ICAEW says accountancy firms need to thoroughly re-think their organizational structure, culture, people, and practices to be fit and ready to compete in a digital world. In its latest report Reimagining the Firm, the accountancy and finance body urges transformation to go beyond digital tools or services to ensure accountancy firms remain relevant in a digital era.
The accountancy profession, like most traditional professions, faces an uncertain future if it fails to adapt to a rapidly changing business landscape. New technologies, a younger generation of workers, new sources of competition, regulations and client expectations are putting pressure on firms to make drastic changes.
According to ICAEW, many of the structures, practices, and processes that made firms reliable or gave them a competitive advantage in the past are now holding them back. Start-ups without this legacy, and with a modern, connected work culture, stand to defeat even the best funded large firms because they can move faster, work cheaper and can be more productive.
Michael Armstrong, FCA and ICAEW Regional Director for the Middle East, Africa and South Asia (MEASA), said: “Changes driven by a range of factors will transform all aspects of business and society in the coming years. Firms and sole practitioners can all take advantage of new opportunities presented by these changes, but they need to choose the path that’s right for them.”
The report identifies four crucial areas of business that accountancy firms must re-evaluate:
As a professional service, excellence in accountancy is fundamentally about the quality of the people delivering those services. How firms invest and train their people to understand and use technology will be a decisive factor in their success. Future audits enabled by technology will be of a higher quality, but this is only part of the equation. Highly skilled humans will always be needed to interpret big data, to report and interact with other humans on key judgment areas and provide assurance around the new technologies which are generating the data. The profession will need people who have accounting skills but who are also IT literate.
According to the report, despite the traditional career path being geared towards the hierarchical pursuit of partner status, more employees today report wanting opportunities across a range of disciplines, moving “horizontally” rather than upwards. Employees are less likely than before to work their way up to partner level, which is seen as undesirable due to high stress and long hours. There is a general concern that to attract the right caliber of people into the accountancy profession, a more positive narrative is needed from the firms and the profession.
ICAEW says firms could become more future-resilient if they start working in multidisciplinary hubs and explore approaches to collaborating across teams. The report suggests firms must find new ways to quickly assemble talent across department silos, with strong digital and client skills. Even the current partner structure may not be fit for the future firm as the advancement of technology and changing workforce patterns will diminish the importance of specialist partners and will promote value creation by experienced generalists and new hybrid professional roles.
In addition to internal changes happening within the firm, clients are also changing in terms of how they select and buy services, how they want to experience them, and also the business problems they need help in solving. Their needs may not fit neatly into accounting practice areas, and will need more than just number-crunching in the future. For example, they may be asked to audit charities’ non-financial results or the non-financial reporting of large companies. The report points out that as most basic compliance and bookkeeping work will be done by computers, accountants will need to develop other additional value-added human-centered services so that they can build a different service offering and thrive in this world.
Without the right firm culture, rapid, organic and credible development and innovation cannot happen. Firms will continue to face changing societal needs and different expectations of the next generations. For many participants, change is in the air. They see in most firms that the culture is already becoming more informal, collaborative and more flat-structured. According to the report, as the workforce is expanding to host three generations, firms should open themselves up more to reflect, respond and engage in proactive conversations across the entire organization.
The report also highlighted that the growing expectations of clients are intensified by the rapid developments of technology, where clients now expect faster turnarounds and a 24/7 contact culture. At the same time, this is contributing to employee demands for new flexible models of work like flexi-time or part-time work.
Michael Armstrong said: “Success is there for the taking as long as firms future proof themselves. This comes down to creating a collaborative and diversified culture; listening to younger generations’ expectations; being more proactive to change rather than reactive; investing in technology and innovative thinking; and promoting and implementing flexible working.”