In the last five years, offshoring has shifted from being a niche strategy to a dominant one used by a number of firms. The extent of offshoring varies according to characteristics of the firm (e.g. the larger the organisation, the more likely the firm is to outsource.
Offshoring is part of the never-ending search for efficiency and cost reduction in firms, and can be undertaken for both primary and support activities of the firm. Offshoring is particularly prevalent in back-office or support activities that are not as customer facing as other functions of the business and are therefore open to being located in lower-cost, non-customer-facing locations.
Drivers for outsourcing
A CPA Australia report lists there are five key drivers of activity for offshoring: automation, disaggregation, consolidation, commercialisation and relocation.
Automation - Automation is when routine activities that can be performed without human intervention are mechanised, usually by computer. These are functions that can be easily automated, such as payroll, are more likely to be outsourced and offshored to other providers, particularly if this activity is not a core competence of the firm.
Disaggregation - Disaggregation describes how activities that were formerly done by just one person can be separated into different tasks. For example, an accountant could perform a broad range of tasks from providing advice to basic bookkeeping; increasingly, however, accountants focus on higher-level advisory tasks, and the more routine job tasks are either automated or pushed into a SSC.
Consolidation - Consolidation refers to similar activities being combined into a shared service operation rather than every operating unit conducting its own business function separately. This can enable activities to be completed more efficiently in the central location.
Commercialisation - Shared activities can be commercialised, either by making them into a profit centre within the firm, or by spinning them off through an outsourcing arrangement.
The result is firms are not hiring as many junior candidates as in previous years translating into less accountants available. A realistic scenario is that firms who used to hire 10 grads at a time are now hiring only 3-5. This short term, cost/benefit driven decision making is sound short term but has long term ramifications.
What can de done to address the problem?
Invest into graduate recruitment - The big 4 firms have made a significant statement at the start of 2019 recently hiring a collective 2,750 graduates! The big players in town know they need to invest in the future accounting stars, so should your firm.
Think long term - Cost saving in the short term through outsourcing will almost certainly mean your firm will have to invest more into talent acquisition through employer branding, recruitment fees and lost productivity. Think long term and include talent and succession planning into the overall business strategy, the costs will be less in the long run!
Broadening your hiring criteria - Be open to hiring accountants that have the minimum skills and educational requirements, otherwise be prepared to have a gap in your workforce. Remember, candidates that have a great culture fit but not quite there yet on their skillset can often be trained up.
Build your employer brand - Once you have re-invested in graduates and junior accountants you need to invest in your employer brand and culture to retain them. Accounting firms are taking great efforts to match their workplace with some of the best in the world, don’t get left behind.
Our perspective is firms need to invest in graduates and junior staff from a succession planning point of view or be willing to pay an above market salary to attract suitably qualified accountants.
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