With growing pressures on tax talent, now is the time to have a conversation about designing an effective talent model.
As disruptive forces such as globalization and digital advances transform business, they are also reshaping the role of the tax and finance function, along with the push toward transparency and global legislative and regulatory reforms. These mounting pressures are also redefining what we know and expect from tax and finance talent.
To better understand how tax and finance functions are reacting to disruptive forces, EY teams conducted a 2018 survey, Reimagining the tax and finance function, of 1,722 organizations globally, which includes 315 of the world’s largest 500 publicly listed businesses.
Their response around talent is clear: Tax and finance functions are facing a significant challenge in finding the right talent even by today’s standards and struggle to do more with less, and it is one of the biggest drivers leading companies to rethink their tax and finance functions. How does this change the face of an organization’s operating model and the talent strategy behind it?
(Also read our updated 2020 TFO survey.)
New, hard-to-find competencies
Digital disruption means the tax and finance function needs professionals with a deep understanding of digital capabilities to enhance their core skill sets.
The need for talent who understand the technical nature of reporting requirements continues to be as important as ever, but now competencies are also needed in areas such as systems architecture, the flow of data through the company’s systems and the technologies to mine and analyze that data, including artificial intelligence and data governance.
It is therefore not surprising that a near-unanimous 98% of the surveyed organizations agree that the core competencies required from finance and tax personnel will expand to include process and technology skills in addition to traditional technical skills over the next three years
Moreover, 87% of respondents indicated that they do not have adequate resources to identify, evaluate and respond to new tax legislation (e.g., US tax reform, base erosion and profit shifting [BEPS] and digital taxation). Today’s tax and finance functions also need people who can work effectively across both organizational and geographic borders, especially as business models change. A strong commercial focus around communication, cultural awareness, team-building, negotiation and judgment has become increasingly important.
Yet companies face a one-two punch: While they virtually all agree on the need for people with important new skill sets, they also overwhelmingly report the difficulty of finding them: 89% of tax and finance function respondents find it a challenge to attract and retain the appropriate talent. Not only are the competencies in short supply, it can be a challenge to offer an appealing career path and the right training to individuals with these skills within a tax and finance function.
Pressure to do more with less
Companies are challenged enough to find people with the right skill sets. But they also face a second talent squeeze. The workload for the tax and finance function is ever higher at the same time as pressure is growing to reduce costs – and the largest single cost for most organizations is people. Workloads have grown due to a virtual explosion in global electronic reporting, transparency requirements and new global tax rules. Yet, in spite of that higher burden, almost all (94%) surveyed organizations have a plan to reduce the cost of their tax and finance function over the next 24 months, with 74% expecting that reduction to be significant.
Successful businesses are embracing technology investments (e.g., robotic process automation, standardized global delivery centers and tax platforms) that can reduce both workload and cost while freeing up tax talent for higher-value activities, including risk management, analytics and the partnering with business units that is more important than ever.
Conversely, a lack of the right technology holds an organization and its people back. Many businesses still have systems that provide inadequate consistency, visibility and oversight in a fast-changing, interconnected world and large teams doing manual work, creating an environment often marked by error-prone and redundant effort.
A path forward
With the tremendous pressures facing today’s tax and finance functions, merely trying to keep pace is not a successful long-term strategy. For global organizations, this means reimagining the tax and finance function. They are scrutinizing their current target operating models in light of their priorities around cost minimization, value creation and risk management and the ability of the current model to stand in the future.
Part of this process involves determining which activities should be viewed as “best-in-class” and which should be viewed as “best-in-cost.”
Activities that are considered lower-value, or best-in-cost (e.g., tax compliance and data collection) should be performed at minimal cost through automation, centralization, sourcing from lower-cost locations or via third parties.
Higher-value, best-in-class activities (e.g., tax planning and managing controversy) are less easy to automate and should be performed with optimal effectiveness and control, either in-house by employees with the appropriate expertise or outsourced to an external specialist provider.
Finding the right mix
Once individual activities are designated as best in class or best in cost, businesses must then decide which ones they want to build internally and which ones to outsource to an external provider.
Leading companies typically choose one of three approaches. The first option is rebuilding or transforming the existing tax and finance function to perform both best-in-cost and best-in class activities. This generally will include building a new digital platform, training or hiring tax technologists who understand both tax and the new tools and exploring the creation or expansion of a shared service center. In terms of talent, this option can be hard to staff due to a shortage of people with the right blend of skills. And it requires constant vigilance to make certain that people, processes and technology keep pace with change.
The second option is outsourcing tax and finance activities to a third party that has already made large investments in a technology platform and a global network of skilled people.
The third option is a blend of the prior two options as companies look to maximize effectiveness and control while still reducing the overall cost of the tax and finance function.
Eighty-four percent of survey respondents responded that they are already outsourcing or considering outsourcing for the tax and finance function.
In terms of talent, an external provider with the right capacity and scale can more easily source and train hard-to-find specialists and provide rewarding career paths, freeing businesses from the challenges of recruiting and retaining the right talent.
Outsourcing talent also means that businesses have ready access to it as needed and a scalable resource model that supports changing needs. Obtaining the right tax talent at the right time and at an affordable cost has always been a difficult task, but never more so than today.
In today’s new world of tax, outsourcing provides a way forward. With the pressures on tax talent only expected to grow, now is the time to have a conversation about designing an effective talent model for today’s needs and beyond.
