Upcoming Shortfall of Tax Leaders: Are You Prepared?
      Upcoming Shortfall of Tax Leaders: Are You Prepared? - Corporate Tax Recruiters - Cowen Partners

      There’s an Upcoming Shortfall of Experienced Tax Leaders: Are You Prepared?

      Baby boomers, who hold the majority of tax leadership roles in the U.S., are entering their retirement years. According to the U.S. Census, by 2030, all baby boomers will be 65 or older — the traditional age people look to retire. Of course, some will leave the workforce early, though others may elect to stay on for a few more years.

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      While generational turnover is nothing new, these particular circumstances are concerning for tax departments. Tax accounting and compliance are notoriously complicated, as there are thousands of U.S. regulations and tax codes that leadership must comprehend, and as the Boomers retire, they’ll be taking much of their expertise with them.

      A Recipe for Disaster

      The looming shortfall among tax leadership has several repercussions: 

      For one, many organizations have global footprints, requiring their tax leadership to understand not only U.S. tax laws but the tax regulations of other countries as well. Other professions, therefore, often tap into overseas talent when there’s a lack of qualified local candidates, but given the complexity of U.S. tax regulations, replacing current tax staff with international candidates isn’t a good option. They simply don’t have the necessary knowledge to support organizational tax needs.

      Furthermore, few comprehensive certifications and higher-level educational opportunities are available for tax leaders who oversee compliance and reporting in multinational organizations. Today’s tax management teams primarily lead through experience, with support from local professionals in the countries they operate in. 

      Additionally, while most tax leaders earn a CPA certification, the CPA program itself doesn’t address international tax laws and accounting. It concerns only U.S. tax laws and regulations. Other leaders advance their knowledge through graduate degrees in taxes, but similar limitations apply. The only certification that addresses global tax affairs is the Advanced Diploma of International Tax (ADIT), granted by the U.K.’s Chartered Institute of Taxation, but few U.S. tax professionals know of it or work to earn it.

      Another problem is the lack of Generation X tax talent to take over baby boomer roles. Many Gen X accounting professionals have chosen different paths than taxes, as they witnessed major accounting catastrophes during the 1990s and early 2000s, including the downfall of Arthur Andersen and Enron. As such, though Gen X accounting professionals could assume tax leadership roles, many won’t have the same expertise as their baby boomer counterparts, requiring additional training or education before they’re ready to lead. 

      In a similar vein, sourcing entry-level tax accountants from audit firms like KPMG and Deloitte probably isn’t an option, either. As more tax professionals retire, the major accounting firms will try to hold onto their knowledgeable team members by offering them higher pay and benefits.

      Preparing Millennials and Generation Z for the Job

      Companies will likely need to look to their younger team members for help with filling the upcoming labor shortfall in taxes, meaning millennials and Gen Z professionals are needed now more than ever. 

      However, like those of Gen X, they’ll likely have fewer technical tax skills necessary to handle the job, as well as a lack of the soft skills required to be influential leaders, given that most won’t have management experience. Therefore, businesses must survey and mentor their younger team members as they move into higher-level positions. Current managers will need to identify the strongest performers and prepare them for the future. 

      In addition, tax professionals often work long hours, and their jobs may require frequent  travel. Thus, the focus for filling prominent roles should be on selecting people who don’t mind long hours and time away from their families.

      Retaining Tax Talent Will Require Strong Compensation Packages

      Global Head of Tax

      As more qualified tax leaders retire, retaining existing talent will be crucial, so companies must remain competitive by offering high salaries and exclusive benefits to their talented teams. Retaining millennials and Gen Z workers will likely require organizations to pay them more, despite fewer years of experience and fewer technical skills.

      Organizations must also prepare for the shift toward earlier retirement ages. Many Gen X and millennial professionals aim to retire sooner in relation to their baby boomer peers. They’re hoping to leave the workforce by their mid-50s or early 60s. 

      While it’s too early to tell how many will be successful in their endeavors, organizations should have younger talent ready to step in if their intentions come to fruition. With that being said, senior leadership can undertake a few techniques to prepare younger employees for tax management roles.

      Improve Communication with Staff and HR

      Strong communication between current management and their staff is critical. Regular communication helps employers understand their team’s needs and long-term objectives, and leaders who understand their team’s goals are in a better position to meet them through development and training.

      While tax managers are often the best people to mentor their staff, given that they understand the landscape and technical knowledge that future leaders need, qualified HR professionals can also work with tax managers to develop a career map for future leaders that allows them to grow their managerial and technical skills. Current tax leaders should facilitate discussions with their finance and HR teams so they each fully grasp the impact that a tax shortfall will have on their organizations. 

      While many departments will struggle as more baby boomers retire, the effect will likely be significant for tax firms. Finance and HR teams should be aware of what to expect, especially in organizations where baby boomers currently fill most leadership roles and where there are few candidates to follow in their footsteps.

      Strong Planning Will Help Organizations Transition Their Tax Teams

      The key to maintaining a capable tax team is planning for the transition. Take a comprehensive look at your tax team and determine who is most likely to retire over the next five or ten years. If most of your department is older, hiring new team members who can take their place once they decide to leave is critical.

      However, bringing on fresh hires or transferring them from other departments isn’t enough to strengthen your tax team. Your current leaders must mentor them, ensuring they share their expertise and management skills with your future managers, and your organization may need to offer higher salaries and better benefits to retain them over the long term.

      Successful Tax Leadership in an Ever-Evolving Tax Climate

      Taxes make up one of the most complex areas of accounting, as, unlike other departments, tax professionals must stay abreast of both the regulatory and legal landscapes in combination with accounting standards. Company structures are changing, too, with the advent of globalization in the 1990s leading many organizations toward expanding their footprints abroad. 

      While globalization is advantageous for growing company market shares and improving local economies, it’s made the jobs of tax leaders much more complex. Today’s tax professionals handle many tasks aside from simply preparing annual returns. Some specialize in foreign direct and indirect taxes, while others concentrate on transfer pricing or tax audits.

      Every company has different needs when it comes to taxes. Smaller organizations that operate in single jurisdictions may find a tax generalist to be perfectly adequate for handling their tax needs, while other organizations may need much more specialized knowledge.

      The primary responsibility of a tax manager is to ensure their teams have what it takes to support the organization’s needs and prepare entry-level workers for future, more prominent roles. With that being said, here are a few tips for effective tax leadership in an ever-evolving landscape:

      Get Your Tax Team in Order

      As a tax manager, you may work 50 or 60-hour weeks, and exceeding that amount means performance takes a nosedive, and your relationships suffer. That means you can’t rely solely on yourself to address the tax needs of your business. The key to effective tax leadership is a solid, qualified team. 

      The size of your team will vary depending on organizational needs. Enterprise-level companies often rely on sizable in-house teams and various outside professionals to handle their responsibilities, but small and mid-level companies can require the same level of support, especially if they have a physical presence outside their state or in other countries.

      It pays to hire skilled tax professionals or individuals who can handle specific responsibilities, but you’ll need to fully understand the needs of your business and hire the right people for each role. If you have a full tax team and don’t need any new hires, ensure your existing team members perform at their highest ability. 

      In addition, it’s common for organizations to misalign their team members in roles that don’t take advantage of their strengths. For instance, you might have a skilled employee experienced in transfer pricing, but they may be working on state tax returns instead. These misalignments can lead to job dissatisfaction and lower productivity rates among team members.

      If you’re a new leader within your organization, get to know everyone on the team. Become familiar with their strengths, weaknesses, and decision-making process to ensure you’re in a better position to understand where your team is lacking, and then build from there. As you grow more confident in your tax team’s abilities, you can delegate some of your more complex tasks to them, improving your team’s efficiency and knowledge. 

      Prepare for External Hires

      At some point, tax managers will need to hire new people to take on open roles. Existing team members may decide to leave, or the organization’s tax needs may grow. Effective tax leaders must properly plan to hire the right people to fill open roles.

      It’s crucial that tax managers look for individuals with varied experience. They shouldn’t attempt to hire people with the same traits and qualities as themselves. Instead, they’ll want to look for individuals with different skill sets who can add new value to the organization.

      For example, if the manager exhibits a strong aptitude for strategy but needs help in executing it, they’re smart to look for execution-oriented team members. Such an employee could handle the planning and details of the manager’s strategy. It would be a mistake to hire another visionary employee.

      Similarly, you must ensure that your new hires work well together. One of the best ways to judge a candidate’s fit within the department is by requiring each new applicant to go through interviews with various team members in the department, not just hiring managers. Multiple interviews can help you determine whether the person is likely to collaborate well or not.

      It’s advisable to aim for continuity within tax departments. Tax departments often face legal challenges and audits several years after filing tax returns. If the people who led the tax initiative quit, new individuals may have difficulty understanding their reasoning at the time or answering the questions of tax officials.

      Encourage Development Among Team Members

      As companies and tax legislation change, it’s critical to ensure your team remains up to date in their knowledge. Local, state, national, and international tax laws are constantly being revised, so you’ll need to have the proper processes in place to keep everyone informed. 

      Employee development will look different according to your employee’s responsibilities. For instance, someone who handles indirect taxes will have a different skill set than someone familiar with transfer pricing. Generalists may have a variety of skills that make them good leaders, but they are likely not the right practitioners for handling specialty assignments, such as the tax provision in a foreign country.

      Most tax professionals aim to minimize tax liability for their organizations. To accomplish that, they often need to work in gray areas and defend their actions if the company comes under a tax audit. 

      There’s also a balance they must maintain between taking on too much risk and too little. An organization that doesn’t assume any tax risk isn’t fulfilling its purpose. They’ll likely pay more taxes than is reasonable, making them less competitive with other organizations. Conversely, a company that assumes too much risk may open itself to unnecessary legal problems.

      Managing Tax Is Very Different from Other Departments

      Taxes are one of the more specialized departments in most organizations. Every team member has unique responsibilities, and some may be pretty intricate. Therefore, to run your tax department efficiently, you’ll need to ensure the team has access to the resources they need and are in roles that emphasize their strengths. You’ll also want team members that collaborate well together. A well-structured tax department will optimize your company’s tax processes in today’s evolving economic landscape.

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