The Tax Leadership Shakeup Ahead- Don’t Get Caught Off Guard

Your tax department will soon face one of two challenges:

1. Tax Leadership Retirement Conservatively, over two-thirds of existing heads of tax are likely to retire in the next eight years, the majority in the next four years. Compounding that, 52% of all current #2s are expected to follow suit in the same time-frame.
2. Tax Leader Retention Due to this mass wave of retirements, your competitors will aggressively recruit your Baby Boomer and Gen X-age #1, as well as your #2s of all ages.

COVID-19 UPDATE: Typically, when an economic correction occurs, those who are nearing retirement will put their future on hold as retirement plans take a hit. However, considering that the cause of the current correction is health-related, we anticipate seeing a different reaction. Baby Boomers realize they are at risk, and resources to overcome the virus will be allocated towards younger generations. The rate at which older individuals leave the workforce will be accelerated as they realize the value in enjoying more time with friends and family

Additionally, in an economic correction, companies look to reduce costs by offering retirement packages to entice older professionals with higher pay grades to retire early. This will happen. We firmly believe these two factors will make it even harder to retain #1’s and #2’s as more professionals retire in the next four years as opposed to the upcoming eight years we expected.

The crunch is coming. Read on to learn how to prevent your tax department from consuming unnecessary bandwidth later. As a CFO or financial leader overseeing a tax function, your major currency is time, and the looming tax leadership crisis threatens to needlessly consume yours.

Retirement

For those with older tax leaders likely to retire in the next eight years, there are several options:

? Create a succession plan utilizing current talent.

? Brace for challenges, as many younger candidates are too narrowly scoped with respect to their technical skill-set or lack the necessary EQ leadership skills, while many others are disinterested in stepping up and taking on such a demanding role at the latter stage of their career.

? For those with qualified incumbents, trust that everyone will soon be vying to recruit them due to the high demand/low supply tax marketplace.

? Do an external search for a tax leader.

? Be prepared to pay a premium for quality tax leaders due to the fierce competition for experienced talent.

? Plans to recruit from outside the U.S. labor pool are unrealistic, as American companies cannot risk importing international tax professionals, just as they cannot export those with expertise limited to U.S. tax laws. Simply put, a global talent pool doesn’t exist.

Retention

Your tax leadership team will be aggressively recruited by your competitors, and the most significant challenge will be keeping them. Age will not be a hindrance, as employers will seek those with tax leadership experience rather than taking a chance on someone who’s never run a tax department.

While unprecedented, due to the current talent shortage, older candidates -- those with three to five years left before retiring -- will be particularly desirable, as they can be brought in to mentor and develop a successor without sending a message that there’s no room to grow. This is crucial, as only 48% of #2s are currently less than 60 years old and retaining your younger talent will be particularly critical for future success. These factors will also put additional pressure on the already challenging task of managing the disparate generational groups currently in the workforce, a topic we review in detail in our White Paper, Four Generations, One Tax Team.

Meanwhile, some tax leaders have hope that The Big4's latest reboot of the outsourcing trend will solve their staffing problems. However, in most cases, outsourcing won’t work either, as the challenges of the U.S. tax talent shortage cannot be pushed onto public accounting firms, who are faced with the same deficit.

Full-scale outsourcing’s main value proposition lies in solving short-term challenges in unique outlier scenarios. For example, spin-off companies needing to metaphorically tread water before being re-acquired, or company mergers involving multiple service providers. In these cases, there can be a benefit to outsourcing during the transition.

For everyone else, building and maintaining a world-class tax department now will reduce the need for your involvement with tax -- and free up some valuable time -- later on.

The factors prompting these future challenges are already in motion. Assess your exposure and develop a strategy now, or risk being unprepared when your tax function is inevitably impacted.

Seeking a macro-overview or targeted insight into your tax function planning needs? Contact Stephanie Conley at 843-216-6664 to arrange a mutually convenient phone appointment with TaxTalent president, Tony Santiago. Pay it forward. Share this insight with another CFO or financial leader.