaged employees will offer more value to everything they touch. They recognize high turnover can lower morale, even among the most engaged employees.
A focus on culture also helps them retain talent by avoiding bad hires in the first place – for instance, by recruiting for demonstrated behaviors versus only skills. Defining culture gives candidates a window into understanding if they’ll be a fit in the role, so businesses are wise to tailor their digital recruitment and marketing approaches accordingly.
Some are opting for a different approach by outsourcing vital but difficult-to-fill positions. This is especially true for finance and accounting roles. A recent study by the American Institute of Certified Public Accountants on outsourced accounting found the service grew by about 20% in 2020, nearly twice the rate from two years prior. And why not? There are several benefits to an outsourced approach, but key among them are continuity, scalability and access to expertise.
An outsourced accounting function helps provide for continuity of operations because the service provider typically has a full team supporting its clients. No more being caught flat-footed by a resignation.
An outsourced team also can provide scalability, as needed, as you are not bound to the schedule and skill constraints of in-house employees. Similarly, the team may have other expertise, such as help navigating state and local tax changes or forensic or cybersecurity work and making the most out of forgivable loan or tax credit programs like we saw the previous two years.
Business leaders who outsource their accounting functions should carefully consider scope upfront: What do you need, and when? The AICPA study noted more vendors are moving toward fixed fees for these services, which can provide cost clarity, but this works best when you set expectations to avoid scope creep. Some organizations may be better off keeping these functions in-house if the level of service needed doesn’t require deep expertise or analysis, if the tasks do not need to be done in real time or if other senior-level employees are available to cover this work. But given the labor market and the pace of technology changes, this might risk putting a Band-Aid on a wound that ultimately requires surgery.
Business leaders must think outside the box when it comes to filling their most important positions as the Great Reshuffle continues. Focusing on culture and your organization’s true strengths has never been more important. Outsourcing to trusted experts for areas where your organization doesn’t have natural strengths or is having trouble filling positions is an option, particularly in highly specialized areas.
Remember, you need to work on your business, not in your business. At your next strategic planning session, evaluate your strengths and consider outsourcing your challenges so you can truly focus on the opportunities ahead.
Jim Ashley is a tax partner and national practice leader of outsourced accounting services with BKD LLP in Springfield. He can be reached at firstname.lastname@example.org.
The expanded facility is expected to reach annual revenue of $650M.