The "Overtaxed" Tax Function
Tax departments are no strangers to resource and staffing challenges. Today’s corporate tax director faces unprecedented pressures: recent major legislative and regulatory developments, increased enforcement activity, heightened press scrutiny, enhanced involvement of stakeholders, and greater focus on financial statements and internal controls. Tax directors have to meet these new demands, often with little guidance and few resource.
As a result, the tax function is perpetually understaffed and drawn inward to collaborate effectively with other functions within the organization and maintain a focus on supporting business decision making. This dynamic is developing at a time when tax directors are being asked to better align tax planning with their firms' business planning. Our CFO interviews yielded many common themes, in particular, the desire to see tax far more engaged in the non-routine, strategic aspects of the tax function.
Such demands, when coupled with the evolving tax reporting environment, are forcing a profound reassessment of how tax departments do business.
Defining the Vision
Amid such formidable challenges lies an opportunity for both the company and the tax director to move toward an improved tax department of the future that is closely aligned with the company’s goals and business strategies. Those companies whose responses to these challenges go beyond the tactical, ad hoc, or reactive and seek to answer tomorrow’s challenges today will gain a competitive advantage.
Clients often ask my opinion regarding how their tax departments should be structured. I always caution that the answer is highly dependent upon a defined core mission, as well as the interplay of collaboration, budget, and resources. The best laid plans can be upended by any one of these factors, the least predictable and most frustrating of which oftentimes are resources—attracting and retaining the caliber of talent that can transform and uplift the tax function.
The Shortage is Real
Talent is now recognized as one of the keys to organizational success—a focal point for discussion and planning at the board and senior management levels throughout an organization. Tax leaders must embrace and articulate this concept as it relates to the specific challenges of hiring tax talent. Communicate the message that building an excellent tax team opens opportunities for “getting to the table” and supporting your organization’s strategic and operational needs.
When companies actually have the opportunity to hire additional tax resources, they are oftentimes faced with a sobering reality during the course of the search. Headcount restraints may give rise to very ambitious job requirements that are difficult to fill. As time marches on and the candidate flow decreases, tax directors begin to rethink the roles or wonder whether they set their expectations too high. It does not only “feel” like there is a shortage of tax talent, there are real dynamics in play that are taking a toll on the profession:
While an increasing number of young people are coming into the profession, the younger Gen Y workforce which makes up over 20% of today’s population has fundamentally different expectations than previous generations. These young professionals feel empowered and have different work values, with the confidence to readily make job changes. These factors suggest that employers who wish to reward and motivate these employees must re-evaluate reward and incentive programs, reconfigure elements of organizational design, and offer lifestyle benefits.
Control the Controllable
The combination of increased regulatory scrutiny and the tight labor market for tax talent means that the most successful tax departments are the ones that are reinventing the way they do business.
Tax departments often suffer from over reliance on one individual or lack of access to specific skill sets. These factors may result in internal control deficiencies for starters, but stagnant tax groups where people are not evolving from both a technical and personal perspective holds the group back from focusing on a more strategic mission that will ultimately be far more rewarding to the entire group.
Many successful tax departments are built on a model that keeps a core group of high performers focused on the value-added work and maintaining a high level of visibility within their organizations, while bringing in project-based assistance for the extra manpower needed for more routine tasks.
When we introduce our Flex Staffing practice to clients, the companies we meet with are oftentimes surprised to hear that as a national tax firm we have chosen to sustain a non-traditional service line like Flexible Staffing, but the current marketplace makes a very compelling case for why this is a business we want to be in. According to the Bureau of Labor Statistics’ estimates, the employment services industry will grow 45% from 2004 to 2014. It will grow faster and add more new jobs than just about any other industry over the next decade.
The staffing industry has been growing faster than the economy because of FLEXIBILITY. Highly skilled professionals today are either seeking more entrepreneurial freedom in their corporate careers or would rather engage in their work on a freelance project basis than be inextricably linked as a full-time employee to one company.
Benefit to Workers: Jobs, flexibility, bridge to permanent employment, choice of alternative employment arrangements, and training
Benefit to Businesses: Flexibility and access to talent
An increasing number of highly-sought, experienced tax subject matter experts have left the “Big 4” or industry by choice to become independent professionals.
Tapping into these experienced resources can help tax directors refocus their attention to the most important deliverables for their departments and ensure that they correlate with retaining and growing their best talent. In the face of many formidable challenges, leadership coupled with an evolving vision, will be the essential ingredients necessary to not only safeguard tax’s many fiduciary responsibilities, but to truly elevate tax’s profile as a business partner.
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