How The Accountant Shortage Impacts CFOs And Financial Hires

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Driving technology, embracing of the strategic importance of a company’s financial functions and an emphasizing corporate sustainability are all transforming the CFO’s job. But they’re also reshaping other jobs in a company’s financial operations. A new report from EY zooming in on the financial controller’s position found that 86% of people in that role expect significant changes in their career in the next five years. The majority of controllers told EY they expect their role to shift from one focused on value protection—paying attention to internal controls and regulatory compliance—to one that looks for value creation—using technology, strategy and data to find new opportunities and recommend new policies.

“The controller of the future will be a trusted partner to the CFO right across the transformation spectrum,” Mike Verbeck, EY Global deputy vice chair for Assurance, said in the report. “They will create value in their capacity as analysts, collaborators, innovators, storytellers and leaders of talented teams, as well as in their capacity as accounting and compliance experts.”

The report makes clear that this is seen as a natural evolution of the controller’s role, fitting with how most companies utilize their financial teams in the foreseeable future. But it’s also clear that the report found technology—including AI—gives the controller the ability to pivot toward more of a focus on strategy and opportunity. The report found that nearly nine in 10 controllers already use AI, which is powerful on two fronts. It can do many of the basic tasks controllers spend their time on now, and also leverage data to find powerful insights.

EY suggests that controllers take advantage of the opportunity to look for value-creation opportunities by embracing data and AI and inspiring team members to see themselves as problem solvers. CFOs should empower their controllers, and also provide training in future-focused skills that build on technology use and responsibilities to climb the ranks at a company. And the CFO should also focus on an innovative and transformational spirit in potential new hires to work under the controller.

Regardless of how financial roles are created and recruited, the entire financial sector is struggling to find talent. Many college students today aren’t pursuing accounting degrees, and even fewer are becoming CPAs. That makes recruiting for any financial position harder, from junior-level to CFOs. I spoke with Keith Giarman, president of the private equity and principal investing practice at executive search firm DHR Global, about how this shortage is impacting things right now. An excerpt from our conversation is later in this newsletter.

Forbes is compiling its first-ever list of best-in-state CPAs, and nominations are now open. You can find all the details and submit a nomination here.

HUMAN CAPITAL

Unionized port workers on the East Coast began their first strike in more than 45 years at 12:01 a.m. Tuesday, stopping trade traffic at ports in Baltimore; Boston; Charleston, South Carolina; Jacksonville, Florida; Miami; Houston; Mobile, Alabama; New Orleans; New York/New Jersey; Norfolk, Virginia; Philadelphia; Savannah, Georgia; Tampa, Florida; and Wilmington, Delaware. About 45,000 union members represented by the International Longshoremen’s Association want a wage increase of 77% and a ban on new automation as part of their new contract with the United States Maritime Alliance (USMX), the organization that represents shipping companies. West Coast port workers earn over $30,000 a year more than their East Coast counterparts. Union members are refusing to meet with the USMX until their wage demands are met.

The strike could have fast and far-reaching impacts on the U.S. economy, with some analysts projecting it costing $3.8 billion to $4.5 billion a day. If the strike continues for long enough, it could impact consumer prices and the availability of goods. President Biden has urged the two sides to resolve the issue quickly and fairly, sending Chief of Staff Jeff Zients and National Economic Council Director Lael Brainard to meet with USMX on Monday. While Biden can defer the strike for 80 days through the Taft-Hartley Act, he said over the weekend he will not “because it’s collective bargaining.”

While West Coast ports remain open, Boeing machinists remain on strike. The 33,000 unionized employees at the aerospace manufacturer’s Pacific Northwest facilities rejected Boeing’s “best and final offer” last week. From the union’s social media posts, the sticking point appears to be the reinstatement of Boeing’s pension plan, which the company did away with in favor of a 401(k) plan in 2014, according to Quartz. It’s unclear from media reports what’s happening currently with negotiations, but according to KING5, Boeing released a statement Monday saying it is “committed to resetting our relationship with our represented employees and negotiating in good faith and want to reach an agreement as soon as possible. We are prepared to meet at any time.”

ECONOMIC INDICATORS

The interest rate cut that everyone was waiting for happened last month. And yet there’s already lots of talk about how big the next one will be at the Federal Reserve policy-making committee’s next meeting in November. (According to CME FedWatch, as of Tuesday morning, 38.4% of economists project another half-percentage point cut.) This isn’t just a case of impatient analysts and investors, writes Forbes’ Derek Saul. After the rate cut was announced, yields on the 10-year Treasury note increased. These notes are the basis for interest rates on things including mortgages, auto loans and corporate borrowing—meaning financing might not be getting cheaper after all.

There are many reasons for Treasury yields to be increasing, some benign and some ominous. Some analysts say investors had already priced in the rate cut, especially since its yields are down compared with earlier this summer. But CNBC spoke with analysts who see uncertainty through the federal deficit and the Fed’s willingness to cut interest rates, even with inflation a bit higher than the 2% it sees as tolerable. On Friday, reports showed the Personal Consumption Expenditures Index—the Fed’s preferred inflation gauge—to be at 2.2% in August.

The stock market on the whole is responding well, however. The first nine months of 2024 were the S&P 500’s best start to a year since 1997, writes Forbes’ Derek Saul. The S&P’s year-to-date gain is 20.3%, and the other markets have also fared well this year: The Dow Jones Industrial Average is up 12% in the first three quarters of 2024, and the Nasdaq is up 20%. Buoying the markets so far are last month’s interest rate cuts—insurers, home builders and utilities saw some of the best returns in recent months—and optimism-fueled AI stocks.

POLICY + REGULATIONS

Last week, the Chinese government announced several broad measures to boost its economy, which has been sputtering and looks unlikely to meet its government’s annual growth target. The multi-pronged effort includes an interest rate cut from China’s central bank, a potential capital injection into its biggest banks to increase lending capacity and governmental economic stimulus, reports Forbes’ Derek Saul. Chinese stocks traded on U.S. markets rallied on the news and have continued to trade higher.

However, the rally—and any benefit to China-based businesses—may be short-lived for those in the U.S. In a note on Monday, JPMorgan Chase strategists said that if Donald Trump wins the presidential election, it’s likely to slow down. Trump has campaigned on strict trade policies toward China, including a tariff of 60% or more on all Chinese goods, phasing out imports of essential goods and revoking China’s most favored nation trade status. Vice President Kamala Harris has said in her campaign that she wants to enact policies that ensure the U.S. keeps its economic foothold above China, but she has not presented anything specific that is as restrictive. Analysts believe Harris will continue the Biden administration’s approach of more targeted Chinese economic policies, including limiting imports and exports from high-tech industries.

OFF THE LEDGER

How The Accountant Shortage Impacts Hiring Of CFOs And Other Financial Employees

As the nature of work has changed and new fields related to finance have cropped up, there’s been a shortage of accountants on all levels—especially with fewer young people opting for accounting degrees, and even fewer choosing to work at traditional firms and pursue the CPA path. This has immediate and potential long-term implications for finance departments and CFOs. I talked to Keith Giarman, president of private equity and the principal investing practice at executive search firm DHR Global, about what it means. This conversation has been edited for length, clarity and continuity.

It’s hard to find the right talent today. What are companies doing to keep the talent they have?

Giarman: A lot of the compensation has gone north. It is a different level skill set that [companies] are asking for. There are a few [qualified employees], and they know that. They know that their price tag and their market value have gone up. Especially in private equity, where they’ve got a hopefully three-year timeline to improve operations and sell a company, they have to have the absolute best and invest in that role. They’re working with the CFO more than the CEO.

For everybody else [in finance], if you accept my logic, there’s fewer of them. Whether it’s somebody running FP&A or somebody lower down in the organization, you’ve got to pay up.

That doesn’t fix it, though, because people come for more than money. [Companies] have to create great working environments and be more flexible, including remote [work]. As a company, we have the same challenges. We’ve tried to create an environment for our research and associate staff where we emphasize things like wellness and the things that the younger generation wants to focus on and feel good about in terms of the community they’re building around them. If you’re not doing those other soft HR things, all the money in the world isn’t going to make a difference. They’ll stay for a couple of years, and they’ll go.

Much of the attention of the accountant shortage is focused on lower-level employees. Are you seeing related challenges with recruiting CFOs?

The answer is a very loud yes, with an exclamation point. The CFOs who will make the cut, where the client will not bend on the requirements, seems like [there are] fewer and fewer as we move along.

It’s also dependent on the cycle of the market. CFOs have been in assets in private equities for a while. We’re finally starting to see the Fed lower interest rates. There could be some exit liquidity opportunity in a year or two. If more transactions are getting done, there’s more folks who have proven themselves: They’re able to flourish in these environments and get the job done. We haven’t been in that for the last 12 to 24 months.

When we do a CFO search today, something that might’ve taken 90 days can take 180. There’s a timing issue with candidates. There’s a compensation issue. There’s a flexibility issue in terms of where they are in the investment cycle, too, because if you’re going to sell the company in two years, are you going to expect somebody to move their entire family on a plane three hours away?

The good news is at that level, you’re thinking about wealth creation and longer-term things that take care of your family and your career. You’re even more disposed to the financial element of the opportunity, and you’re willing to put in the hard work to get it. If [companies] can make the numbers work and people can see a path to the end zone, there’s a better chance you’re going to land those bigger fish, and they’re going to stick.

What does the future look like for this shortage?

The thing that’s going to make it better is selling a bunch of companies, where good people free up. There’s $8 trillion of private equity money floating around out there, and a lot of that’s in companies that have CFOs that are waiting to exit. [After interest rates drop enough to restart more dealmaking, probably in 2025], that’s when you’re going to see more IPOs. You’re going to see more deals, you’re going to see more M&A. The people that are really good, there’s going to be more freed up that you can get access to. They’re going to be looking for their next great CFO opportunity.

FACTS + COMMENTS

Forbes published the Forbes 400, its annual ranking of the richest billionaires in the United States, on Tuesday morning.

$5.4 trillion: Collective worth of everyone on this year’s list

67%: Proportion of those on the list who are self-made—either founding their own company or helping build one

23: People on the list for the first time. Together, they’re worth $163 billion—just 3% of the total net worth of the list

STRATEGIES + ADVICE

Today, effective employee motivation is more than a simple bonus or bringing a treat into the office. Here are five things you can do that will actually make a difference.

Partnerships can make businesses more successful. Here are four ways to tell if your current partnerships are healthy ones.

VIDEO

QUIZ

Fidelity found that X, the social network formerly known as Twitter, is worth less than the $44 billion that Elon Musk paid to purchase it in 2022. About what fraction of the purchase price is it worth now?

A. Two-thirds

B. Two-fifths

C. One fifth

D. One tenth

See if you got the answer right here.